It costs money to innovate. It costs money to be the first-to-market. And it costs money to enter the marketplace with superior goods or services. The point is, sometimes a high price point isn’t simply justified; it’s a driver of progress.
In this installment of Insights, we’ll look at how two luxury auto brands—Mercedes-Benz and BMW—have been competing for 100-years by rolling out advancements that defined automotive innovation. The lofty prices these German manufacturers charge fuels their innovation, and luxury buyers happily oblige in exchange for the latest and greatest features. The rest of us benefit when these advancements diffuse into everyday cars, making them safer and more functional.
Fundamental Financial is here to empower exceptional entrepreneurs. So along the way, there’s a lesson here for all businesses: Investment to bring something new and superior to the market can lead to long-term rewards, even if it requires a premium price. If demand exists, premium pricing early on can enable scaling and sustainability later. As you’ll see below, Benz and BMW have done just that—literally racing toward the future for 100 years.
A recent Bloomberg story titled Benz vs. BMW: A Century of Out-Inventing Each Other looked at how BMW this March marked its centennial—and a century of technological rivalry with Mercedes-Benz. “In newspaper ads, Benz, which can lay claim to having invented the car in 1886, congratu-mocked its Bavarian archenemy: Thanks for 100 years of competition. The 30 years before that were a little dull,” Bloomberg reported. During that long-running rivalry, the two companies pioneered key automotive technologies including fuel injection, anti-lock brakes, all-wheel drive, and electronic stability protection (aka traction control), among many others.
“The luxury car segment has become the testing ground for leading edge systems and features,” noted Fast Company Magazine in its piece, How Luxury Cars Drive Innovation. “There, car companies can sell new technologies and continue to refine them, and when the cost comes down years later, the technology finds its way into other segments of the car market.” Ben Mitchell, National Planning Manager for Lexus, told Fast Company, “We try not to throw just any technology on a vehicle. There still has to be enough customer demand— even at the top of the market.” But as long as appetites for hi-tech wonders like parking assist and intuitive infotainment systems grow, automakers will continue to innovate. And that’s wisdom any entrepreneur can apply.
To offer a glimpse at Benz and BMW’s incredible competition, below are some highlights from Bloomberg’s detailed timeline.
1886: Karl Benz creates the Patent-Motorwagen,widely accepted to be the first automobile.
1921: A young Mercedes Benz employee, Ferdinand Porsche, helps build the first supercharger
1923: Banned from building aircraft or their engines by the Treaty of Versailles, BMW makes the R32, its first motorcycle.
1925: BMW’s R37 and R39 motorcycles fit production engines with cylinder heads made of lighter, cooler-running aluminum.
1954: It's more famous for its gull-wing doors, but the Mercedes-Benz 300SL is the first production car to have fuel injection.
1978: Mercedes-Benz offers an electronic antilock brake system on its S-Class sedan, beating BMW to market.
1985: At the Frankfurt Auto Show, Mercedes unveils its all-wheel-drive system, 4Matic. BMW does one better, selling an all-wheel-drive version of its 3 Series sedan, the 325iX.
1995: Electronic Stability Program—an anti-skid technology that’s now mandated on all vehicles by U.S. law—first appears on a Mercedes-Benz S-Class.
1998: Daimler starts selling the Smart Fortwo, a two-seat microcar for city driving.
2001: The BMW-owned Mini brand shows its new small car, the Mini Hatch/Hardtop, at the Detroit Auto Show. The car becomes a huge sales success.
2015: Mercedes-Benz’s advanced research vehicle, the F015, presents a vision of a driverless future with swiveling conference-style seats.
2016: BMW shows off its concept Vision Next 100, offering a glimpse of controls based on motion sensors and Iron Man-esque displays.
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