Deadpool
01-20-2004, 11:21 AM
An isolated pocket of Joshua Tree National Park in California contains a roadside sign that says, simply, "Fried Liver Wash"--a highway marker that is so bizarre and delightful that you won't care to investigate its meaning. It dethrones our previous favorite in America: a sign we saw in Natchez, Miss. bearing only an arrow and the words "We Buy Pecans."
Surrounded by Joshua trees and boulders on the park's twisty, desert drive, Nissan's (nasdaq: NSANY - news - people ) new Infiniti QX56 sport utility feels surprisingly at home. For one thing, the park's campgrounds seem like a natural backdrop for an eight-seat, family-oriented sport utility--albeit one that seems far more urban than rural in mentality. And while the QX56's weight transfers like a diving mastodon when you brake at speed to take a corner, it feels--as it does on the highway--like a freight train when you get it going on a straight-away.
An American national park is a fine place to study the QX56; its main competitors are General Motors' (nyse: GM - news - people ) Cadillac Escalade and Ford Motor's (nyse: F - news - people ) Lincoln Navigator--two of the biggest, plushest and most profitable American sport utilities. Infiniti is basically an American brand; it derives most of its profits from the United States, and the Infiniti nameplate does not exist in Japan or Europe. Also, the QX56 will be the first Infiniti built in North America, rolling off the lines at the new Nissan factory in Canton, Miss.
The QX56, with its simple, focused design--inside and out--is poised to make a ton of money for a company that is already on a tear. Infiniti topped 100,000 sales for the first time last year, and by a healthy margin: 118,655 units, or an increase of 35% over calendar year 2002. The company posted record operating profits for the first half of fiscal year 2003, and its incentive spending was 60% less than the industry average as of October. Infiniti's dealers are also in something of a golden age. J.D. Power and Associates' 2003 Customer Service Index ranks Infiniti as the top brand for the third time. This year, the average Infiniti dealer will make $1 million in pre-tax profits.
The tooling and marketing of new vehicles are always significant costs but the accepted wisdom in the auto industry is that large and luxurious makes money. Like the Escalade, the QX56 will be able to keep costs low and, hopefully, profits high by sharing an already existing platform. The Escalade uses Chevrolet's Silverado pickup platform, and the QX56 will share components with Nissan's Pathfinder Armada SUV and Titan pickup.
But it will have to do more than just hold costs down to turn the QX56 into a money machine like the Escalade. The Escalade and stretched Escalade ESV are two of GM's three most profitable vehicles. The Hummer H2 is the third, and the Escalade ESV makes more money than the base Escalade because it has a higher sticker price. American sales of the Escalade and Escalade ESV increased to 48,487 in 2003 from 36,150 in 2002--an increase of 34% that was brought about by the introduction of the ESV (2003 was its first full year on the market). The Escalade brand, fed by a strong marketing campaign and appeal to both urban and suburban buyers, sets the bar high indeed for the QX56. The Escalade is the in-demand SUV of the minute and such juice can rarely be created by executives in the corner office. It just happens.
But Infiniti has a good shot at recreating Escalade's magic. Philip Guziec, equity analyst for Chicago-based Morningstar said that "any Japanese company entering the luxury SUV segment is hitting directly at the heart of the profit center of the domestic manufacturers." However, he points out that "the return on investment for the QX56 may not be as good as the domestic automakers', because they were the early entrants into that segment. They've been making money for the past few years. As the segment gets more and more entrants, the profits will be smaller."
Guziec said he is certain that the QX56 will make money, and it seems like as safe a bet as any within the auto business. Mark Igo, vice president and general manager of Infiniti division for Nissan North America, said the QX56 will be Infiniti's "most important" introduction this year.
"We want to try to grow our business in the area of $40,000-plus in terms of the transaction price for the vehicle," he said. "We have QX, which is going to give us an opportunity, and we'll announce a show car concept in New York [the auto show in April] for our new M45 sedan. That will give us a nice one-two punch."
While Infiniti will not announce the QX56's pricing until February, it is expected to have an estimated base price of $50,000 (with all-wheel drive, and including a $680 destination fee). The vehicle will go on sale near the end of February, and Infiniti hopes to move 15,000 QX56's per year. It will target a customer with an average household income of over $350,000, an average age of 48 and children of high school age. Infiniti expects more women buyers than men, and expects that the QX56 will sell to customers who already have two vehicles in their household fleet.
Families will find the QX56 to be very accommodating and luxurious. Perhaps they will even find it fun to drive; the QX56 feels ungainly in some driving situations, but like a sophisticated express in others (i.e., the sort of flat, straight roads on which most Americans commute). It keeps quiet, and may even keep your kids quiet if they don the QX's infrared headsets and watch DVDs on its rear-seat player.
Ultimately, we like this vehicle a great deal and have to scrape to find bad things to say about it. To be sure, the "barrel-shaped sides" may not be to everybody's taste, and the Cadillac Escalade may have a larger cache of hipness and street credibility, but these are minor quibbles. Even then, though, intangibles like cool take a backseat to the QX's top-notch interior, which seems better thought out than that of the Escalade (the Navigator and QX are at about the same level of interior refinement).
The QX is the only all-new Infiniti scheduled to arrive this year; the company will focus instead on working with its existing cars. The Infiniti display at the New York show will feature a preview of the new M45 (the eight-cylinder 2006 M45 will be joined by a new, six-cylinder model called the M35 when the overhauled version arrives in early spring, 2005), as well as a freshened version of the Q45 flagship sedan and, probably, a freshened version of the entry-level G35 line.
Infiniti is considering building a small crossover SUV, like BMW's new X3, to fit below its new FX sport utility in the lineup. Additionally, Igo said he "would love to" have an upscale roadster like DaimlerChrysler's (nyse: DCX - news - people ) Mercedes-Benz SL-class or Toyota's (nyse: TM - news - people ) Lexus SC430 in Infiniti's showrooms.
Until then, Inifiniti's newest SUV is a fine start to the year. One thing is for certain: the QX56 will escalate pressure on the Escalade.
Surrounded by Joshua trees and boulders on the park's twisty, desert drive, Nissan's (nasdaq: NSANY - news - people ) new Infiniti QX56 sport utility feels surprisingly at home. For one thing, the park's campgrounds seem like a natural backdrop for an eight-seat, family-oriented sport utility--albeit one that seems far more urban than rural in mentality. And while the QX56's weight transfers like a diving mastodon when you brake at speed to take a corner, it feels--as it does on the highway--like a freight train when you get it going on a straight-away.
An American national park is a fine place to study the QX56; its main competitors are General Motors' (nyse: GM - news - people ) Cadillac Escalade and Ford Motor's (nyse: F - news - people ) Lincoln Navigator--two of the biggest, plushest and most profitable American sport utilities. Infiniti is basically an American brand; it derives most of its profits from the United States, and the Infiniti nameplate does not exist in Japan or Europe. Also, the QX56 will be the first Infiniti built in North America, rolling off the lines at the new Nissan factory in Canton, Miss.
The QX56, with its simple, focused design--inside and out--is poised to make a ton of money for a company that is already on a tear. Infiniti topped 100,000 sales for the first time last year, and by a healthy margin: 118,655 units, or an increase of 35% over calendar year 2002. The company posted record operating profits for the first half of fiscal year 2003, and its incentive spending was 60% less than the industry average as of October. Infiniti's dealers are also in something of a golden age. J.D. Power and Associates' 2003 Customer Service Index ranks Infiniti as the top brand for the third time. This year, the average Infiniti dealer will make $1 million in pre-tax profits.
The tooling and marketing of new vehicles are always significant costs but the accepted wisdom in the auto industry is that large and luxurious makes money. Like the Escalade, the QX56 will be able to keep costs low and, hopefully, profits high by sharing an already existing platform. The Escalade uses Chevrolet's Silverado pickup platform, and the QX56 will share components with Nissan's Pathfinder Armada SUV and Titan pickup.
But it will have to do more than just hold costs down to turn the QX56 into a money machine like the Escalade. The Escalade and stretched Escalade ESV are two of GM's three most profitable vehicles. The Hummer H2 is the third, and the Escalade ESV makes more money than the base Escalade because it has a higher sticker price. American sales of the Escalade and Escalade ESV increased to 48,487 in 2003 from 36,150 in 2002--an increase of 34% that was brought about by the introduction of the ESV (2003 was its first full year on the market). The Escalade brand, fed by a strong marketing campaign and appeal to both urban and suburban buyers, sets the bar high indeed for the QX56. The Escalade is the in-demand SUV of the minute and such juice can rarely be created by executives in the corner office. It just happens.
But Infiniti has a good shot at recreating Escalade's magic. Philip Guziec, equity analyst for Chicago-based Morningstar said that "any Japanese company entering the luxury SUV segment is hitting directly at the heart of the profit center of the domestic manufacturers." However, he points out that "the return on investment for the QX56 may not be as good as the domestic automakers', because they were the early entrants into that segment. They've been making money for the past few years. As the segment gets more and more entrants, the profits will be smaller."
Guziec said he is certain that the QX56 will make money, and it seems like as safe a bet as any within the auto business. Mark Igo, vice president and general manager of Infiniti division for Nissan North America, said the QX56 will be Infiniti's "most important" introduction this year.
"We want to try to grow our business in the area of $40,000-plus in terms of the transaction price for the vehicle," he said. "We have QX, which is going to give us an opportunity, and we'll announce a show car concept in New York [the auto show in April] for our new M45 sedan. That will give us a nice one-two punch."
While Infiniti will not announce the QX56's pricing until February, it is expected to have an estimated base price of $50,000 (with all-wheel drive, and including a $680 destination fee). The vehicle will go on sale near the end of February, and Infiniti hopes to move 15,000 QX56's per year. It will target a customer with an average household income of over $350,000, an average age of 48 and children of high school age. Infiniti expects more women buyers than men, and expects that the QX56 will sell to customers who already have two vehicles in their household fleet.
Families will find the QX56 to be very accommodating and luxurious. Perhaps they will even find it fun to drive; the QX56 feels ungainly in some driving situations, but like a sophisticated express in others (i.e., the sort of flat, straight roads on which most Americans commute). It keeps quiet, and may even keep your kids quiet if they don the QX's infrared headsets and watch DVDs on its rear-seat player.
Ultimately, we like this vehicle a great deal and have to scrape to find bad things to say about it. To be sure, the "barrel-shaped sides" may not be to everybody's taste, and the Cadillac Escalade may have a larger cache of hipness and street credibility, but these are minor quibbles. Even then, though, intangibles like cool take a backseat to the QX's top-notch interior, which seems better thought out than that of the Escalade (the Navigator and QX are at about the same level of interior refinement).
The QX is the only all-new Infiniti scheduled to arrive this year; the company will focus instead on working with its existing cars. The Infiniti display at the New York show will feature a preview of the new M45 (the eight-cylinder 2006 M45 will be joined by a new, six-cylinder model called the M35 when the overhauled version arrives in early spring, 2005), as well as a freshened version of the Q45 flagship sedan and, probably, a freshened version of the entry-level G35 line.
Infiniti is considering building a small crossover SUV, like BMW's new X3, to fit below its new FX sport utility in the lineup. Additionally, Igo said he "would love to" have an upscale roadster like DaimlerChrysler's (nyse: DCX - news - people ) Mercedes-Benz SL-class or Toyota's (nyse: TM - news - people ) Lexus SC430 in Infiniti's showrooms.
Until then, Inifiniti's newest SUV is a fine start to the year. One thing is for certain: the QX56 will escalate pressure on the Escalade.