Cundari Competitive Audit: BMW X3 Series, Mercedes-Benz GLC and Audi Q5 March 20th, 2017

26 Duncan Street Toronto, Ontario M5V 2B9 Cundari.com Agenda

1. Difference between a Traditional SUV vs. a Crossover SUV.

2. Compact luxury crossover SUV segment defined.

3. Introduce BMW and its direct competitors.

4. Product comparison: 2017 BMW X3 vs. 2017 Mercedes-Benz GLC vs. 2018 Audi Q5.

5. Introducing the all-new 2018 BMW X3.

6. Sales data observations. Traditional SUV vs.Crossover SUV Traditional SUV Crossover SUV Construction Body-On-Frame Construction Unibody Type* • Based on a truck’s platform Type* • Based on a car’s platform. • The vehicle’s body and frame are • The vehicle’s body and frame are built-out separately and put together built-out together as a single structure. once completed. Benefit* • Spacious with fuel economy of a car Benefit* • Better torsional flexing for off-road due to lighter design. handling. • Cheaper to fix, helpful for fleets. • Stronger towing capabilities.

*https://cars.usnews.com/cars-trucks/best-cars-blog/2016/09/SUVs_vs_Crossovers_Whats_the_Difference/ Compact Luxury Crossover SUV Segment Consumer Drivers

Factors Number of Price Sensitivity Practicality Brand Prestige Insight Segments Stock Features

Consumers trade-off brand prestige for more base Near-Luxury Crossover SUV features. They want their crossover SUV to be well- High High High Medium (E.g. Lincoln MKC, Acura RDX) priced, highly practical and their maintenance fees kept low.

Consumers trade-off more base features for brand Compact Luxury prestige. They still value practicality, but they know Crossover SUV Medium High Medium High and accept that their maintenance fees will be (E.g. BMW X1 and X3) higher.

Consumers want brand prestige, practicality and Mid-Level Luxury an array of base features. They value comfort, Crossover SUV Low High High High design and performance and are okay with higher (E.g. BMW X5 and X6) maintenance costs that come along with owning a vehicle from this segment. The Big Three Brand Tagline The Ultimate Driving Experience. The Best or Nothing. Progress Through Technology.

Brand Positioning Joy of Driving. Luxurious Design. Technology.

Compact Luxury Crossover SUV BMW X3 Mercedes-Benz GLC Audi Q5

Year Their Crossover SUV 2003 2014 2008 Was First Introduced

2018 Q5 2.0 TFSI Quattro Comparable Base Model 2017 X3 xDrive28i 2017 GLC 300 4MATIC Komfort S Tronic

Second Generation First Generation Second Generation Current Generation (2010 - Present) (2015 - Present) (2017)

Base MSRP $46,050 $45,150 $44,950 Product Comparison Exterior Design

Insight Base Wheel Options • Three 19” rims • Four 19” rims • One 18” rim • BMW gives consumers a good • One 20” rim amount of base rim choices, Upgrade Wheel • One 19” rim (+$500) • One 18” rim (+$500) • N/A and one 20” base rim option Options • Two 20” rims (+$750) that MB charges +$750 for and which Audi doesn’t offer. • MB offers the most amount of options for consumers to personalize. Base Vehicle Paint • Two Base (Black or • Two Base (Black or • Two Base (Black or • All car brands offer the same Colour Options White) White) White) base colour options, BMW/ Audi offer about the same Upgrade Vehicle • Nine Mid-Level - • Seven Mid-Level - • Eight Mid-Level (+$890) number of mid-level colour Paint Colour Metallics (+$895) Metallics (+$890) upgrade options. Options • Two Premiums (+$1,400 • MB offers the most amount of and $1,600) options for consumers to • One Ultra Premium personalize. ($5,200) Design Philosophy The Art of Driving.* The Art of Luxurious The Art of Progress.*** • Mercedes-Benz’s luxurious Living.** design clearly appeals to this Exterior Design Sculpted, athletic and Elegant and modern (but Seamless, strong and segment’s want for ‘brand Characteristics muscular design.* not trendy) design.** minimal yet progressive prestige’. design.*** • BMW’s current model is outdated, but the 2018 model is set to come with a refreshed exterior design. • BMW can take the angle, ‘high performance functionality breeds beautiful design’ which adds substance and enhances ‘brand prestige’.

*http://www.carbodydesign.com/2012/05/bmw-design-dna/ **http://www.carbodydesign.com/2012/05/mercedes-benz-design-philosophy/ ***http://www.carbodydesign.com/2014/11/audi-prologue-concept/ Interior Design

Insight Base Upholstery • Two options • Two options • Four options • Audi offers more base Colour Options upholstery options to Upgrade • Seven options (+$1,500) • Four mid-level options • N/A consumers, whereas Upholstery Colour (+$1,900) BMW/MB offer less Options • Two ultra premium base options so they options (+$5,500) can up-sell consumers. • MB offers the most Base Trim Colour • Four options • Three options • One option amount of interior Options styling options but it Upgrade Trim • N/A • One option (+$1,500) • N/A comes at a hefty price Colour Options tag. Design Philosophy • Driver orientation and • Luxurious living space, • Progressive technology • The X3’s current interior ergonomics.* not fashionable but bred design.*** is outdated and will be • All display elements rather modern.** • Design director Marc refreshed in the 2018 should be arranged in • One should get into Lichete’s new design model. the driver’s direct field their car, close the philosophy, “Audi will • BMW’s advertising of vision so that door and feel at be extremely should convey the information relevant to home.** progressive with sleek amount of expertise and various driving buttonless interiors, and thought that goes into situations is easily a focus on artificial providing their accessible. The interior intelligence. The customers with an should have a restful exterior, interior, and intuitive and affect on the eye.* colour/trim should blend comfortable driving together.”** experience. Comfort is Interior Design Sporty, intuitive and Elegant, aesthetically Sleek and minimal, with an important facet of Characteristics comfortable, with a beautiful, with intricate an emphasis on luxury = higher devoid of flat surfaces.* modernized details.** technological features.*** perceived ‘brand prestige’.

*http://www.carbodydesign.com/2012/05/bmw-design-dna/ **http://www.carbodydesign.com/2012/05/mercedes-benz-design-philosophy/ ***http://www.topgear.com/car-news/future-tech/audi-brink-design-and-tech-revolution Practicality

Observation Trunk Capacity • 1792L (Max • 1600L (Max • 1623L (Max • BMW offers the with back with back with back largest amount of seats down). seats down). seats down). cargo space but both BMW and Audi’s trunk layout offers a good amount of useable space. • Mercedes-Benz’s trunk layout has an awkward angle and offers less useable space due to its chassis and exterior design. Combined • 9.9L • 9.8L • 11.4L • Audi offers the best Fuel Economy fuel economy. (L/100 km) Base Features Offered

Takeaway Insight

• N/A • N/A • Sun and Moon Roof* • Q5 has a base sun and • Audi offers the best moon roof, X3 and GLC selection of stock offer it as an upgrade. features in terms of interior quality and • N/A • Back-Up Camera • N/A • Only the GLC offers a base rear-view camera, technology. • the X3/Q5 offer it as an Mercedes-Benz offers a upgrade. plentiful amount of stock safety features. • HD Radio • N/A • N/A • Only the X3 offers HD • BMW falls behind in Radio as a base feature, comparison to MB and GLC/Q5 offer it as an Audi for stock features upgrade. offered. • N/A • Keyless Ignition Start • N/A • Only the GLC offers Base keyless ignition start as a standard feature. Features • N/A • Collision prevention • Audi Pre-Sense Basic • Mercedes-Benz offers an Offered** assist. and Pre-Sense City.* array of top-notch stock • Driver drowsiness safety features. Audi also monitoring. offers two stock safety • Crosswind assist. features. BMW offers • Mercedes' Pre-Safe. complex safety features • Mercedes' mbrace as an upgrade. connect.

• N/A • N/A • Leather Seats* • Q5 offers stock leather seats, X3/GLC offer it as an upgrade. • Cruise Control • Cruise Control • Cruise Control* • All models offer cruise control as a stock feature.

*2017 Audi Q5 used in this comparison chart. **https://cars.usnews.com/cars-trucks/compare/?trims=13186-383566_13312-388307_13216-385121 Product Comparison Insights Recap Exterior Design Interior Design Practicality Base Vehicle Features Offered Wheel Options Upholstery/Trim Options Trunk Space Features • BMW gives consumers a good amount of • Audi offers more base upholstery options to • BMW offers the largest amount of cargo • Audi offers the best selection of stock base rim choices, and one 20” base rim consumers, whereas BMW/MB offer less space but both BMW and Audi’s trunk layout features in terms of interior quality and option that MB charges +$750 for and which base options so they can up-sell consumers. offers a good amount of useable space. technology. Audi doesn’t offer. • MB offers the most amount of interior styling • Mercedes-Benz’s trunk layout has an • Mercedes-Benz offers a plentiful amount of • MB offers the most amount of options for options but it comes at a hefty price tag. awkward angle and offers less useable stock safety features. consumers to personalize. space due to its chassis and exterior • BMW falls behind in comparison to MB and design. Audi for stock features offered. Vehicle Paint Colour Options Interior Design Characteristics Fuel Economy • All car brands offer the same base colour • The X3’s current interior is outdated and will • The Audi Q5 offers better combined fuel options (black or white), BMW and Audi offer be refreshed in the 2018 model. economy than the BMW X3 and Mercedes- about the same number of mid-level colour • BMW’s advertising should convey the Benz GLC. upgrade options. amount of expertise and thought that goes • MB offers the most amount of options for into providing their customers with an consumers to personalize. intuitive and comfortable driving experience. Comfort is an important facet of luxury = higher perceived ‘brand prestige’.

Exterior Design Characteristics • Mercedes-Benz’s luxurious design clearly appeals to this segment’s want for ‘brand prestige’. • BMW’s current model is outdated, but the 2018 model is set to come with a refreshed exterior design. • BMW can take the angle, ‘high performance functionality breeds beautiful design’ which adds substance and enhances ‘brand prestige’. 2018 BMW X3 (Third Generation) 2018 BMW X3 Upgrades

• The third-generation BMW X3 is expected to have a new vehicle substructure (CLAR) that was first introduced to the redesigned 2016 BMW 7 Series, also applied to latest 5 Series and upcoming 3 Series. • Aesthetics: Front fascia inspired by X1, pronounced sculpted lines, new headlights and wider taillights. 2018 BMW X3 xDrive30i • Fuel Economy: Improved. • Space: More interior room and plushier cabin. • Features: Latest connectivity and safety features, e.g. iDrive 6.0. • Powertrain: • 2017 xDrive28i -> 2018 xDrive30i • 2017 xDrive35i -> 2018 xDrive40i 2017 BMW X3 xDrive28i

http://www.bmwblog.com/2016/12/29/2018-bmw-x3-render-shows-aggressive-design/ Sales Data Observations 2017 BMW X3/MB GLC/Audi Q5 MTD Sales

Observations Jan 2017 600 • The Audi Q5 has outsold the BMW X3 and 498 510 500 477 MB GLC for January sales over the past 428 398 three years. 400 372

• The GLC has achieved its best January BMW4X3 300 sales over the past three years and has MB4GLC Audi4 Q5 minimized the sales gap against the Audi 200 Q5.

Feb 2017 Number of Vehicles Sold 100 • For the first time in two years, the MB GLC 0 has outsold the BMW X3 and Audi Q5. Jan Feb Months

*Source: BMW Sales Data 2016 BMW X3/MB GLC/Audi Q5 MTD Sales

Observations Feb 2016 1000 • This is the closest in two years that the 900 BMW X3 has gotten to closing the gap on 800 the Audi Q5 which sold 17 more vehicles. 700 Apr 2016 600 BMWCX3 500 • Audi’s peak sales month of the year, sold MBCGLC 908 vehicles for Apr 2016 and 904 400 AudiC Q5 vehicles for Apr 2015. 300 • BMW and MB were outsold by 357/478 200

vehicles respectively. Number of Vehicles Sold 100 Sept 2016 0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec • Audi’s second best sales month of the year, sold 469 more vehicles than BMW and 435 Months more than MB. Oct 2016 • Strongest disparity in vehicle sales for the year, Audi outsold BMW by 499 vehicles.

*Source: BMW Sales Data Appendix 2017 Mercedes-Benz GLC

Feb 2017 - GLC Coupé Campaign 2017 Audi Q5 Creative

Feb 2017

March 2016

April 2016 Sept/Oct 2016 2015 BMW X3/MB GLC/Audi Q5 MTD Sales

1000

900

800

700

600 BMWCX3 500 MBCGLC 400 AudiC Q5 300

Number of Vehicles Sold 200

100

0 Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec

Months

*Source: BMW Sales Data