Printable 3/20/20, 11:29 AM You may not reproduce, display on a website, distribute, sell or republish this article or data, or the information contained therein, without prior written consent. This printout and/or PDF is for personal usage only and not for any promotional usage. © Crain Communications Inc. February 03, 2020 12:00 AM Lincoln bests BMW, Audi and Mercedes-Benz in residuals MICHAEL MARTINEZ ! " # $ AUTOMOTIVE NEWS ILLUSTRATION Lincoln's residual values have surpassed German luxury brands, a signiPcant milestone. Here's how the Ford brand did it. https://www.autonews.com/sales/lincoln-bests-bmw-audi-and-mercedes-benz-residuals Page 1 of 5 Printable 3/20/20, 11:29 AM DETROIT — Lincoln Motor Co.'s residual values have surpassed those of the three biggest German luxury makes, a signiPcant milestone born from a patient, consistent product strategy and an injection of analytics into sales and marketing operations. According to Pgures from Cox Automotive, Lincoln's residual values at 36 months topped those of BMW, Audi and Mercedes-Benz in January. Since 2018, Lincoln's residuals have consistently beaten BMW — the nation's top-selling luxury brand — and often have exceeded or been in line with Audi and Mercedes. The trend, which coincided with the brand adding more crossovers to its lineup, is likely to continue, given last week's news that Lincoln is discontinuing the MKZ sedan and co-developing a luxury electric vehicle with startup Rivian. Lincoln's U.S. sales, despite an 8.3 percent gain in 2019, still trail many rivals. But strong residual values are a vital metric in the lease-heavy luxury space, allowing automakers to offer customers more attractive monthly payments. And it's a striking contrast to the lifelessness that Lincoln exhibited in the early 2010s, when beating the German luxury juggernauts in any vital metric seemed unthinkable. "To be mentioned in the same sentence as BMW says a lot," Michael Sprague, Lincoln's head of marketing, sales and service in North America, told Automotive News. "There's not one speciPc silver bullet to Px the residual values. It's something the company has been working toward for a really long time." Lincoln in 2018 chose a quality-over-quantity approach to sales, quietly cutting certain :eet business it deemed harmful to residuals, including Sprague: A mention with BMW “says a lot.” company cars and daily rentals. Its U.S. sales that year fell 6.8 percent as a result, although executives argued the underlying fundamentals were strong. Even before that, the brand was focusing on data and analytics. Ford Motor Co. hired Paul Ballew as global chief data and analytics oacer in 2017, and Lincoln relied heavily on the work of his global data, insights and analytics team. https://www.autonews.com/sales/lincoln-bests-bmw-audi-and-mercedes-benz-residuals Page 2 of 5 Printable 3/20/20, 11:29 AM "One of the largest groups we support is marketing, sales and service," Ballew said in an interview shortly after taking the job, which he left last year. "Our focus there is not just on improving traditional methods, but how analytics can help deliver a better experience for our customers by knowing them in a meaningful way." Sprague said the team looked at everything from vehicle pricing and packaging to marketing and advertising. In one instance, MKZs with a speciPc hybrid package were sitting on dealership lots far longer than other variants, so the brand eliminated the option. In another, oacials noticed while working with an outside agency that just two of the four "Lincoln Wish List" holiday commercials were generating meaningful sales leads, so they cut the other two. "We're making decisions based off data," Sprague said. "It's great to have the team fully dedicated to it." Lineup overhaul Beyond looking at data to make decisions about how it packages and markets its vehicles, Lincoln has taken a deliberate approach in what it sells. https://www.autonews.com/sales/lincoln-bests-bmw-audi-and-mercedes-benz-residuals Page 3 of 5 Printable 3/20/20, 11:29 AM Residual race f Increases in 36-month residual values, shown here from January 2017 through January 2020, allow a brand to offer more attractive lease and @nancing deals. in The brand in recent years has emphasized crossovers and SUVs, redesigning older vehicles and introducing new nameplates. It also has placed value on the interior, using high-end materials and eye-catching designs that have earned praise from critics. "The improvement in the new Lincoln SUVs did help its value increase," said Eric Ibarra, Kelley Blue Book's director of residual values. Cox Automotive forecasts the Nautilus will have higher residual values than its predecessor, the MKX, by 3 percentage points at 36 months. It predicts a 4-point bump for the Corsair over the MKC and an 18-point increase for the Aviator compared with the now- discontinued MKT. Lincoln deliberately kept the MKT in production for a few months after the introduction of the Aviator to help protect its residual values, pumping the MKT into jeets so the Aviator could go to retail customers. https://www.autonews.com/sales/lincoln-bests-bmw-audi-and-mercedes-benz-residuals Page 4 of 5 Printable 3/20/20, 11:29 AM Lincoln's residuals could be further helped by new products in the coming years. The brand this year will introduce a plug-in hybrid variant of its Corsair crossover. The timing of the EV — likely an SUV — that it's developing with Rivian is unclear, though it's expected to be sometime after Rivian launches its own vehicles this year. The Continental, Lincoln's lone remaining sedan after the MKZ's planned demise, is expected to be cut in 2021, although Sprague argued that it still has value for the brand, especially in China. In the U.S., Lincoln has tried to juice sales by offering a limited run of high-end models with suicide doors, although overall Continental sales fell 25 percent last year. Sprague said the improved residuals likely will lead to greater lease rates but did not provide speciPcs. In 2019, about 45 percent of Lincoln's reported sales were leases, according to Cox. He said Lincoln would continue on the path it started. "We're going to continue to take action to strengthen the brand," Sprague said. "That's healthy not just for us but for dealers as well." Inline Play Source URL: https://www.autonews.com/sales/lincoln-bests-bmw-audi-and-mercedes-benz-residuals https://www.autonews.com/sales/lincoln-bests-bmw-audi-and-mercedes-benz-residuals Page 5 of 5.