Analysts: Rolls-Royce’s Project Cullinan SUV Is Late, Necessary

(Bloomberg) -- At first blush, the idea of a Roll-Royce SUV sounds like a natural fit.

This is the 110-year-old marque known for conveying the world’s wealthiest, most powerful people in the stateliest four-wheeled confines known to man. It has been the preferred coach for Tom Brady, David Beckham, Carey Grant, Muhammed Ali, John Lennon, and Queen Elizabeth II, plus a host of billionaires discretely concealed from within its cosseted wood-paneled walls. These passengers are often been shuttled around in big, anonymous black SUVs, too—it seems logical to combine the two experiences.

On the other hand, a massive lumbering SUV just sounds ... gauche. Too obvious. It sounds like clear pandering to popular demands—something to which high-end brands never like to admit. 

But that is the very reason the brand will introduce a new 4x4 conveyance, code-named Project Cullinan, sometime next year. It needs to stay relevant, to be making the cars that its audience wants. And, the thinking goes, while the nanny or the butler can drive the Porsche Cayenne for errands around town, the head of the house needs a Rolls. (Whether he or she is driving it or riding in the back seat.)

“A Rolls-Royce SUV would serve to modernize Rolls,” said Ian Fletcher, an automotive analyst for IHS Markit. “There are plenty of customers who don’t want a sedan. They don’t necessarily need a practical car, but they want something that is with the times. It’s to help broaden the consumer base.”

Alex Prindiville, founder of the U.K.-based auto-seller Prindiville Cars, agreed. 

“Rolls-Royce are behind the curve,” said Prindiville, who is scheduled to receive the first Rolls-Royce SUV delivered to a showroom in the U.K. “Rolls-Royce don’t want to lose their marketplace to Bentley or to Lamborghini. They are basically launching this product to keep that handful of customers, to keep them from deviating.”

If high-net worth individuals are going to buy an SUV (and there's no end in sight for the segment's extreme popularity), it might as well be from Rolls, the thinking goes. Why give consumers a way out away from the brand? 

The Next Step

This comes as no surprise, even despite objections in private from the brand’s top brass about ever making an SUV. As Maserati, Bentley, and Lamborghini became the latest luxury brands to introduce SUVs, auto analysts and industry insiders have expected this introduction from Rolls.

Rolls-Royce first announced plans for a “high-sided vehicle” (HSV) in 2015, then released a camouflaged photo of one last week. It’s about time, said Jack Nerad, executive editorial director and executive market analyst for Kelley Blue Book.

“It’s the natural progression for Rolls,” he said. “The luxury business is really a crossover business—almost a truck business, oddly. When you look at where the volume is in all the luxury brands, especially in North America, it’s all in crossovers. It’s hard to sell sedans. It’s hard to sell sports cars.”

For one thing, trucks and SUVs deliver better profit margins than sedans because of their size and prestige, which demands a price premium; the sheer magnitude of SUVs also allows more opportunities for upgrades and bespoke treatments. For another, the most important growing market in the world, China, largely eschews sports cars in favor of large vehicles. SUV sales there have seen a constant rise, from just 5 percent of the market 10 years ago to nearly 16 percent in 2015. 

The Grandest SUV Yet

Company officials have yet to release minute details of its new car, which is named after a massive diamond in the Crown Jewels of the United Kingdom. In fact, they seem uncertain as to how to play it to the media: A spokesperson declined Bloomberg’s initial request for an interview; some days later, a different spokesperson suggested a television interview the following week with brand Chief Executive Officer Torsten Müller-Ötvös, only to cancel it at the last minute. (The official reason, offered via e-mail: Müller-Ötvös fell ill and won’t be available until the new year.)

At the moment, at least, we know the rig will have a V12 engine, 600-plus horsepower, and AWD “all-terrain” capabilities. Land Rover and Mercedes-Benz have recently produced $220,000-plus SUVs; the one from Rolls will probably exceed $400,000.

“It will be the most luxurious four-by-four out there,” Prindiville said, speculating about its magnitude. “It will be elegant; it will be refined. It will be able to go over a certain amount of mud on the polo field, even if it will never climb Everest. Our customers will be queuing up to buy the product.”

Big Appetite for It

It's undeniable that there will be buyers. The strength of the luxury SUV market is so well-known at this point as to be a cliché. SUVs have dominated the auto industry for years. SUV sales rose 88.5 percent from 2008 through 2013, according to research firm IHS, and were up 15 percent year-over-year 2014 to 2015. So far this year, they are on track to beat last year’s sales by nearly 7 percent. One in every five vehicles sold worldwide is an SUV, according to IHS.

In fact, this new “High-Sided-Vehicle” (HSV), as Rolls calls it, is a move not totally unrelated to the brand’s history, when it was closer in some ways to how Land Rover has positioned itself of late. Rolls-Royce vehicles won Scottish Reliability Trials, European endurance races, and Alpine contests for decades. Adventurers such as Lawrence of Arabia used them to cross Middle Eastern deserts. 

“This [adventuring spirit] is the driving force as we complete the design of a vehicle that will propel us into the next phase of the marque,” Giles Taylor, the director of design for Rolls-Royce, said in a written statement about the vehicle.

Bespoke, of Course

At any rate, analysts seem to agree that it will be difficult for Rolls-Royce to misstep with this new endeavor: The brand enjoys supreme elite status in the luxury world, and the upper-crust SUV segment remains at all-time highs. The main thing will be to ensure that it looks good. Rolls’s flat vertical grille and high sides are easy to see on the camouflaged pre-production model—a strong improvement from the rear wing attached to a Phantom on early tester versions of an all-terrain car.

“If they don’t change radically the styling, yes, they will get it wrong—they do need to modernize it, round it up a little bit,” Prindiville said about the early photos. “But I think that Rolls-Royce will get it right because they always do. As long as they don’t go too ultra-modern, too supercar-ish, it’ll be fine. They’ll do it slowly, but they’ll get it right.”

The other component to success will be for Rolls to allow customers to make the vehicle distinctive from every other luxe SUV new to market. More than 90 percent of all Bentley vehicles sold are bespoke, which affords huge profit margins for an automaker. There’s no reason to believe those from Rolls will be any less customized, especially in the SUV segment.  

“It will be distinct from the others, much more expensive,” Nerad said. “The way for Rolls to differentiate themselves is to offer extras, or the bespoke.”

Any additions will need to complement the likely standards—exotic woods and mother-of-pearl inlays, lambswool carpeting, locking, bulletproof glove box, Champagne coolers, door umbrellas, and the like. So prospective buyers will have to get creative. (A $46,000 picnic basket, anyone?)

In the meantime, Cullinan will head to the Arctic Circle later this month and then to the Middle East in early 2017 for extreme-weather testing. Full production is slated for 2018. Better mark your calendar.

To contact the author of this story: Hannah Elliott in New York at helliott8@bloomberg.net.

To contact the editor responsible for this story: Justin Ocean at jocean1@bloomberg.net.