By on October 31, 2012

“Take BMW. In the near term, they will have nine entries in the compact segment. This is basically our heartland,” he told me on the sidelines of the Paris auto show. “With the brand reputation they have, you start to have a massive problem.”

-Gunnar Herrmann, Ford of Europe’s Vice President of Quality

Roughly a decade ago, BMW Canada started advertising how their new 320i (Canada-only, not for the USA) was retailing for $34,000, about the same price as a generously-equipped Honda Accord. The implied question was, what would you rather have? A Honda Accord, or a Beemer.

The first shot in the paradox of aspirational marketing may have been the Mercedes-Benz A-Class, a Golf competitor from the brand that made the 600 Großer. Rumor has it that Ferdinand Peich was so incesnsed by this, it spurred him to create the Phaeton, a Volkswagen that could compete with the S-Class. We all know how that turned out.

As the Automotive News article notes, a base model turbocharged BMW 1-Series is only 500 euro more than a mid-range Ford Focus with a similar powertrain. The quality gaps between the two must be nil, otherwise Ford risks losing customers to BMW. But what happens when the brand equity of BMW is so devalued that it ceases to mean anything? Mercedes answer to this question was an enormous flop. But if this strategy continues to be pursued, then prole drift is inevitable, and the only way for the wealthy to distinguish themselves via consumption will be Bentley, Rolls-Royce, Aston Martin, Ferrari and the like. ‘

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105 Comments on “QOTD: What Does Premium Mean Anyways?...”


  • avatar
    MarkP

    Brand image is a b***h. There was a time when BMW and Mercedes were not viewed as aspirational vehicles. Now they are, but it took years to make that happen. If they spend enough time devaluing the brand, it will take years to build it back again. Just look at US brands like Cadillac and Lincoln.

    • 0 avatar
      Dan

      When was Mercedes ever not an aspirational vehicle?

      They were certainly always priced as one.

      • 0 avatar
        DC Bruce

        I would say through the 1960s and mid-1970s, Mercedes was an expensive to own, unreliable European car that was owned by people who wanted to be seen as “different,” not “wealthy,” but different. Given their weak (usually added on) air-conditioning systems, they were at a serious disadvantage in the warmer parts of the country, where air conditioning was fast becoming a must-have in a “luxury” car, and, of course was available in lots of non-luxury American cars.

        And, never forget that lots of European taxis of the era were Benz sedans.

      • 0 avatar
        MarkP

        You have to be old enough to remember, but there was a time when a MB looked like a Rambler. They had very close to zero aspirational value, pretty much like a Rambler.

        Of course the 300SL was a very different proposition, but I don’t think the halo extended all that far.

      • 0 avatar

        DC Bruce: “And, never forget that lots of European taxis of the era were Benz sedans”
        This is still true today. You will also see a lot of Benz trucks in all sizes on the road.
        I’d consider that as an asset.

    • 0 avatar
      Numbers_Matching

      Mercedes was always a highly engineered, overbuilt solution compared to the overstyled, flamboyant land yachts of the day. They were (once) aspirational due to substance, not perception.

  • avatar
    danio3834

    “Premium” is supposed to incense some feeling of value, however all it really means is you pay more.

    • 0 avatar
      dave504

      Most people associate premium with a badge, even though features on an S-Class will be available on a Kia in a year. Being that most of the “premium” badge vehicles are leased, not purchased, I fully expect to see a ton of twentysomethings driving the 4-banger 1-series (and eventual Mercedes competitor), none of whom could tell you which wheels drive the car, if their lease package includes the real leather, or even the difference between an M1 and 1M. But, hey, they drive a BMW and you drive a Focus.

      As a side note, I believe that the huge proliferation of new and used luxury vehicles on the road in a time of major global recession is solely due to our zero interest rate environment. The day of reckoning will be difficult for these brands when interest rates finally go back to sane levels and luxury car sales revert back to the mean.

    • 0 avatar
      icemilkcoffee

      Don’t underestimate the selling point of ‘I paid more’. Why do you think there are so many women clutching $1000 dollar LV handbags, which don’t do anything that a $35 handbag wouldn’t do?

      • 0 avatar
        kvndoom

        “Vanity, definitely my favorite sin.”

        -Al “Satan” Pacino

      • 0 avatar
        corntrollio

        The LV thing is pretty funny. I don’t see many people who actually have the money to consume this kind of stuff carrying Louis Vuittons. It’s usually tacky people who really should have spent the money on paying down their debt and living in a better apartment, rather than carrying a label.

  • avatar
    tatracitroensaab

    I think that it’s not as much as a problem as you’d think – nobody would look at a 1 series, b class, or the like, and think of anything more than “semi luxurious hatch.” these don’t really undermine the brand because it’s really a whole different species from the rest of the cars that they’re peddling. It’s the compact 3 series/a4/c class segment that has the power to wreck a brands image. These cars have been essential to the profits of these brands, because it’s “affordable luxury” – its a relatively affordable status symbol, like fancy sunglasses, handbags, and shoes. These things are becoming ubiquitous, which is really hurting a brands exclusivity, and the elite will begin to buy other more exclusive “less mainstream” status symbols. This happened with Caddy – in the 70s they extended their volume too much, and got record profits in the short term, but in the long term it hurt their prestige and people turned to BMW and Mercedes. I think that the new realm is going to be the “upper Mercedes” level items – Porsche is going into this sweet spot, and Maserati is there too. Arent they making a three series fighter? I forgot

  • avatar
    Zackman

    Nowadays, “premium” means to me real wood interior trim, chrome shifting and other various levers and buttons, not to mention buttery-soft leather and all the acroutments that comes with it.

    A friend’s newly-purchased 2008 Lexus fills that bill, but I can’t see myself in that type of car. My 2012 Impala LTZ is the fanciest automobile I have ever owned, but I don’t consider it a “premium” car at all, just a nicely-appointed Chevy.

    Really, to me, “premium” is more a price tag than anything else – unless it’s a Rolls-Royce Drop-Head coupe – now THAT’S “PREMIUM”!

  • avatar
    vvk

    Premium means attention to detail. In an average car, there are always little details that are not quite 100% perfect. It could be the absence of a cargo cover or a trunk light or variable intermittent wipers. In a premium car, these little annoyances are minimized.

    For example, a BMW tail light is smart enough that if the brake light bulb burns out, it will use another red bulb instead. So you are never left without a functioning brake light. This costs money, along with hundreds of other little details like that. This money is missing on less expensive cars. Once you start using a premium car like that, you start noticing these details, even if all you have is a bare bones base model with wind up windows.

    “Premium” has absolutely nothing to do with “features.” It has to do with performing the primary function close to 100% perfect. An Asian refrigerator may have all kinds of LCD screens, LED lights and other “features,” while a Fisher&Paykel fridge may be very plain and simple. However, which one is “premium” is determined by how well it keeps the food temperature constant and how quickly the ice cream spoils.

    • 0 avatar
      slance66

      This nails it for me. There are many unseen things. For example, when selling my 10 year old 2001 Volvo, the purchaser had me take it to his mechanic who had it on a lift. He pointed out the stainless steel exhaust to the purchaser. Then showed him a junk pile of rusted out exhaust systems from newer Camrys and Accords he had behind the shop.

      In my BMW I notice so many small things. Not just rain sensing wipers, but even the “fixed” speed wiper setting varies by speed. There are loads of thoughtful details like that. I don’t give a crap about the radio or nav. Yes, every Kia can add that, because it’s not a premium item. How do the doors close? Do you cut your fingers on the sharp edges of the plastic door bins? That’s what matters.

      • 0 avatar
        th009

        @vvk, @slance66, I’m very much with you. Interior design and materials, small details like damped glovebox doors and grab handles, nice toolkits, good tactile feel on the controls, real wood or aluminium trim, upholstered trunk lids, hidden grocery bag hooks in the trunk. As vvk said, it’s all about attention to the smallest details.

        My last two cars were both 7+ years old when I traded them in, and both still had perfectly functional original exhausts. Stainless steel, of course. And galvanized steel for the body.

        Whether a buyer is willing to pay a premium for these kinds of things is a very personal thing. I certainly am, though.

      • 0 avatar
        stroker49

        My 1999 Oldsmobile Alero had stainless exhaust! I agree, it is the details. If you look in the luggage compartment of a BMW it is beutiful. My Cadillac STS -05 has a nice interior but in the boot it looks like in a Chevvy. Maybe not important? Maybe not in the USA but in Europe we want it to be perfect everywhere.

      • 0 avatar
        corntrollio

        I’m with slance66 and vvk on this one. You can see the detail in the lighting, the way the grab handles are damped, the mirrors, the tactile feel of the materials, and many other things.

        Another example — while in reverse: (a) shifting the climate control to recirc so that fumes don’t enter the car, and (b) also running the rear wiper (on an SUV/wagon) when the front wipers are running.

    • 0 avatar
      Gardiner Westbound

      The premium priced Fisher & Paykel refrigerator isn’t that good at keeping food cold according to Consumer Reports. It has a poor reliability record. The BMW’s smart taillight is superfluous if it’s in the shop because the high pressure fuel pump has gone south again.

      • 0 avatar
        vvk

        Of course, the CR crowd is present and accounted for.

        I am an avid CR reader. I read it and do the opposite of what they say.

      • 0 avatar
        th009

        I have never owned a Fisher & Paykel appliance. But I will say that our Miele dishwasher fits the above definition of “premium” perfectly, with the attention to the smallest detail. (And it has, incidentally, been 100% reliable for 10 years now.)

    • 0 avatar
      bball40dtw

      From the criteria VVK and Slance have created, the Focus Titanium is just as premium as a 1-series.

      The Focus Titanium has a cargo cover, intermittent wipers, multiple “fixed speed” wiper settings, doesn’t cut your hands on the cargo bins, a stainless steel exhaust system, glavanized body, soft touch matierals everywhere, excellent NVH, etc.

      It just has a Blue Oval on it.

      • 0 avatar
        bball40dtw

        Just be honest and the BMW is premium and the Ford isn’t because of exclusivity. The income level of a BMW owner, on average, is probably higher than that of a Ford owner. BMW has the image of being a “finer thing” in life, even if being RWD and having a straight six don’t really matter anymore.

        It has nothing to do with features or build quality. Its about all about image.

      • 0 avatar
        Silvy_nonsense

        “I am an avid CR reader. I read it and do the opposite of what they say.”

        I’m going to donate some money to CR and ask that in return for the donation, they run an article cautioning people to never stick forks in electrical outlets. I’m happy to help vvk win the Darwin award he has been working toward his entire life.

      • 0 avatar
        burgersandbeer

        Have you sat in both a Focus and a BMW?

        After recently driving a Focus, my thought is the interior is overrated. With only 11k miles on this example, there were already rattles. The fake aluminum trim (I think that’s what it’s supposed to be), especially on the parking brake lever, was awful. The stitching on the steering wheel where you rest your thumbs felt sharp. Even though the seat was leather, you could hardly tell sitting in it. The upper dash was the rubbery, soft-touch stuff, but the upper door panel where I like to rest my arm was not. A moot point, since I couldn’t find a comfortable seating position to do this anyway. The padding on the actual armrest built into the door pull is embarrassed by the padding in the same spot on a Nissan Versa. I’m not sure if the intermittent wiper settings were speed sensitive like they are in a BMW, but the wipers themselves were the saddest little strips of rubber I’ve seen on a car in some time.

        To be fair, my comparison from BMW is an ’98 5-series, a car that makes even some newer BMWs seem cheap. Maybe a 1-series or even lower trim 3-series would be close to a Focus? Point is, I doubt it. The Focus is checking off luxury appointments on a spread sheet, but they aren’t integrated as well with the small touches that make the difference.

      • 0 avatar
        bball40dtw

        I’m not saying that the Focus is on par with the 5-series. There is a $30k difference between base prices. I don’t find it to be an aspirational vehicle or exclusive. The interior is much better on the 5er. My first car out of college was a 1998 5-series that I bought from my uncle.

        However, there isn’t much of a quality gap betwen a 1-series and a Focus. The gap that does exist is shrinking. There are some things I don’t like about the Focus interior, but nothing is a dealbreaker. As far as the wipers go, I don’t like the minivan wiper look, but they work extremely well.

      • 0 avatar
        krhodes1

        The current Ford Focus certainly is a premium offering in its segment in the United States. So is the VW Golf. Neither competes with BMW in the States, both compete with the low end BMWs in Europe. The Focus is also noticeably more expensive than other competitors that are not as nice.

        Something that has been brought up before is that ALL makes are trying to become more “premium” and thus make more money by having higher transaction prices. NOBODY (other than a couple of wingnuts on this board who SAY they would) wants a brand-new penalty box anymore. Plus realistically, if you can afford a new car AT ALL, you can afford something nicer than the stripper loss-leader advertising special. Used cars are the new entry-level cars, and why not considering how much more reliable cars are these days?

  • avatar
    PintoFan

    “Premium” is just price point combined with brand exposure. The cars have to be expensive enough to be a means of flaunting wealth, but at the same time not ubiquitous enough to seem common. I’m convinced that the overexposure of both BMW and Mercedes in the U.S. is driving the growth of Audi.

    • 0 avatar
      Dynasty

      That might be growing Audi growth.

      I wonder how many repeat customers Audi has? I’ve known three people who have driven Audis, and all of them could not wait to get rid of their car, and get something else.

      I think in general people get tired of doing what everybody else is doing. Then a trend doing something else develops. A saturation point is reached, and something new to aspire to is reached.

      Eventually this will come full circle and 50% of the cars sold in America will be GM branded…

      • 0 avatar
        th009

        @Dynasty, Almost all the Audi and BMW drivers I know are repeat owners. (I only know one MB owner, and he is a repeat owner as well.) But both of us only have anecdotal evidence …

      • 0 avatar
        DanDotDan

        My wife has a 2000 S4 and it’s the best car we’ve ever owned. There was only one problem in twelve years: the secondary air pump failed and was replaced under the emissions warranty. We’re looking to replace it with something larger and we test-drove the A6. Say what what you want about premium vehicles, but the A6 is nice, nice, nice inside. It’s the kind of car where you sit down and immediately feel like you’re being pampered.

      • 0 avatar
        corntrollio

        I know quite a few. There are forums of enthusiasts with even more people who have bought multiple Audis. It’s mostly the same with BMW owners too, from my experience. I know a few Mercedes enthusiasts too, but probably fewer than either of the above.

        Obviously there are people who rotate through luxury cars through leases, but that’s not everyone — there was data on this earlier:

        http://www.thetruthaboutcars.com/2011/08/shocker-premium-buyers-actually-lease/

  • avatar
    threeer

    “Bimmer” not “Beemer!” Anywho…

    The words “Near luxury” and “premium” are much-bantered around marketing terms. I’m sure there is quite a bit of overlap, and it depends on which manufacturer is spinning the tale. I think that it’s possible to have “premium” level vehicles in all classes…but it comes down to perceived value and if a person is willing to pay more for the rich, Corinthian leather in a subcompact or not…

  • avatar
    krhodes1

    Ultimately premium is like obscenity – hard to define but you know it when you see it.

    But I will take a stab at it – to be “premium”, a car has to be better than the class norm, not necessarily the best of the best of the best. A Golf is not nicer than an S-class, but it is a whole lot nicer than a Corolla or a Civic. Or a US-spec Jetta for that matter. Cleaner design, nicer materials, I would say even the much maligned 5 is a premium feature in that it produces effortless torque compared to the tiny Japanese motors. And yes, the Golf costs a little more. A 1-series hatch is even MORE premium than a Golf – it drives like a BMW after all.

    I’m not so sure volume matters all THAT much, at least at the volumes the premium makes are selling. BMW sells 250K cars a year total in the US, that hardly makes them ubiquitous. Maybe ubiquitous in certain neighborhoods… The Golf is typically among the best selling cars across Europe, and it is certainly considered a premium offering there. As is the 3-series for that matter.

    IMHO, Cadillacs problem was not volume per se, but how they achieved that volume. They became tarted up Chevrolets. They shared bodies and engines and interior bits with all the other GM brands, and had nothing unique to offer that you could not get in a Chevy. BMW and Mercedes do not have that problem. Audi used to, but VW has more-or-less corrected it. Even the Audis that share platforms with VWs are sufficiently unique looking and feeling that only car geeks like us know that they are Golfs underneath. And the Golf is a premium offering to start with.

    Which I suppose IS the secret – if you make the platform good enough for the really premium car, the lesser car can CADILLAC first, then dumbed it down a bit to make the Cavalier, instead of taking the Crapalier and sticking Cadillac badges on it.

    • 0 avatar
      corntrollio

      “Audi used to, but VW has more-or-less corrected it. Even the Audis that share platforms with VWs are sufficiently unique looking and feeling that only car geeks like us know that they are Golfs underneath. And the Golf is a premium offering to start with.”

      Well, in some cases, they used the same platform as the Passat too, although that hasn’t been the case since the B6 Passat came out. But you’re specifically talking about the A3 and TT I imagine.

      The main subtle difference in drive-train for the more expensive Audi models excluding the TT — i.e. everything now on MLB, which would be A4 and above — is that Audi is longitudinal, whereas VW is transverse. This means Quattro with Torsen. Right now MLB is Audi only, although the Porsche Macan would be MLB too.

      However, the smaller Audis, including the TT, will use MQB, which is transverse and uses Haldex instead of Torsen.

      Of course, the new North American Jetta and North American Passat have gone down-level a bit from the former premium positioning in order to increase volume. So far it seems to have been successful.

  • avatar
    Freddy M

    First of Derek, thanks for spelling it “Beemer” instead of the universally accepted spelling “Bimmer.” It’s not pronounced like “simmer” so don’t spell it that way! No offense, Threeer.

    Premium to my mind means higher levels of quality, standard equipment/toys and a more robust powertrain and better ride comfort/handling. But I recognize nowadays, that premium also implies what badge is on the car.

    In this case, I don’t think BMW or any of the other luxury automakers will risk terrible damage to their brand images by competing in the compact markets as long as they don’t attack the HEART of those markets. By this I mean offering a 1 series at a pricepoint that is intended to be a high-volume seller. As long as they position their product and price it accordingly to make a good profit on each unit sold while retaining an air of exclusivity through low volume sales, I don’t think they have to worry much.

    But it’s if they want to become the high sellers in that category, beating out the Corollas and Civics is where the will have branding issues which may hurt their higher end image.

    • 0 avatar
      th009

      Bzzzzt. Bimmers (pronounced the way it’s written) have four wheels. Beemers have two. It’s as simple as that.

    • 0 avatar
      TCragg

      If you are a member of the BMWMOA (BMW Motorcycle Owners of America), then “Bimmer” is the accepted spelling for a BMW automobile, and “Beemer” is the accepted spelling for a BMW motorcycle. Before I bought my R1150RT and became a BMWMOA member, I never knew the difference.

    • 0 avatar
      threeer

      Freddy…none taken (even if you are incorrect LOL)…as a long time member of the BMWCCA and former owner of several older Bimmers (those of the four-wheeled variety), the distinction was always pretty clear. Of course, out in the real world, “Beemer” took on the nomenclature for all BMW products thanks to Hollywood.

      In the end “premium” is in the eye of the beholder…

  • avatar
    JaySeis

    Out here in rural land means that buying premium labels you a ***king idiot for having to drive 2-3 hours one way for premium dealer service or pay for non-premium service (and no “premium” parts) locally. Ford, GM, Chrysler, Toyota, Kia are all local (Subaru and Suzuki was upon a time too, alas no more).

    • 0 avatar
      Silvy_nonsense

      Why would I drive 2-3 hours one way when I can just send a member of my household staff? Under-educated, ambition-deficient rural dwellers need menial jobs, too, you know.

  • avatar
    Pch101

    Automotive branding is a sort of ladder, and a luxury brand is defined in part by the top of the ladder, even if most of a brand’s customers never climb to the top.

    A good ladder will have three basic rungs and a specialty performance sub-marque. For BMW, that means 3/5/7 and the M.

    It isn’t a problem to have a 3-series priced similarly to a higher-end Accord, just so long as there are (a) two core nameplates above the 3 and (b) higher-end versions of the 3 itself. BMW has that covered, obviously.

    Some price overlap at the lower end of the range isn’t a problem. Complete price overlap would be, but that clearly isn’t happening here.

    • 0 avatar
      Luke42

      I’ve heard this view for my entire life, but the older I get, the less I believe it.

      I’m not sure if it’s because normal cars are genuinely comfortable and have all of the features that I would wajt from a luxury car, or because I’m both practical and a little contrary. Mabye a little bit of both.

      The ladder model fails to explain why my father drove Honda Accords for the latter part of his working life. The ladder model also fails to explain the Prius phenomenon (which is similar, at least in my house). People buy the Prius even when they can afford much more expensive car, and it’s far from the top of Toyota’s ladder. You can wave your hands and say it’s because Prius owners all want the image, or you can drive the car for a month and try to figure out what exactly would constitute an upgrade for a person interested in a practical and efficient daily driving appliance. The ladder hypothesis starts to look like Chutes and Ladders as soon as you acknowledge that it has more than one dimension, which it does.

      • 0 avatar
        Pch101

        “The ladder model fails to explain why my father drove Honda Accords for the latter part of his working life.”

        The luxury branding ladder doesn’t apply to mainstream cars such as Accords. There’s no need to have an $80,000 Honda in order to bestow credibility on the Accord.

        The three-rung ladder applies to luxury cars. The Germans have this model nailed (3/5/7 + M, C/E/S + AMG, A4/A6/A8 + S or RS). The Japanese are still trying to figure it out. Cadillac struggles with it, and Lincoln is pretty much out of the race.

        These are derivations of the Sloan GM North American model, but adapted for a global market. Rather than do it with five brands, the new way is to do it with one or two brands, and three core nameplates with closely associated identities. The idea is to brand the car, rather than focus on the nameplate.

      • 0 avatar
        corntrollio

        If GM plays its cards right, this could be ATS/CTS/XTS + V.

        These 3 on the ladder are “compact executive car,” “executive car,” and “full-size luxury car.”

        On this front, Lincoln doesn’t know what the hell they are doing, and Acura just seems to be re-badging Civics to create entry-level models (see ILX).

  • avatar
    marjanmm

    That approach worked in Europe. BMW 3, Audi A4 destroyed the mid size sedan market here.
    The combination of practicality of compact hatchbacks, “pensioners’ cars” image of mid size sedans and relative affordability of low end smaller premium sedans all but killed off the mid size sedan market in Europe.

    While it may not be easily describable, it seems “premium” is instantly and intuitively recognizable and appreciated by most.

    • 0 avatar
      Freddy M

      Interesting. Could that be why Ford’s new Mondeo is very Aston-Martinesque? To compete head on with the luxury brand offerings and take back the crown?

      • 0 avatar
        marjanmm

        I think that’s just a consequence of “one ford” strategy where Mondeo and US Fusion are the same thus Euro car inherits the design Fusion needs in the very competitive US mid size market.
        By far the best selling mid size car in Europe is Passat and it is the most conservatively styled car in history (including all Toyotas).

        It’s true non premium brands have been trying to up content in their mid sizers in Europe to try to compete with BMW 3, Audi A4, C class. Especially Honda with the Accord which is sold as Acura in US and Opel with Insignia sold as Buick in US (so both counting as somewhat premium in US) however it didn’t really work. Last year:

        16 Mercedes C Class 178,345
        17 BMW 3 Series 166,860
        20 Audi A4 162,085
        28 Opel Insignia 138,755
        181 Honda Accord 12,304

  • avatar
    Dan

    Premium begins and ends with plebes not being able to have one.

    • 0 avatar
      Zackman

      Class distinction, perhaps? True “first-class” vs. “coach” as on passenger trains in the distant past – and airliners, too.

      “Dogs and sailors keep out”!

      • 0 avatar
        raph

        Been to Norfolk Va in the 40’s I take it, my grandmother used to tell me how shameful she thought having a “dogs and sailors” sign in a yard was – followed by how she hated to see the end of segregation – ah. the good ol’ days when America was kinder, gentler, and more noble

    • 0 avatar
      azmtbkr81

      This is what disqualifies BMW and Mercedes. Sure, some of the higher end models could be considered premium but many who desire and eventually purchase entry to mid-range luxury vehicles are those who can scarcely scrape together enough to make monthly payments on the 5 year notes. If you have to forego a gym membership or a nice dinner out in order to make a car payment you are not driving a premium vehicle – no matter how soft the leather is.

      Premium means completely over the top and out of reach for all but the 1%: Ferrari, Aston Martin, Bentley, ’70 Hemi ‘Cuda, etc.

  • avatar

    I agree. In the U.S., at least, BMW and Mercedes-Benz and Audi need to think not just about extending their reach to lower customers, but about the ones they already have. Part of the allure of owning a German luxury car is that most people cannot afford one, or not a nicely equipped one anyway…

    • 0 avatar
      Luke42

      I’ve recently entered an income bracket where owning a BMW would be mandatory in some circles. I wont’t touch a german car, though, partly because I got burned by a Volkswagen, and partly because exclusivity isn’t admired by my friends. So, the exclusivity – and the kind of a-hole that is attracted to it – both detract from the value of the car to me personally. On the other hand, I like to be comfortable and I respect attention to detail – so I sometimes find myself asking if I mind looking like an a-hole in exchange for a premium interior. The answer is usually no, but not always.

      If German cars were so comfortable, reliable, and easy to maintain that people typically kept them for 20 years, then I might overcome my prejeduces. But if I want a reliable maintainable car with leather seats, I’m going to be driving a Toyota or a Ford (to pick two that are in my driveway). The affordability of these vehicles is a bonus!

      • 0 avatar
        corntrollio

        “If German cars were so comfortable, reliable, and easy to maintain that people typically kept them for 20 years, then I might overcome my prejeduces.”

        People who buy them sometimes do keep them that long. People who lease them obviously don’t. There are plenty of enthusiast forums that cater to people who own BMWs, Audis, and Mercedes of that vintage. I myself will probably end up getting a W126 Mercedes at some point.

  • avatar
    glwillia

    BMW and Mercedes aren’t really “premium” brands in Europe the way they are in the US–the 1 series and A class can be and are cross shopped against the Golf. Sure the S-class and 7-series are premium/luxury, but the lower models aren’t.

    Sort of like Toyota in Japan before the Lexus brand was used there–you could buy a Yaris or a Celsior, both wearing the same badge and from the same dealer.

  • avatar
    el scotto

    When C classes and 3 series are heavily advertised as lease fodder, I think that takes some of the “premium” away. I think a great many of the lessees could give a fig about the excellent engineering of either car. What they do care about is that they have an “exclusive” German car with low lease payments that goes nicely with their designer handbag or Italian suit. The car becomes a prop in their cliched yuppie lifestyle. They are almost never sticks. My apologies to the enthusiasts who have 3 series and C classes. You have to glean through the lifestyle chaff to find those who are enthusiast wheat. I find lots of the enthusiast wheat on here :)

  • avatar
    onyxtape

    “Premium” is never about features or speed or performance.

    It’s all about exclusivity. I have and you don’t have.

    I know it’s fashionable on TTAC to say that 3ers and C-classes are everywhere, but in the grand scheme of things they’re still quite exclusive.

    The new thing I hear from my wife’s female acquaintances is that Louis Vuitton has now fallen out of favor with them because “everyone” now has one. They’re now latching onto Chanel because fewer people have them. And they don’t even try to rationalize it with some other excuse – that’s the actual reasoning they use. I guess in that sense, men aren’t that different than women – we don’t want to be seen wearing the same thing.

    • 0 avatar
      el scotto

      $4154 down and 429$ a month lease doesn’t say exclusivity to me. 335i Sedan lease for zip code 22314 (Alexandria, VA.) They’re all over DC, check the parking lots at Metro stations. Then again you can get Kate Spade bags at the base exchange.

      • 0 avatar
        Darkhorse

        When the average government apparatchik makes over $100K/year what do you expect? Contractors are closer to $200K.

      • 0 avatar
        MarkP

        Darkhorse, you might find those rates in the DC area, but not in many other areas with high government/contractor employment. Contractor employees do generally make more than a government counterparts, but it is nowhere near a factor of two. And $200K a year for an employee of a government contractor is far, far from the average. Higher executives sure, but, that’s way above the average.

      • 0 avatar
        onyxtape

        MarkP: Yeah, damn those greedy public school teachers driving those fancy foreign cars with those fancy foreign names like Elantra and Sorento.

    • 0 avatar
      Silvy_nonsense

      Premium and exclusive are often related, but they are not the same thing.

      Just because you have the money for initiation fees, dues or tuition doesn’t mean you’re going to get into the nice country club or private school of your dreams. If just any rich fool can waltz in and buy something, that something, whatever it is, isn’t exclusive.

      Premium is related to the price of goods or services – anyone can have them if they simply scrape together the money. Exclusivity is related to the relationships you must have in order to get access to the goods or services – simply having the money isn’t enough and may not even apply.

      • 0 avatar
        krhodes1

        We seem to be on the same page, but I disagree that things are premium BECAUSE they cost more. I think it is more the other way around – it costs more because the higher level of attention to detail is more expensive. At least when we are talking about cars – ladies purses and other fashion accessories baffle me.

        To use our usual whipping boy, regardless of what one may think of it’s reliability, durability, or desirability, the reality is that a 3-series is a FAR more expensively engineered piece of machinery than a Camry. Far more attention to detail in every way from the basic engineering structure to the suspension to the brake system to the engine to the materials used. Are they perfect? Oh, Hell, No. BMW could do a better job of engineering individual components. They could do a better job of quality control. But TANSTAAFL always applies, if you built it to last forever no one could afford one. Even Camrys don’t last forever.

    • 0 avatar
      krhodes1

      I think “premium” and “exclusive” are two different things. Target is “premium” compared to WalMart, but is not “exclusive” for example. A Golf is in no way exclusive, but it certainly is premium.

      Entry level Germans are mostly premium, but only a little exclusive. Though realistically, a car that typically retails in the low-mid-40s is NOT something everyone can afford, even on a subvented lease. NOBODY buys those stripper $35K C-classes, just like no one buys $9995 Versas. You still need a pretty substantial income. The average income of a 3-series buyer is something like 2X the national average household income. As you move up the model ladder, the cars become more and more exclusive.

      • 0 avatar
        Silvy_nonsense

        “As you move up the model ladder, the cars become more and more exclusive.”

        No, they don’t. You can argue they become more expensive (and therefore more premium), but if anyone with money can buy something, it’s not exclusive, it’s just expensive.

        Despite what they may market to the contrary, Rolls-Royce does not offer an exclusive product. They will sell one to anyone who has the money (and factory customize it with horrible paint and interior colors if requested). They don’t turn anyone away and aim to increase production over time as demand increases.

        Ferrari, in contrast, offers certain exclusive products from time to time. For example, the F40 and F50 were produced in limited numbers and not just any rich person could buy one. You had to be a known, long time customer and vouched for by a dealer before the factory would allow you to have one. Ferrari excluded customers by both under supplying the market and actively choosing certain customers based on factors other than ability to pay for the car.

        For a product to have the cachet of exclusivity, there needs to be a gatekeeper doing some actual exclusion.

  • avatar
    stuntmonkey

    Those Canada spec ‘luxury-edition’ E46’s and E90’s either look heinous or dirt cheap on the used market. Very inexpensive way to get into a BMW, but virtually no point. The chassis dynamics might be there, but the power to weight ratio is off, and the amenities are sparse. The current CDN 320i lists at $35,900 CDN, which is a full $8000 under the 328i.

    The much maligned ILX, with the 2.4l and 6spd, adds to that moon roof, real (albeit plebeian) leather, and a lower lb/bhp ratio, and lists for $5000 less.

    Since cars are depreciating costs, any amount that you pay over what you really need is a luxury. In the truest sense of the word, ‘premium’ means that the manufacturer gave themselves the luxury of making a better product for the heck of it, also other and above what is required. Like how they used to paint and finish the wood in a Steinway piano… *where it was attached to another part of the wooden frame.*

  • avatar
    espressoBMW

    “Premium” is always the next step (or more) up from what you currently own. A 3-series used to seem like a premium car to me…till I bought one. It’s all about your personal perspective.

    I think this can be true for most people regardless of what you drive. Here’s what a lot of us do: We aspire to own a premium car. The big day finally arrives and you now own one. What do you do next, you join the car club and/or forums (BMWCCA, Porsche, whatever) and surround yourself with like owners. At same time, you become complacent in your “premium” car as you drive it to and from work every day. In so doing, you become more familiar with models that are more premium and/or rare and you realize what you have doesn’t seem so “premium” any longer and the next purchase is planned.

    Of course, there are those that are not motivated or interested in cars and drive Camrys all their life. Not that there’s anything wrong with that. It takes all types.

  • avatar
    Robbie

    It seems inevitable that Mercedes and BMW will see their brand equity diminish, since they no longer exclusively sell items that hoi polloi cannot afford. Right now, they are effectively selling off their brand name for cash and making a killing doing so; but, both will have to face Fordification down the road.

    • 0 avatar
      Silvy_nonsense

      When Mercedes started selling the 190 decades ago, it didn’t exactly slow down sales of the 300 and S-class. Broadening the product line down market has not slowed sales of vehicles at the top end of the market. If your argument was correct, sales of expensive BMW and Mercedes products would have been dwindling for year, but sales results show the opposite.

  • avatar
    carguy

    Derek, for a kid growing up in Germany in the 70s your insinuation that making small cars is a down market move makes little sense as back then BMW mainly made compact vehicles. The 1800 and the 2002 and later the 3 series were small, light and agile vehicles that attracted baby boomers who didn’t want the stodgy fare from Opel, VW or Mercedes. Realizing that too much revenue was dependent on the 3 series (and fearing the boomers would grow out of smaller vehicles) they branched out into larger cars – although at first not that successfully. Fast forward to today when BMW has a bewildering array of luxo barges for middle aged men and SUVs for their wives. While they are doing well in that segment, rising gas prices and traffic congestion are dictating the trend to smaller more efficient vehicles and BMW is once again adjusting its direction to make sure that they have a product for younger urban dwellers. To suggest that this somehow is analogous to brand erosion is possibly a misunderstanding of BMWs corporate history.

  • avatar
    dolorean

    “…a base model turbocharged BMW 1-Series is only 500 euro more than a mid-range Ford Focus with a similar powertrain. The quality gaps between the two must be nil, otherwise Ford risks losing customers to BMW.”

    I don’t believe this argument holds water. You’re assuming that both cars appeal to the same buyer, which I don’t think would be the case. The Focus, especially in 5 door guise, would appeal more to an owner with a small family (one to two small children) or an older couple who like to travel with their dogs or all their luggage or who like antiquing. The 1 series is perfect for that new hire in a corporation or banking or wall street and wants to show the world he’s made it, at least that far. The 1 would also appeal to those older DINKs who want a fun car for the weekends.

    The Focus is the practical car, the 1 series the fun one. For example, I wouldn’t want a rear wheel drive anything if I live in an area with moderate snow and ice conditions in the winter, or if I traveled a lot with a lot of luggage or my contracting tools, or if gas mileage was an issue. Maintenance, tires, premium gasoline, all are reasons to go with the Focus over the 1. Not a good comparison at all.

  • avatar
    86er

    Since car love is 99.9%* subjectivity, I will tell you what “premium” means to me.

    Prodigious:

    Room (also see: Comfort)
    Torque
    Wheelbase
    Comfort (also see: Room)

    *Percentage was determined subjectively.

    • 0 avatar
      rwb

      What about quality? Attention to details?

      Obviously you’re not wrong, but those are the things that I’ve always thought separated any “premium” product from the rest, and all other things are secondary, so I’m curious to hear the reasoning.

  • avatar
    Wscott97

    Around here in So. Cal, BMWs and Mercedes are just as common on the streets as a Toyota Camry. With so many people driving those cars, the thrill of owning one is nothing special. My friend is the repair shop manager of one of the local Mercedes Dealerships and he told me that he would never buy a used C class or 325I. People can afford the cars but can’t afford to maintain them. What’s the point of driving one of those “premium cars” with all those little details when you either have to pay a premium price new or buy a hardly maintained used. I much rather buy top fully loaded Optima with more feature and styling for half the price. (You get more complements and looks with a fully loaded economy car than a basic no option premium car.)

  • avatar
    Landcrusher

    I’m afraid premium now means you better sell it soon after the warranty runs out. I predict a trend back to longevity as a desired trait, or at least cheap to repair. I don’t know when the current trend of upping parts prices and planned obsolescence will end though. Could take years or even legislation to stop this madness.
    I’m not sure most people have caught on yet. It is moving down market though.

    • 0 avatar
      Dynasty

      I’ve caught on. The first thing is brake rotors need to be built to last at least 100K miles before needing “turned”.

      I saw someone comment on here about their 5000 lb Mercedes SUV needing new rotors at 30K, and someone else commenting that is what happens when you want a 5000 lb car to brake like a sports car.

      No. That’s what happens when Mercedes Benz cheapens out on $4.00 worth of cast iron. Which turns into an extra 500 dollars for a new set of rotors every 30K..

      • 0 avatar
        corntrollio

        “someone else commenting that is what happens when you want a 5000 lb car to brake like a sports car.”

        That was me. Until you change the laws of physics, if you want sports car-level brakes, you’re going to have to pay for them…

        On non-SUV German cars, the brakes last a lot longer.

  • avatar
    86er

    In today’s market, “premium” seems to mean what everybody wants but nobody wants to really pay for.

  • avatar
    George B

    To me “Premium” means pleasing to the senses with fewer cost reduction compromises. A brand gets devalued if it makes too many visible cost reduction compromises to get the price down and volume up. A premium car uses real metal with secondary machining while a non-premium car uses molded plastic parts that pretend to be metal. Premium means the pleasant aroma and texture of real high-quality leather while non-premium uses vinyl pretending to be leather. More engineering time was spent tuning the suspension on a premium car while a non-premium car is more likely to react to road imperfections in an unpleasant way. The interior design of a premium car shows attention to detail to make the overall layout aesthetically pleasing while a non-premium car has more parts bin parts that just don’t match.

    A friend called yesterday trying to sell me a Hyundai. Claimed that they were offering exceptionally good deals to move inventory before the end of the month. I told him that Hyundai didn’t offer any car I wanted even if the price was low. In my opinion Hyundai tries too hard to check off all the boxes for standard features while compromising too much in the overall aesthetic impression. I would rather pay a little more for a car that didn’t look as cheap.

  • avatar
    Eric 0

    I remember when BMWs were not premium, and not widely desired. My first car, in high school, was a BMW 2002 that had cracked vinyl seats, crank windows and no air conditioning. It was not in any way “Premium.” It had a 4 cylinder engine that made maybe 100 hp, and it is to this day the best driving car I have ever felt. This is the car that started it all for BMW, and the reason why the 3 series, far from being brand dilution, is still considered BMW’s soul, and their most important car. But a new 3 series is bigger than a 5 series from the eighties. The 1 series is not really a successful attempt to update the 2002 or even the E30, because modern safety features and the 3 series chassis it’s based on make it too heavy, but it is at least an attempt. Far from brand dilution, compact strippers like the 1 series are essential to the brand.

    • 0 avatar
      DC Bruce

      I almost bought a new 2002 in 1974 — one of the dumber things I missed out on (bought an RX-2 rotary instead, which was fun in its own right, but not a 2002). I remember in the summer of 1969, I was living and working in LA with my college roommate. His sister had received an extremely generous insurance payment for having been a passenger in a traffic accident that barely injured her. It was enough to buy a new car. He and I tried to talk her into a new BMW 1600 (the lower-powered version of the 2002), but she ended up getting a six-cylinder Camaro instead.

      BMW’s advertising distinguished it as the enthusiast’s German sedan, pointing out such features as double-jointed rear axles on its independent rear suspension, unlike Mercedes, single-jointed swing axles, etc. It also could suck the doors off of any British sportscar except the E-Type. The 320i and its progeny were the successors to the 2002. In the 1980s, young, affluent urban professionals discovered these cars in droves and, at that point, BMW did become aspirational.

      I’ve thought about replacing my Z3 with a 1-series, but the back seats are not suitable for adults and the base model trim reflects obvious “built-to-a-price” thinking. The extra money for a 3 series seems well invested, and not that much of if is required. The closer on the deal is the 1-series awkward styling. The new 3 is a little bigger; perhaps the new 1 should be a little bigger, too. Then it would make more sense.

      • 0 avatar
        Advance_92

        You can also credit Max Hoffman’s business plan for BMWs he imported in the early 70s, ordering strippers with big engines and selling them for a low price when the 2800s with self leveling suspensions and the like were too expensive. It’s no coincidence that prices went up (and as with the 320 and 528 performance dropped, blame CAFE all you like) as soon as BMW started importing cars directly in the mid 70s.

    • 0 avatar
      krhodes1

      But when it was new, that 2002 certainly WAS premium in comparison to other similar cars on the market. Compare it to the very similar but much cheaper Datsun 510 for instance. The Datsun was a terrific car, but it was also a cheaply built tin box that rusted 2X faster than the BMW (and that is saying something). Or compare the 2002 to the European Ford Escort of the time – same thing, the BMW cost more but is was also rather more sophisticated and better built.

      I agree very much with those that have said it is the little things and the attention to detail that make a car premium. I’ll even go so far as to say that those mid-90s Camrys were premium cars. They had that attention to detail that has been lost in the name of cost-cutting. But they were EXPENSIVE back then too.

      • 0 avatar
        Eric 0

        It may be that a true definition of a premium brand is their ability to charge more for a product that does not have more features, or better performance on paper. My 2002 certainly would have cost more new than some Detroit cars of the time that had air conditioning, quadrophonic stereos or what have you. The Prada empire was built on utilitarian black NYLON bags that they managed to charge a fortune for. Sony managed to charge a “Sony Premium” above their competitors similar products for years. Brand dillution occurs when people stop believing that this premium is buying them something special.

    • 0 avatar
      corntrollio

      Did you have a crank sunroof too? My buddy’s 2002 did, and so did another friend’s 1980 320i.

  • avatar
    iainthornton

    I’ll quantify it the best way I know how.
    I have a 6 year old Vauxhall Corsa. It’s a good car with alloy wheels, leather seats, Bluetooth etc.
    I have a friend with a nearly new Audi A1 with comparable spec (but no leather) and an engine of the same size.
    My Vauxhall is more comfortable, marginally quicker and more economical and in fact generally more reliable. But I wouldn’t describe it as premium (it’s better, but not premium). Just little messy touches which make it feel like it wasn’t finished. The nasty clips securing the boot floor, for instance. The whirr of the fuel pump priming. The ugly, cheap key. It’s just attention to detail. The product doesn’t have to be better – it just has to feel more complete.

  • avatar
    jacob_coulter

    The paradox is much of the “aspiration” is the fact that not everybody has access to it. Once you open the floodgates, you can ruin a brand very quickly.

    If Rolex started selling their watches for $500 a piece (they could still easily make a profit with that type of pricing BTW) they would sell a boatload, but in a few years, nobody would care, it would be like owning a Seiko watch. Rolex has decided instead to play the “long” game and raised their prices to nowhere near a “reasonable” profit margin so for generations it can be a symbol of wealth. They make a $400 watch and charge $6,000 for it.

    As far as car brands go, I personally think Porsche ruined a lot of the cache by offering cars like the Boxster. I don’t have any numbers or charts to quantify it, but being a Porsche owner now has about the same barrier of entry as a Camaro. I would be willing to bet a majority of civilians wouldn’t be able to tell the difference between a $100k 911 and a $40k Boxster without a badge to help them.

    My opinion is this type of thinking is an unfortunate part of human nature, but I think it’s foolish to ignore if you’re a brand.

    • 0 avatar
      packard

      The price of Camaros must have really gone up- there is no such thing as a “$40K” Boxster. The average cost is mid-$50Ks. Go on the Porsche website and build one. The options can easily add $20K to the base price.

  • avatar
    Eric 0

    I think the association of a certain brand with “aspirational premiumness” as opposed to a certain level of quality is a western, and particularly American mindset. European and Asian manufacturers have had to play to this mindset in order to be successful here. As they became aspirational brands here, BMW and Mercedes stopped exporting the budget smaller engined versions of their cars, and some small cars altogether. Toyota, Nissan and Honda had to invent entirely new brands in order to export their more premium domestic products such as the Toyota Crown and Honda NSX. Japanese companies in particular seem to take pride in working hard to produce a quality product at every price point. Seiko makes watches that range from under $100 to Seiko Grands that are priced in Rolex territory. No one in Japan would think a Seiko Grand was “just a Seiko.” or a Toyota Century was not a premium car. It’s just not the way they think. This attempt to capture all price levels under a single brand is common to every Japanese company I can think of, from Toyota to Sony to Yamaha. I think this universality is what Ferdinand Peich was reaching for with the Phaeton.

  • avatar
    genuineleather

    Let’s not conflate “premium” with “luxury”.

    Premium is within reach of the masses. In fashion, this is referred to as “contemporary” or “bridge” clothing (see: Coach, Theory, Armani Collezione). The quality may be better, the materials superior, and the brands shinier, but they are not the ne plus ultra of their category. True aficionados recognize most the entrants in this category as merely “lifestyle dressing.” The C-class, 3-series, all Acuras,and 95% of Audis are found here.

    Luxury is not. It is expensive, exclusive, and special (see: Chanel, Kiton, Giorgio Armani). In other words, the best offered. S-Class/7-series are luxury cars, as are some US-spec midsizers. Acura, Lincoln, Cadillac, and possibly Infiniti still don’t compete in this segment, and thus cannot be seen as true “luxury” brands.

    • 0 avatar
      Eric 0

      Right, but the Japanese do not really have luxury brands, so much as luxury products, like the Toyota Century, or Seiko Grand. The Germans also don’t really have Luxury brands, (at least not cars,) although they own all of the once British luxury brands.

  • avatar
    ajla

    H6-V8-V10-V12.

  • avatar
    bbbuzzy

    Here’s a good example. Your value system drives you to support Toyota and Ford, yet you admit there are things like “attention to detail” and a “premium interior” that you have some interest in paying for. Lexus and Lincoln are your solutions, “premium” versions of things that matter to you.

  • avatar
    CelticPete

    An inline 6 and RWD doesn’t matter anymore? Wow I didn’t know time could defeat physics. LMAO.

    For my money – the German premium cars for the most part do FEEL more premium. They really manage to balance sporty and comfortable in a way I haven’t felt in most Japanese or american cars.

    For me a Caddy SRX4 didn’t feel more premium then a Ford Edge..when it comes to how it drives. For my money no FWD car is premium – only AWD and RWD need apply.

    This of course spells trouble for the German luxury makes as they plunge into the world of FWD hatches. They would do well to let the everyman brands handle it – like Mini and VW. For each FWD warmed over Focus they sell – they dilute the brand identity.


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