By on January 23, 2013

After a long slog through NAIAS and getting TTAC’s house in order for the new year, I was delighted to see the response to my first big endeavor of the year, my Generation Why piece. But with 174 comments and multiple tangents, I wanted to open up the floor to clarify a few things.

1) I should have been more clear in my thesis. While I highlighted both the BMW 320i and the Mercedes-Benz CLA, due to having both of them debut at NAIAS, I do not think they can be weighted equally

2) The 320i is really not that drastic of a departure for BMW’s North American product range – or world product range for that matter. As I mentioned, Canada has had a 3-Series model below the 325/328i for over a decade. This model is actually fairly spartan in its options and features (at least the E46 and E390 variants were) and it’s not unusual to find stick shift models purchased by older guys who just want a fun sports sedan. We all know that the majority of these cars in the U.S. will not be equipped like this, but the point remains the same – it’s not such a departure from BMW’s past ethos. Unfortunately, a number of commenters seized upon the 320i example – to the point of turning it into a strawman – as a means of criticizing my thesis (that a premium auto maker’s quest for volume and short term profits will ultimately erode that brand equity over the long term).

3) I should have been more clear in my piece that the product that’s really in danger of doing damage is the Mercedes CLA. The 320i is ultimately a 3-Series, and part of BMW’s core range. The CLA on the other hand, is a strange bird for Americans. It is a stubby, compact car with odd proportions. For those in the know, it is a front-drive, four-cylinder Benz, something that those types will equate with a cheaper car. For those who don’t know, it’s a Mercedes, but it’s small – and small does not mean premium to many American car buyers. Yes, Mercedes and BMW are full-line car companies in Europe. But merely having a car in Europe is a privilege  Anything larger or more expensive than a Golf is a luxury, and that’s why the A/B-Class, 1-Series and A3 work over there. They are right-sized, but pricey enough to let everyone know you’re not clipping Carrefour coupons.

4) I still re-affirm my belief that allowing too many people to obtain a premium product harms its very nature. Let too many people into your exclusive nightclub and it suddenly becomes passe. If too many people can buy your premium clothing line at T.J. Maxx or Marshalls, its seen as a mass-market product, or worse, something for poor people. I’m fairly agnostic when it comes to “brand values” or “heritage” – that stuff is just pap cooked up by suits and sold to wide-eyed types as a marketing narrative. I find it conceivable that, in such a crowded, competitive marketplace, traditional Mercedes customers could abandon the brand if too many undesirables are seen as entering the brand via the CLA and other lower-end cars. In more affluent communities, there are already soccer moms driving AMG SUVs merely because they are more expensive than the more pedestrian GL550s and ML320 Bluetecs. If this is the trend, then how much more damage can a $30,000 compact do?

 

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130 Comments on “Generation Why: BMW And Mercedes Ignore Coach At Their Peril, Part II...”


  • avatar
    hf_auto

    It’s worth bearing in mind that the stereotypical “traditional mercedes customer” is driving an 80s-90s vintage model. All of the big mercedes fans I know gave up on the brand in the 2000s- I think the crap quality of the S-class during that period did far more damage to the brand than the CLA ever will.
    I personally don’t see anything wrong with the CLA as a nice entry point for young professionals that will eventually move up the range if the CLA treats them right. It’s not like mercedes is moving the “traditionalist” S or SL downmarket. I also don’t see FWD as a bad thing- other than the AMGs, I’ve never seen mercs as driver’s cars since the cosworth 190Es, so I don’t care which wheels are driven.
    Finally, let’s not forget the urban market and how they see vehicle size. I live in downtown Seattle and would pick a smaller CLA over a CLS/E/S every day of the week regardlesss of price.

    • 0 avatar
      28-Cars-Later

      Good point about this mini-Benz for urban dwelling, but if you weigh this market over the others I doubt Mercedes find significant growth enough to justify damage to the brand’s image in the other markets.

      I also see the 80s and 90s Benzes around as well, I assume this is because they still run properly without a bi-weekly trip to the dealer.

      • 0 avatar
        hf_auto

        Yes, it’s a fine line to cheapening the brand, but I think a small car could be done right without hurting the Mercedes brand. It’s a little hard to describe concisely, but what I’m trying to say is a smaller, less expensive (not cheaper) car isn’t a bad thing as long as they are building the “Mercedes of small cars”. Because the US market likes to buy it’s cars by the pound, a smaller car probably HAS to be less expensive. I don’t think a traditional customer would frown on a future Mercedes product just because they built a smaller car. In short- the CLA needs to be the polar opposite of the Jaguar X-type.

        The older benzes definitely don’t seem to have the same disposable “quality” of the 2000s models. The other thing that was apparent to me riding around in my in-law’s 500E (the O.G. Porsche sedan, not to be confused with E500), is that those cars felt damn special. Not fun, luxurious, elegant, etc, but SPECIAL. The soul of overzealous german engineers oozes from every part of that car. Vacuum-actuated door locks, wiper mechanisms that are orders of magnitude more complex than they need to be, indestructible leather, etc.- old Mercs had all kinds of features that asserted human-kind’s intellectual superiority over the rest of the animal kingdom. You sit in an S65 AMG today, and it is just a sea of CAD-designed, injection molded parts made with softer plastics than a Ford, a huge engine, and all the tech-gadgets from the Bosch, TRW and Continental catalogs thrown in for good measure. I generally don’t subscribe to the “they don’t make ‘em like they used to” mentallity, but with Mercedes I can’t shake that feeling. The first E55 AMG was the last great mercedes in my book, and the commoditization of Mercedes started in 1999 with the W220 S-class. From that perspective, how much damage can a CLA do?

      • 0 avatar
        darkwing

        @hf_auto: I agree. Plenty of people who wouldn’t be caught dead in a Cruze are happily tooling around in Volts. They’re statement cars, yes, but part of that statement is “this car isn’t cheap”.

      • 0 avatar

        That’s silly. The Cruze is a fine vehicle, and I actually think the clean styling makes it look more upscale than it really is…

    • 0 avatar
      glwillia

      The W124 500E was definitely a driver’s car as well.

  • avatar
    Sundowner

    I don’t disagree, but from the other perspective, a car maker has to sell a certain number of cars just to survive as a brand. Audi has learned this and adapted with the use of the MLB platform: you can’t make a profit selling 1500 A6′s a month for $55k and you certainly can’t help but lose your shirt on 500 A8′s a month,even at $90k unless they liberally canibalize parts and share R&D costs with the $35k A4′s and Q5′s (really an A4 wagon) that sell 50,000 a month combined.

    It’s a cheapening of the brand, but it’s a survival tactic, too.

  • avatar
    28-Cars-Later

    I completely agree with your thesis.

    also typo:

    “The 320i is ultimate a 3-Series, and part of BMW’s core range.”

    I’m thinking you meant ultimately

  • avatar
    Pch101

    Between them, BMW and Mercedes’ have 5% US market share. That means that 19 out of every 20 vehicles sold in the US are being sold by someone else. They aren’t exactly common cars, despite their relatively strong growth in share.

    If they had the US sales volumes that they used to have, they would fail. Today’s global economy won’t permit an automaker to sell just a few cars without charging a substantial premium, i.e. six figure prices per car. And even prices well above $100,000 per unit don’t assure an automaker of commercial viability — consider Aston Martin as an example of how prices at a quarter million dollars or more aren’t necessarily enough to create a viable business.

    • 0 avatar
      geeber

      I wonder if BMW and Mercedes seem more numerous because both companies do a good job of maintaining brand identity and sharing common styling cues throughout their line-ups. This is particularly true among their passenger cars.

      Both brands seem pretty popular around here, and I don’t live on the East Coast or California. Their VISIBILITY seems out of proportion to the market share you quoted (which I do not doubt is accurate).

      Ford may sell lots more vehicles, but no one thinks a Focus looks like an F-150 or a Mustang.

      • 0 avatar
        Pch101

        “I wonder if BMW and Mercedes seem more numerous because both companies do a good job of maintaining brand identity and sharing common styling cues throughout their line-ups.”

        That’s certainly part of it. But there’s another issue here, namely one of selection bias, i.e. people tend to see what they want to see, and disregard the rest.

        Even if BMW and Mercedes were to collectively double their US market share, they would still be at only 10% of the new vehicle market. That just isn’t that very high. Volume poses no threat to either of their businesses; as is the case with every luxury automaker, the key is to maintain a product lineup that remains faithful to the branding story (read: avoid building their version of a Cimarron.)

        This notion that a product can only remain exclusive if virtually no one buys it is not only inaccurate and ironic, but foolhardy. US market share for SAAB peaked in 1986-7 at 0.3%. Given their price points, that simply wasn’t enough volume to create a sustainable business. They became so exclusive that they’ve excluded themselves out of existence.

  • avatar
    ott

    When I first saw a picture of the CLA in silver, it looked hideous to me. Above, in red, it’s actually really nice. It’s amazing what the right colour can do…

  • avatar
    cdnsfan27

    As a MB salesperson I am very much looking forward to the CLA’s arrival and the shift of C-Class production to Alabama. The CLA will bring in some new, and more importantly, younger clientele that will slowly move up the MB food chain. A 30K MB, especially if well equipped, will sell well. The C-Class will move upscale a bit, as will the E-Class. As a result we should see higher volume and hopefully more gross especially in the C-Class due to a lower cost of production.

    • 0 avatar
      28-Cars-Later

      Wasn’t this low end approach tried once before, that small hatchback Mercedes offered about ten years ago?

    • 0 avatar
      Synchromesh

      As a potential customer and somebody who these cars are aimed at, I’m very much looking forward at pointing and laughing at these when some dbag pulls up on a shiny new CLA and tries to race my current car. Because overpriced German tank is still an overpriced German tank.

      • 0 avatar
        th009

        I can’t remember the last time someone pulled up next to me and tried to race me — it has definitely been more than a year. And I do drive a sport sedan that could potentially attract such challenges.

        I will state, once again, than not everyone races from stoplight to stoplight.

      • 0 avatar
        azmtbkr81

        I think it has been a long time since any Mercedes, save for maybe a Unimog or G-wagon, has had tank-like durability. I suspect the CLA won’t change that.

      • 0 avatar
        baabthesaab

        I remember very well!! It was a city bus. I was driving a ’51 Hudson Hornet. Remember how legendary they were?

        The bus won!

      • 0 avatar
        hf_auto

        “Preference refers to the set of assumptions related to ordering some alternatives, based on the degree of happiness, satisfaction, gratification, enjoyment, or utility they provide, a process which results in an optimal “choice” (whether real or imagined)”

        In other words, the dbag in the CLA won’t care about the guy that’s pointing and laughing in the car next to him and prioritizes arriving at the next stop light first for some reason. Maybe the dbag in the CLA doesn’t want to drive to work in a high-powered tupperware container? Point is, not everyone shares your priorities- let the CLA owner live with his decision.

      • 0 avatar
        th009

        @hf_auto, +1 to that.

      • 0 avatar
        burgersandbeer

        @hf_auto

        I think you need to compete for one of TTACs writing gigs. I say this partly because of a perspective almost completely absent from the current staff, but mostly because of the phrase “high-powered Tupperware container.” That was great.

      • 0 avatar
        Tick

        @hf_auto

        +1

        High powered tupperware. Priceless

  • avatar
    cackalacka

    Website ate my comment, but per our host’s assertion that luxury and scale are incompatible, I submit to the group the corporate history of the DeBeers franchise.

    Several generations ago, a diamond ring was inaccessible to all, save for nobility. Now everyone’s wife/fiancee has one. They are not inherently more valuable than many other, lesser valued, precious stones.

    If a mining company can do this with a rock, who is to stop a car company from trying?

    • 0 avatar
      28-Cars-Later

      Good point.

    • 0 avatar
      GiddyHitch

      DeBeers is essentially a monopoly, so they control the supply to create artificial scarcity while simultaneously mounting a very effective marketing campaign that equates marriage with natural diamonds even in the face of a man made product that is superior in numerous regards.

      I don’t see parallels with the auto industry. Pharmaceuticals comes closest, off the top of my head.

      • 0 avatar

        The diamond industry has absolutely nothing in common with autos. One is a monopoly, the other an over-saturated marketplace.

      • 0 avatar
        rushn

        DeBeers lost it’s “monopoly”, and continues on a downward spiral, a long time ago. They no longer control the supply and sure as heck do not control the middlemen anymore.

        And even before their dive down, they’ve pushed diamonds to become cheaper and more accessible to a majority of people, just the point cackalacka is making. A few good advertisement campaigns, proper pricing of small diamonds and creation of new market segments (sounds familiar?) like tennis bracelets, anniversary rings, etc. etc., and diamond is part of culture at every income level.

      • 0 avatar
        sirwired

        Derek,

        You aren’t looking at DeBeers vs. MB properly.

        Yes, DeBeers has a monopoly in diamonds. But MB has a monopoly in, well, Mercedes cars.

        There isn’t anything unique about diamonds as jewelery. Yes, they are pretty rocks, but there are many pretty rocks, most of which DeBeers has nothing to do with. You could very well regard jewelery as an “over saturated marketplace.” (DeBeers doesn’t even have a monopoly in Diamonds; diamonds can be synthesized for much less than DeBeers charges.) The availability of Sapphires, Rubies, Emeralds, etc. didn’t stop DeBeers from convincing the world they NEEDED diamonds.

        What DeBeers did was take their monopoly in an utterly non-essential good, and turn it into a monopoly that nearly every American man feels like getting suckered in to, lest he be made to feel like a chump.

        There’s nothing inherent about the car market (vs. the jewelery market) stopping Mercedes from doing the same thing.

      • 0 avatar
        cackalacka

        I’ll admit, there are quite a few differences between the objects, but remember a sapphire may be more beautiful, and hold more material value (being relatively more scarce) than a comparable diamond. Yet, what does the future country-club soccer mom want?

        Likewise, a V6 Honda fitted with decent tires may be more functional and luxurious than a CLA. Yet, what does the country-club soccer mom want?

        Both are over-saturated, or did I not just watch 1.266321 x 10^34 commercials saying ‘He went to Jared’s!’ last month?

        Our host is incorrect, these objects are luxury items, as such they have EVERYTHING to do with one another.

        All boils down to perception, all driven by marketing, aspiration, and insecurity.

        As enthusiasts, we can all aspire to owning a McLauren or Ferrari or name the 4-wheeled arousing vehicle of choice.

        In the end, most, if not all of us, know that we can scratch that itch with a well balanced, quick ride, probably one that can be fetched on Craig’s list for <10k.

        BMW/MB are not releasing these stripped down models for folks that could be satisfied with a V8 pony or Miata, they're pimping to the aspirational class.

        They know what they're doing, there is more money to be made on the folks that can afford (or finance) a $40k ride to aspire for a $110k appearance, just as there is more money to be made on legions of engagement rings than just a handful of Hope diamonds.

        As long as there is an S600, and as long as there is the Hope diamond, there will be a market for sub-premium luxury.

        This isn't a straw man. It is human nature. Commerce has cultivated a super-industry to harness it.

  • avatar
    Tstag

    This is why some prefer a shaguar

  • avatar
    GiddyHitch

    Without “brand values”, an automaker risks becoming Acura or Lincoln. I agree that the CLA has the greatest risk of eroding brand exclusivity if it doesn’t pass the eye test, as was the case with the 318ti and 230k. It ultimately comes down to execution, and I will have to reserve judgement until I see one in the flesh.

    • 0 avatar
      hubcap

      “It ultimately comes down to execution…”

      Key phrase FTW!

      The CLA, if done correctly, will be a hit. IMO the biggest threat to Mercedes is to not have the durability/reliability that the brand supposedly represents baked into the car.

      Absent that, I think this car will be a success.

  • avatar
    Jeff Waingrow

    I don’t see a problem with the new small Mercedes so long as it’s an excellent car and is of high quality. If you walked into Tiffany’s on Fifth Ave. in NYC, you’d have no problem finding numerous items for well under $100. Same is true for many other deluxe venues around the country. I think the key is that everything sold be of outstanding quality for what it is with respect to design, materials and construction. But fail that and you might well have a problem.

  • avatar

    It’s the eternal dilemma. Cater to the carriage trade and deal with high costs, or add a cheaper volume model to amortize costs and risk cheapening your brand. In the other thread someone, I think it was Skor, mentioned Packard. It’s popular to blame Packard’s demise on the “junior” Packards and the Clippers of the 1930s, but they probably let the company survive another 20 years.

    It’s not like luxury marques that stayed exclusive never went out of business. Remember, Lincoln and Cadillac are the only *surviving* American luxury brands. Plenty of companies, automotive and otherwise, have gone out of business trying to sell stuff to rich folks, or like Faberge, turned to the mass market for survival.

    Either way, making a luxury car brand a sustainable success is a rare thing.

    I think right now, Ferrari and Roll-Royce are on the cusp of making too many cars. They sold more R-R cars last year than ever and now they’re extending their version of the BMW 7 Series, the Ghost, with the Wraith coupe. I think Ferrari is now selling 7K units a year. Maserati wants to sell in the tens of thousands.

    What I think might happen at the luxury high end, btw, is a return to custom coachbuilding. If you combine some of the modern modular architecture and drivetrain technologies with bodies that can be designed and crash tested in the digital domain and rapid prototyping, I can see a revival of true custom bodywork. I asked Bob Lutz at the NAIAS if small companies like Lotus don’t even try to build regulatory compliant engines, how can a small startup like Fisker really get all the testing and validation done that a modern car needs and he said that nowadays most of the testing is done digitally, and that the real world testing is done to validate the digital tests.

    • 0 avatar
      28-Cars-Later

      Great post, that little tidbit form Lutz has me really thinking… me being a computer geek and all. Physical tests are only done to back up what the computer says, seems a bit of putting the cart before the horse but of course the computer is programmed for accuracy.

    • 0 avatar
      Morea

      Ferrari has a waiting list. You are “invited” to purchase a new car when it is available. Waiting list jockeying is an art form with Ferrari customers and dealers. (If you can’t wait buy a Maserati to tide you over.)

      True luxury makers limit production to insure exclusivity. Ferrari may be the only one to do this.

  • avatar
    Zykotec

    ouch, Welcome to Europe…A place so posh that you can barely manage to sell one or two of those ‘noisy rattly unrefined’ Civics, or re-badged cramped TSX wagons (Accord here) with almost no options or engines to choose from….

  • avatar
    CelticPete

    Your thesis is still flawed. Underlying the assumption that making your products less exclusive will hurt your brand is the true flaw..

    It’s that these car companies generate sales – via snob appeal only. The assumption is that the only ‘value’ these cars have compared to their competition is that they are exclusive. This is most assuredly not true. In fact the wealthy buyer can be MORE discerning – not less because they can afford nicer cars.

    People buy BMWs (for example) because they drive better. Not necessarily on the track but in day to day life. The steering is more precise. The transmissions are more pleasing. The seats are more comfortable. The ergonomics are better. All this leads to a better driving experience. And all the folks who think a V-6 FWD Toyota Camry delievers the same thing – to even untrained drivers are all wet.

    Now Japanese loving TTAC editors and writers might not agree with these assertions but I can assure you that customers do. This is how they got the premium marquee in the first place.

    People like you see to think the only reason to buy expensive cars is abject stupidity. That’s not true at all – and I suggest you drive more premium cars to understand this.

    My g/f recently bought a Audi A5. Its not particularly powerful compared to what she could buy for that money. But it has superior seats, rear biased AWD, it looks good on the outside and on the inside. And when I want to drive it – I actually fit. It is a nice car for her.

    This is the exact market for BMW and Mercedes. They have faith that they build actual nice cars that add value for the cost. So they are not worried they will pollute the brand. Because its not simply ‘status’ or ‘badges’ that drive their popularity. People think BMW and Mercedes are “premium” BECAUSE THEY ARE.

    If BMW started building Honda’s and charging high end BMW prices – people would stop buying them. They might be less reliable – but the feel better to drive, sit in and look at.

    • 0 avatar
      darkwing

      You’re falling into the same trap. The “premium” quality you’re talking about is associated with the high-end, $100K+ cars. It’s still there in the mid-range, $60K+ cars (though here we start to see some cheapening, I think, with the low-end, four-banger lease specials.) But applying that same logic to high-volume, high-profit $30-50K cars is erroneous; they’re in an entirely different class.

      • 0 avatar
        th009

        The Audi A5 CelticPete is talking about is a $38K car, not a $60K one, yet his assessment of its premium attributes is spot on. And a largely similar assessment would be true for the A4 as well — or the 320i, for example.

        The trick lies in being able to offer cars with the “premium feeling” at competitive prices. If the cars feel cheap (and by this I don’t mean the size) compared to their mass-market brethren, you start risking devaluing the brand.

    • 0 avatar
      icemilkcoffee

      Don’t fool yourself- it is snob appeal. A BMW doesn’t drive any better than a Camry in every day driving. A Camry goes where it’s pointed. How much more ‘precise’ do you need it?

      You bought a BMW because you think it makes you a ‘discerning’ buyer. That is snob appeal. On every measureable gauge of quality- the Toyota Camry blows your BMW out of the water. Also- BMW did start duilding Hondas (minus the reliability) with their Mini line. It was actually a sales success.

      I will concede that Audi has exceptional seats.

      • 0 avatar
        Remi

        It may be snob appeal for some, but not all – the question is, in what proportion…

        I can guarantee you that a Toyota Camry does not drive like a BMW 3 series. The Camry is a great car, but driving pleasure isn’t one of its qualities.

      • 0 avatar
        Dynasty

        What is the cost to manufacture difference price wise between a “premium” vs non premium car?

        Lets take a Mazda 3 base hatchback with 16″ alloy wheels for instance which has a MSRP of right around 21.5K

        Use the larger engine in the 6. Maybe $500 cost.
        Upgrade the suspension, brakes, and transmission for the heavier and more powerful motor: $500

        Higher quality materials in the interior of the car: $500 at most..

        And maybe another 500 dollars to cover anything I’m missing.

        So we’re talking basically there is a 2000 dollar difference in manufacturing between a premium vehicle and a regular vehicle.

        Now if they could just fix the styling on the 3 and make all those changes I’d by one. And probably spend another 5K on top of their existing MSRP to purchase one.

      • 0 avatar
        corntrollio

        Your main argument is “decontented appliance cars are good enough for anyone on public roads.” A lot of people disagree.

        It also depends on what “every day driving” is. If you’re on boring suburban freeways, sure, it may not be that different most of the time. If you live off of two-lane winding roads or in a hilly/mountainous area, it could be quite different.

        In addition, the handling difference between a Camry and a BMW can make a difference even on boring suburban freeways if it means the difference between avoiding a collision and not, but that’s rare. I don’t buy the argument some people make that a powerful car is likely to keep you out of a wreck, but handling could.

        As for saying a Camry blows certain cars out of the water with respect to quality, it depends on how you define quality. It’s certainly not 1992 any more, and Toyota’s aren’t nearly as bulletproof as they were from that era.

      • 0 avatar
        Pch101

        “I can guarantee you that a Toyota Camry does not drive like a BMW 3 series.”

        Yep. I assume that most people who claim that they are the same must not have driven a 3-series.

        German suspension tuning feels different. Some of us (myself included) will pay a premium for it. In terms of reliable design and engineering, Toyota and Honda blow the Germans out of the water, but they have yet to master the art of delivering the same intangibles.

      • 0 avatar
        Morea

        So PCH drives a BMW? Interesting…

    • 0 avatar
      el scotto

      “People buy BMWs (for example) because they drive better.” BWAAAHAHAHA! You mean tail gating, speeding, aggressive driving, changing lanes six times in a half mile between texting and sipping their latte’s drivers? Or is their some hidden advantage for the Masters/Mistresses Of The Universe in corporate parking garage? Yes I used to own one.

      • 0 avatar
        corntrollio

        I’ve never owned a BMW, but the main people tailgating me in recent years have been big pickups (often lifted) or POS/beater compacts/subcompacts. The main people weaving between lanes have been driving POS/beater once-sporty-ish vehicles (not actually sporty ones). Is your experience different?

        The texting/illegally-non-handsfree-phoning people, that’s probably closer, although that is a broad spectrum of people. I would say the 3-Series isn’t that a big offender of that, but SL and CLS (but not 7-Series or S-Class) and any AMG driver are probably bad along with Lexus RX drivers. 5-Series/E-Class are probably worse than 3-Series/C-Class about it.

      • 0 avatar

        Please. When I drive the 3, the lane in front of me opens up. When I drive the TDi, I get cut off and shut down consistently. The Kidney Grille is known to the proles and they move over. The VW gets no respect.

        On the other hand, when you need to get into a slow line of cars, folks “let in” the VW way more than the BMW.

        • 0 avatar
          CoreyDL

          It’s funny you mention that, when I had an A8L, people ALWAYS let me in to slow lines, or waved me out of side turnings. I rarely got cut off on the highway.

          Now I have a GS, and that never happens. People in BMWs seem to try and irritate me intentionally.

    • 0 avatar
      Tick

      Celtic Pete. You don’t know how to be a Petro-Hipster. Allow me to reiterate the “Petro-Hipster luxury car article on TTAC” rules for you.

      1. All people with money are DBs. It has nothing to do with the fact that they succeeded in the same free market economy everyone else lives in.

      2. Luxury car buyers only purchase cars for the badge, nothing else.

      3. Women with kids are referred to as “soccer moms” and only purchase luxury SUVs as status symbols. Never for their concerns (perceived or otherwise) regarding safety

      4. Real Petro-Hipsters drive underpowered, obscure, brown, and unreliable cars. Not because we’re 30 yrs old and still living in a one bedroom apartment with a dead end tech job, but because we’re more enlightened than the automotive proletariat.

  • avatar
    davefromcalgary

    There is actually an interesting point in CelticPete’s post. With respect to the Audi A5, and by extension the A4, Q5, etc. The 2.0L TFSI engine is not a new engine by any stretch. It has been around for a few years now and the mainstream media constatly mention how it produces “only 205 hp” (+/- depending on the application.) On paper it fall short to comparable engines from BMW (the N20, 240 hp) and even 2.0T’s from contemporary competitors such as GM or Hyundai. Yet when the rubber hits the road, reviewer and owner alike, no one ever complains about only 200 ponies underhood. The fact is, people like driving these cars, and derive value in other aspects of the vehicle,(the way it drives, looks, fit and finish) or the package as a whole, and are obviously buying them for a reason. As an example, the fact that the Regal GS makes 70+ horsepower over the A4 I don’t think is poaching a lot of Audi’s sales.

    • 0 avatar
      corntrollio

      Audi also has historically underrated the 2.0T for marketing reasons in order not to cannibalize 3.2V6 sales. In reality, the 2.0T makes more horsepower than claimed, but it runs too close to the 3.2V6 (261 hp at the highest) that was being used in the A4 (before the phaseout), the A5, A6, and Q5.

      Like Mercedes and BMW, Audi treats its engines as trim levels too, so the 3.2V6 base model came better equipped than the 2.0T when Audi sold both.

  • avatar
    dswilly

    I think the real key to the success of this strategy is if the end product is worth a crap. Removing fluff from a “premium” product to hit a price doesn’t automatically remove the premium experience any more than adding it to a cheaper product automatically makes it competitive with the premium class. There is more to the driving experience than loading on heated seats, leather, cameras, etc. If the car drives better it will survive. As mentioned above several times, if you can’t tell the difference between a Honda Accord and a 3 series or A4, no problem, you have found your car.

    • 0 avatar
      icemilkcoffee

      The F30 3 series has worse steering feel, worse throttle response than its predecessor and it has an auto-start-stop that everyone hates. Yet it sells better than its predecessor.

      Let’s face it- 99.9% of premium car buyers cannot tell the difference between an Accord, an Audi and a 3-series aside from the snob appeal.

  • avatar
    Scott_314

    Not to worry Derek, it was an excellent article and thought provoking, agree with the thesis or not.

    I for one think down-market and smaller is smart for the brand: bring the idiots (recent grads with a first job) in on a cheap lease, then keep them on the upgrade path. “Well, that’s $7900 in lease return fees, but we’ll waive it if you go with the 328, only $599 a month!”.

    By the way, the truly wealthy spend their money on healthy fun shit like scuba diving, personal tennis coaches, fancy bicycles, ski-trips, and hosting parties. They might have a Jag XK or equivalent, but don’t put that much thought into cars and probably drive a six-year old Lexus or Mercedes E-class as their daily.

  • avatar
    BobAsh

    “But merely having a car in Europe is a privilege Anything larger or more expensive than a Golf is a luxury, and that’s why the A/B-Class, 1-Series and A3 work over there.”

    Nope. Not even here in Central Europe is stuff like Ford Mondeo considered “luxury”.

    Small and expensive cars make sense here not because people can’t afford big and expensive cars, but because there’s not enough space for big cars. Hence people want to buy cars that are expensive and show their status, but can still be easily parked in the city centre.

    A typical buyer of loaded Mini could probably buy a 318i easily, but he doesn’t want to.

    • 0 avatar

      No Bob, it is A luxury to be able to own a large car, park it, fill it up with fuel etc, I did not imply that the Mondeo is a luxury car.

      • 0 avatar
        BobAsh

        I understood what you meant. But you are not right. Owning a car is not considered a “privilege” in Europe, and owning a large, non-premium car (Mondeo, Passat, Insignia, Laguna, some kind of MPV or small SUV) is not considered a luxury.

        I live in relatively poor, post-communist country and even here, the best-selling car is bigger and more expensive than a Golf (not by much, as Škoda Octavia is, in fact, just a Golf with bigger boot, but even so…).

        In Western Europe, VW Golf is not considered to be a suitable car for family, default choice is something from C-segment (Passat, Mondeo), or, in recent years, some kind of SUV or MPV. Even here in the “east”, less and less families choose Golf-sized or smaller cars.

        And it’s not so expensive to fill it up with fuel or park (what’s expensive on parking a big car, anyway?). Many people who can’t afford even a base supermini drive decade old Passats and Mondeos, or even MPVs like Galaxy around here.

        The reason that “small luxury” works here is not that people are not able to afford “big luxury”. It’s that the negatives of a big car are much more pronounces in Europe than in America. That’s why Smart works here and why Mini works here so well.

        It’s not that expensive to run a large car here, it’s just royal pain in the butt for many people.

        It’s not that it’s more expensive to park an S-class than A-class. It¨s that in many situations, you simply WON’T park that S-class.

        BTW – one more important thing. Having a car is much less necessary in Europe than in America. So for many Europeans, owning a car is not a privilege, but a pain.

  • avatar
    Advance_92

    That CLA looks like it’s trying to pick up where the Volvo C30 and V40 left off, while not looking as silly as the current S60.

  • avatar
    CelticPete

    Lots of people drinking the haterade here. Purchasing or leasing a new car isn’t really a sound financial decision. You don’t ‘need’ a new car. You pick them for fun.

    So why not pick a car that’s luxurious, good to look at a bit fun to drive. BMW and Mercedes aim to do that – at a lower price point. The idea that only people who would purchase such cars are status chasing over extended you folks is just haterade.

    Believe it or not women like to buy cars – and they don’t particularly care if a car is down on horsepower. Going back to my example my g/f wanted a car thats good looking on the inside and out – and drives nice. Plus she likes to ski.

    That kinda narrows down your list in a hurry. People buy cars irregardless of status. She was seriously considering a Dodge Challenger R/T. But felt it was too big for her..

    The reason why these german brands are going is beause they have bridged the reliability gap well enough such that people will consider buying them. They always were more desirable based on driving dynamics and ergonomics. And hence rich people who didn’t have to worry about reliability always bough them.

  • avatar
    icemilkcoffee

    In the end, it’s not about market dilusion and whatnot. It’s about the razzle-dazzle. You just cannot stagnate and let the market overtake you. You’ve got to keep up the ‘product excitement’ factor with razzle dazzle. Keep pumping out new models every couple of years. Keep it fresh for your customers. And you will avoid the Acura/ Jaguar/ Lincoln type of stagnation. In this sense the CLA already did its job- it keeps people talking about it.

  • avatar
    gkbmini

    Whether or not the CLA cheapens the MB Brand, it will come down to the interior. If the interior looks like a modern MB interior, all will be good. If the interior hints of plebeian origins, the neveo rich, posers, and d-bags won’t even touch it. A hybrid option and MB interior, will be deemed the greatest new idea since the Lexus H 250.

    • 0 avatar
      oldfatandrich

      I do not understand the sweatiness which the introduction of the CLA has induced. This car will be a minor footnote in a Benz store. And you can be certain that there will be no more $30,000 CLAs going out the door than will $32,750 320i’s. In retropsect, I do not see that terribly cheapened interiors of the first iteration of the current C Class or the absolutely horrific plastics of the 1 Series have done much damage to the “panache” of either Benz or BMW. Dr Z is a fairly savvy car guy and, if he remembers to put some M-B feel in the interior, he’s going to sell a lot of CLAs. Call it a poor man’s CLS, but there are plenty of aspirational buyers who will cut down on their craft beers and Chilean wines to be seen behind the wheel of a car that sports a three pointed star.

      In the meantime, I’m averaging 31 mpg highway in my new S350. Diesel, why have we taken so long to get to know each other ?

  • avatar
    Summicron

    So glad I’m immune to this German car stuff. Honda captured me in the 90′s and I’ve stayed with Dai Nippon.

    But it’s sure fun to see how passionate people get over this topic.

  • avatar
    el scotto

    Wonder how many CLA’s I’ll see at the Outlet Mall?

  • avatar
    tjh8402

    Derek the clarification is appreciated, although I’m still waiting for you to justify your knowledge of handbags as a straight male :-P, and the discussions in the other thread are quite enjoyable. I do agree with your main premise in point 4, “I still re-affirm my belief that allowing too many people to obtain a premium product harms its very nature”, and I think it does apply to both Mercedes and BMW, but for different reasons and requires looking at different products. In Mercedes case, I can see you being right about the CLA at some point in the future. The exclusive nature of Mercedes has always been in the prestige attached to it, and probably, yes the price (I’m not sure if Mercedes was ever more expensive than BMW, but I’d say their bread and butter was definitely in the more expensive models).

    BMW’s exclusivity, on the other hand, has been that the only people who bought them were people who cared about how they drove, because the compromises in comfort and ease of use was generally too much for a brand whore who was just looking for the image.

    I recall this editorial from autoblog several years ago:

    http://www.autoblog.com/2011/03/09/opinion-is-bmw-becoming-too-soft/

    “BMW has brand issues. Take the [2011] Super Bowl…BMW ran two ads in the big game for a cost of between $5 and $6 million. One ad was to push diesel engines. Another was to push the fact that all X3 crossovers are now being built at BMW’s plant in South Carolina….How about using the big game to push the core of your brand equity – driving excitement. How about an ad that says: “aspire to own and drive this marvelous machine.”

    Something has gone horribly wrong at BMW. And I think I know what it is. Back in 2006, then- BMW marketing director Jack Pitney…shared with me a Powerpoint strategy showing how far too many people, in his mind, weren’t considering a BMW because they were intimidated or otherwise put off by the performance image of the brand. It was this finding that led BMW to first do a corporate ad campaign touting BMW’s independent ownership, and then the softer “Joy of Driving”… It was literally meant to advance a “softer side” of BMW, and attract more people who were not necessarily driving enthusiasts to the brand.”

    While the sales would indicate that thus far, BMW has not made a mistake in either their marketing or product design and therefore the editorial is wrong on that point, I’m more interested in the issue of “intimidation”. I think BMW has designed the product line to match the marketing. They market the brand as softer and more feminine (I’m willing to bet much of BMW’s increase in sales has come from a higher percentage of their buyers being women) and offer products to match with the cars themselves softer, smoother, quieter, and more effortless to drive. Far more brand equity has been lost due to plethora of X3 and X5′s clogging shopping malls and 1 and 3 series in sorority house parking lots then any moves downmarket.

    Sorry if that takes this off track again by focusing on BMW instead of Mercedes, but I’ve been a BMW fanboi for most of my car guy existence, the son of a BMW owner for almost 10 years, and now a BMW owner myself for over a year, so I have more of an opinion on that brand. So as to try to offer a little more commentary about Benzes, I do think the posters who noted Mercedes’s declining quality as being more damaging to the brand than who buys it probably have a point. That being said, Mercedes, despite their history and status, have a much murkier brand image. For the past 40 years, what has defined as BMW has been that its the Ultimate Driving Machine. I think Lexus nailed it when they described their cars as the “relentless pursuit of perfection.” Volvo clearly stands for safety. What does Mercedes stand for? In order to erode brand equity, you need to first clearly identify the qualities that brand built that equity on in the first place, and then you can determine if they new products will detract from that.

    • 0 avatar
      icemilkcoffee

      Mercedes stands for heavy doors that pops your ears when you close them.

      I do agree that the profusion of X3′s and X5′s dilute BMW’s core image. It’s pushing the sales volume and raking in the bucks for BMW, just as the Cayenne has for Porsche, but it’s certainly diluting that masculine ‘ultimate driving machine’ image.

      • 0 avatar
        corntrollio

        “but it’s certainly diluting that masculine ‘ultimate driving machine’ image.”

        You think the X5 M dilutes “ultimate driving machine”? If anything, the X3/X5 gave BMW a cash infusion to make the ultimate driving machine better, but according to enthusiasts, at least, apparently they didn’t use it for that.

      • 0 avatar
        th009

        Heavy-feeling doors that feel solid and seal firmly when you close them — or open them — are definitely part of the premium experience, regardless of the brand. As is solid-feeling switchgear, for that matter. A premium car needs to feel premium.

    • 0 avatar
      28-Cars-Later

      This is an excellent analysis. I can just see the suits having conversations like “we’re intimating people” and “we’re losing women buyers”. Creating a performance image was precisely the point of the entire brand as you explain (at least for the last thirty years). Now they want to quash it and created a softer sissier image… pity the suits who make these decisions will be able to take their golden parachutes out as the plane descends toward the mountain.

    • 0 avatar
      oldfatandrich

      My dear tjh, permit me to acquaint you with life on planet Earth. A Mercedes-Benz stands for material success in life—whether earned or inherited. Absent the brands in the stratosphere (RR, Bentley, Aston, and the Italian toy cars), a Benz—in particular an S-Class, a CL-Class, an SL-Class or any of AMG iterations thereof—is nonpareil in its presence. It is not approached by any of the vehicles manufactured by BMW, Audi, Lexus or Jaguar.

      • 0 avatar
        CJinSD

        Sounds like they’re where Cadillac was in the 1970s: Dead to the new generations that would drive the economy forward, but considered a safe purchase by people who had Cadillac’s(now Mercedes’) position embedded in their minds back when the cars were still superior to alternatives.

  • avatar
    corntrollio

    $30K for a CLA-class is pretty low, no? Wasn’t a C230 coupé (aka the CLC-class) around $26K base when it first came out a little over 10 years ago?

    I already don’t think of a C-class as a real Benz, so I doubt I’ll consider a CLA-class a real Benz. In that sense, it doesn’t dilute the brand for me.

  • avatar
    Type57SC

    regarding point 4. Why is Apple still successful and premium? This would seem to suggest that it’s possible with the right product and customer experience.

    • 0 avatar
      corntrollio

      I see two things:

      1) Design has something to do with it. For example, the MacBook Air in 13-inch guise is lighter than even the lightest PC-based ultrabook on the market (albeit only by 0.3 lbs). The 11-inch MBA is 0.6 lbs lighter still. Some people also find it more aesthetically pleasing and find the interface superior, and others don’t.

      2) Some of it is also snobbery/badge. I know several (usually older) people who can barely make a phone call on their iPhone, much less use apps and do all kinds of advanced things on it, but have it for the looks.

      Enthusiasts think you can run premium on design alone because they err towards purism, but a premium brand also depends snobbery/badge too. You need both kinds of buyers, and you try to find a happy medium between the two and keep everyone happy. For example, several Android phones had certain features much earlier than iPhones had them, but iPhone was still seen as superior, due to design and badge both.

      Some people argue that BMW has strayed too far from design towards snobbery/badge, and they might be right, and they might not.

  • avatar
    Dimwit

    I want to get in before this thread devolves into watches and purses again.

    One of the ongoing themes is that MB/BMW are “losing it”. Guess what? Not to everyone. A spokeswoman from Sask. was proud of the fact that luxury name plates are up by a ton. They ARE aspirational brands. You louts in the big city may not appreciate them the same way but to the great unwashed those are the brands when you’ve “made it”.

    Answer one question: What will you buy if neither are the go to brand any more? Seriously, there’s nothing else remotely in their space. The Koreans aren’t there and I don’t expect them any time soon and the Japanese are running into problems. That brand cachet may be tarnished but there’s nothing waiting in the wings to pick it up unless you think Lincoln is the answer.

    • 0 avatar
      Dynasty

      I’ll buy a Buick… as soon as they get good enough.

      • 0 avatar
        burgersandbeer

        I imagine the Verano turbo is worth considering in this market segment. Everything I’ve read suggests the car is an extremely quiet, comfortable cruiser with composed (if not super exciting) handling. I haven’t driven it, but I have driven the Cruze that it shares a platform with. The Cruze is a shockingly quiet cruiser for that class of car.

        My point isn’t just to argue that a Buick might be worth considering; it’s that Mercedes has comparable competition for the CLA, so it will be very interesting to see how much the badge can help them.

        I’m generally in the camp that believes you are getting value for the premium paid for Bimmers and Benzes. With BMW for example, you could have RWD and a fantastic I6 in a practical, comfortable package. Mercedes also offers RWD in its current core offerings. These are characteristics that impact the driving experience in a positive way, and are not found in less “exclusive” competitors.

        Recently BMW has abandoned its naturally-aspirated I6 in favor of an FI I4, eliminating one of their competitive advantages. I suppose they had to for fuel economy, but a turbo 4-cylinder is hardly unique. Many manufacturers make good ones, and it will be harder for BMW to set themselves apart with that engine. I always thought Mercedes was best at V8s, so using more I4s doesn’t really impact the bottom of their range much anyway.

        With the CLA, Mercedes is not only using I4s, but also FWD. I think this is important, and more potential customers than some would believe are going to notice. RWD isn’t just for track crowd – the better balance and steering is noticeable at legal speed on the street too. Lexus, who no one has every accused of focusing too much on sporty dynamics, must use it on even non-sporty models like the GS and LS for a reason. Cadillac seems to be enjoying a bit of a resurgence by re-introducing RWD on certain models. Infinity also found success moving to RWD. FWD premium brands like SAAB and Acura are either dead or struggling. With a 4-cylinder and FWD, the CLA has very little mechanically to distinguish it from those struggling brands or well-equipped trim levels of mass market brands.

        The CLA is going to have to be damn good to set itself apart and justify a premium compared to a functionally equivalent car from a mass-market brand and competition like the Buick Verano turbo and maybe even the Acura ILX. Maybe it will be much better to drive, but with the basic architecture now similar to everyone else, that’s hard to imagine. I bet the badge helps for at least the first generation of the CLA, but consumers will probably catch on. Maybe Generation Why even catches on sooner, as Derek suggests.

      • 0 avatar
        dougjp

        Wait until Mercedes does its thing with options on the CLA, and then add up the cost and compare. Its a fair bet it will be at least $ 10k more than a Verano turbo (and slower), when equally equipped.

        At this point most people are drinking up the Mercedes Kool-Aid (and video ads) without thinking it through. Mind you, with that car wash ad, no wonder the big head is lost :)

      • 0 avatar
        28-Cars-Later

        “I’ll buy a Buick… as soon as they get good enough. ”

        You’ll be waiting a long time.

        The pre-09s were well built with good value, but used “old” technology and platforms. They then go in the opposite direction, trendy rebadges with problematic 4 bangers (regal) and ugly faux Japanese styling (lacrosse, verano). The Buick, Cadillac, and Chevrolet car lines are as dead as Oldsmobile. I’m truly shocked RenCen didn’t screw up the truck/SUV lines as badly as they did car.

    • 0 avatar
      akitadog

      I’m waiting for a Cadillac 3.6 with stick, or maybe a used ATS-V. In fact, I’ve been waiting for an American 3-series for a long time. Of course, now the purchase is a bit easier to stomach, being more established and all, so I suppose, when either of these come onto the market, I’ll be ready to jump on it.

      It’s funny how, as BMW is losing its way, Cadillac is taking the mantle from them, and with force.

  • avatar
    Onus

    I don’t see how this logic isn’t cut and dry.

    There are plenty of “rich” people out their that want a bmw. They don’t give a crap about how the car is. lets be honest they don’t. They buy the badge. When bmw makes a cheaper model they will get more of these people that want to “buy” the bmw badge. This will be an amazing success for bmw and Mercedes.

    I say “rich” in quotes because no one buys these with cash. I think if most people didn’t waste their money on dumb stuff they could buy one with cash. They also wouldn’t owe their soul to a bank. Anyway…

    • 0 avatar
      CelticPete

      [quote]There are plenty of “rich” people out their that want a bmw. They don’t give a crap about how the car is. lets be honest they don’t. They buy the badge. When bmw makes a cheaper model they will get more of these people that want to “buy” the bmw badge. This will be an amazing success for bmw and Mercedes.[/quote]

      This is that hipster logic I guess. Rich people are not stupid. Even the small segement that buys cars on reputation still are buying because they have the reputation of being the best.

      The question is how did they get this reputation? Well because good drivers have rated them this way. Its not different then computers. Intel sells alot of chips and right now if you build your own computer you are going to use intel.

      Why? Because the people that know computers know that right now intel chips are superior to AMD. It’s one thing to claim that BMWs are aspirational choices. It’s quite another to claim there is nothing to them – that they aren’t adding value.

      That’s the issue that I have. All new cars are crappy value propositions. Buy some unloved domestic and fix it up yourself if you want a good value.

      It’s not stupid to buy a 320i if that’s the car you want. Maybe you want a sweet driving nice looking car but don’t need space for more then two and don’t really want the fastest car around.

      I will say the torque in the BMW 3 series (328i) makes the thing pretty darn fast. 0-60 in 5.6 seconds.. THis car even with the ‘official HP” of 180 will probably seem times in the lowish six second mark. That might seem impossible but BMW doesn’t suffer then Hyundai exaggeration problem.

  • avatar
    mcc.pj

    Mercedes sell the A- and B-Class in the Australian market – hell, and Viano work vans for that matter – and it doesn’t seem to have taken the shine off their other products. This is also a traditionally ‘bigger is better’ car market, like the US.

    • 0 avatar
      Pch101

      “Mercedes sell the A- and B-Class in the Australian market – hell, and Viano work vans for that matter – and it doesn’t seem to have taken the shine off their other products.”

      The US is different because GM introduced tiered branding here in order to distinguish their luxury cars from the mainstream.

      The Australian market was never large enough for anyone to bother with using sort of strategy, but Americans have come to expect their luxury cars to carry a different badge.

      • 0 avatar
        mcc.pj

        Those market distinctions are true, but I don’t know that they support the article’s point.

        For the last several decades, GM’s tiered branding mostly served to lob products by lesser brands upmarket. Eg, ‘that’s not a Chevy Nova, it’s a Pontiac/Buick/Oldsmobile’.

        The CLA is the opposite, a product by a premium brand that’s reaching downmarket. I reckon consumers are a lot more forgiving of the latter than the former.

      • 0 avatar
        Pch101

        “For the last several decades, GM’s tiered branding mostly served to lob products by lesser brands upmarket.”

        It didn’t start out like that. During the Sloan era, the brands were well defined and there was an obvious ladder to climb.

        Over time, that strategy began to fail as automakers began to use more nameplates in order to segment the market. The inevitable result was mission creep; the domestic producers’ multiple brands overextended their roles with overlapping products and became redundant, while the motivation to produce a wide variety of models encouraged excessive badge engineering.

        Nonetheless, that still leaves us with the need for a two-brand hierarchy. It would be foolish for Mercedes and BMW to sell small hatchbacks and subcompact sedans to Americans (those styles are presumed to be cheap, regardless of the badge), or to reduce their price points too much.

        But that isn’t happening here. This CLA will be slightly longer and wider than the current C-class. Even though it is based upon a compact platform, it should be large enough to have credibility. The price point is fairly high.

        My guess is that one of the purposes of this exercise is to create brand loyalty via lease dependency. The younger buyer may choose a CLA as his gateway to the luxury car market, which for the majority will necessitate a lease. That lease supports the craving for a steady stream of new cars, which makes it fairly likely the second or third car that he leases will be something costlier. BMW has done a superlative job of running what is in effect a large car rental operation, and Mercedes is trying to leap ahead in conquering those future customers.

  • avatar
    jimboy

    IMO, Mercedes, and to a lesser extent, BMW, have already lost their ‘cachet’ as it were. Most people I know with money, would NOT purchase any mercedes, and would probably restrict themselves to a ‘sportier’ BMW, rather than a larger one. These vehicles are seen as ‘poseur’ cars in my neck of the woods, not really worth it at their price point.
    Many have gone to the high end Asian vehicles, and some are moving back to larger American vehicles like Cadillac and Chrysler. Strangely, Maserati’s are also more common than I would have predicted. It seems to be immigrants who gravitate to Merc and BMW, perhaps because of their reputations in their country of origin?

  • avatar
    Power6

    I live where the soccer moms drive X5Ms and AMG Benz SUVs. It doesn’t seem to hurt that the poor peeps drive Cs and 3s.

  • avatar
    AGR

    Thirty years ago M-B launched the 190E, the same arguments were valid 30 years ago regarding the 190E, in addition to a myriad of issues that cropped up on the 190 especially relating to the A/C system.

    In the meantime M-B sold more vehicles in Canada and North America. Did the 190 customer upgrade to an E Class in most instances NO. Does an E Class customer upgrade to an S Class again in most instances NO.

    Is the S Class customer held captive in the S Class, in most instances YES.

    When M-B decided to build an SUV, knowing very well that most M-B customers had an SUV as the family kicker, the M Class emerged with a myriad of budgetary cuts to meet a price point. Its was presumably a total POS in the early models, in the meantime M-B sells (leases) more vehicles.

    As Derek mentions these lower line vehicles tend to dilute the brand image, while generating increased sales, and since in Canada 75% of the lower line vehicles be it sedans or CUV’s are leased, and heavily promoted with various lease programs.

    These vehicles also support a strong CPO program and sales, build a lower line vehicle, lease it, take it back at the term of the lease, remarket the vehicle as a CPO, make money again with the same vehicle.

    The CLA will attract a new generation of customers with an aggressive lease price, will this new generation trade up to a C or an E Class, probably not, will an S Class customer mingle with the CLA customer, probably not.

    M-B dealers in North America already offer a myriad of models, and Sprinter vans, the service departments service all of these vehicles, from an SLS,S,AMG,S,CLS,E,C,M,GL,SLK,SL,GLK,Sprinter.

    If Gen Y’s have a disposable income of X per month for mobility, its in every manufacturers best interest to have a product offering within the monthly budget of Gen Y’s.

    The old school M-B customer did not blink at a $1,500 scheduled service charge, the new age M-B customer with a leased vehicle has absolutely no desire to spend any money beyond the bare minimum.

    The Boomer that was perhaps the best S Class customer is at a stage in life after having owned several S Classes to own a different vehicle in his retirement years.

    As for quality if a vehicle is leased for 36 months, the warranty is 48 months, does the original owner care about long term quality / durability, does the second owner of the CPO version care about quality or durability with an extended warranty?

    In Canada the full size pick up market is locked up and owned by the Detroit 3, and the entry level luxury/premium market is locked up and owned by the German 3 (Audi/BMW/M-B)in addition the German 3 own a huge portion of the used market with their CPO programs.

    Imagine the Coach store leasing Coach bags on a 6 month term, taking them back, and leasing them out again, as certified pre owned Coach bags for another 6 month term.

    Imagine the diamond store leasing a diamond for 36 months, taking it back, and leasing it again for another 36 months.

    • 0 avatar
      packard

      Diamond stores (direct importers) will take back graded diamonds previously purchased as trade on a new purchase most will guarantee to give you credit for the original purchase price. The stone will then be resold.
      With regard to the watch comments- a mechanical watch is industrial art. Many newer watches have crystal backs which allow you to view the highly detailed innerworkings. The superior manufacturers make their own movements, (Ex. Zenith, Rolex). Lesser brands buy movements from big companies like ETA and rework them to varying levels. For time keeping purposes a quartz watch is more accurate but not beautiful. Even the Swiss now make quartz models. It is claimed that the Swiss quartz workings are superior quality. Ask a watchmaker.

      • 0 avatar
        corntrollio

        Mr. Baruth already covered the issue of bespoke movements and ETA movements in a prior article:

        http://www.thetruthaboutcars.com/2012/10/avoidable-contact-the-watery-big-bang-the-32-step-power-steering-fluid-check-disposable-faux-ury/

  • avatar
    glwillia

    I don’t understand how cheaper cars dilute the brand. In Europe, MB sells the A-class and B-class (which feel like, and are priced like, a premium Golf). BMW sells tons of 116i’s and 118d’s. The vast majority of these cars come with manual transmissions, steel wheels, cloth interiors, no moonroof, etc., yet MB and BMW still are held in high esteem. Same thing in Japan, where Toyota sells both the iQ and the Celsior (and until recently, Lexus didn’t exist there). The existence of the former does nothing to tarnish the latter.

    I don’t understand Internet car culture. BMW is slammed for making their cars more electronic, heavier, more gimmicky, then they release a cheaper, fewer-options model, and they’re “reducing their brand cachet”? I think I see why car manufacturers ignore the demands of Internet car forums…

    • 0 avatar
      Kevin Jaeger

      I agree – all this hate for a car like the CLA and there hasn’t been the slightest bit of actual information about the car that reflects poorly Mercedes. Does it actually have cheap materials? Poor ergonomics? Bad ride or handling? Dynamics no better than a Cruze or Elantra?

      Mercedes already successfully sells A and B classes. If this car actually has weaknesses relative to the competition let’s hear about them. I frankly don’t buy any story that it cheapens the brand by its mere existence. It can certainly tarnish the brand if there’s something wrong with it, but I’ve yet to read anything about what that might be.

    • 0 avatar
      corntrollio

      “BMW is slammed for making their cars more electronic, heavier, more gimmicky, then they release a cheaper, fewer-options model, and they’re “reducing their brand cachet”? I think I see why car manufacturers ignore the demands of Internet car forums…”

      Exactly, as they should be ignored. The internet car enthusiasts are cheap and just want this car to be available to them used or available to them new for $15,000, which is ridiculous. For that, they should be ignored and mocked. This 320i is exactly what a lot of people on this site ask for.

  • avatar
    Darth Lefty

    A car is still a premium product in the USA. If it weren’t for financing, no one would buy them at all. There are about 300 million people in the country and 14.5 million new car sales, so roughly one in twenty people can afford a new car. If Mercedes sells 300,000, then only one in a thousand people will buy a Mercedes this year.

  • avatar
    Maymar

    The problem with the whole idea that exclusivity is the selling point behind German luxury cars, and nothing but doom and failure will transpire by going down market, is that they’ve been all that exclusive up until now. Never mind the sales figures that outrank some midsized sedans, never mind 30+ years of trying to market entry level cars, what about how every luxury manufacturer has had a Certified Pre-Owned program for decades?

    The CLA will be a disaster for Benz if it’s a bad car. A bigger disaster would be a bad S-Class. Either way, if they build good cars, cars that somehow justify their existence, then someone will buy them.

  • avatar
    glyphics

    The problem for BMW is moving the 1-series from its current RWD-based architecture to a FWD platform that it will share with MINI. The 1-series was looked upon by enthusiasts as the reincarnation of the 2002; lighter, sportier and less expensive than the bloated 3-series. In its next iteration, that cachet will be gone.

    BMW is taking a bigger risk by not expanding MINI’s exclusive FWD franchise, by not seeking for it a new, non-retro design language and by building a BMW that, by virtue of its shared FWD platform, may not be perceived as an “ultimate driving machine.”

  • avatar
    Ciriya.com

    The CLA, for all intents and purposes, matches up against the A4 as much as anything else. Same size, same sorts of engines.

    And THANK YOU to whoever brought up the petro-hipster point. If you honestly can’t tell the difference between a BMW or Benz vs a Camcord after driving them, you’re either blind or stupid. Speaking as someone who has driven hundreds of new and CPO cars due to years of dealership jobs before joining the military, yes, you can tell. I thought BMWs were overrated badge snob cars, til I drove my first BMW and fell in love. Having driven at least 15 more BMWs since then, my first impression still stands.

    New cars being 3,000 dollars cheaper won’t dilute either brand, because used car market. Bimmers, Benzes and Audis are so damn common because there are tons to 10 to 15 year old examples of all three (less so Audi but still).

    People buy em why? Because of the way they look, the feel of the seats, the way they ride and drive, the sound of the stereo, they like the climate control, the way the interior looks and smells and feels, the proportions; everyone has their reasons. It isn’t just the badge. And neither Bimmer or Benz (or for that matter, 99 percent of their customers) give a damn if all of their owners aren’t rich old white people. Pretty sure I’ve never seen a 7/S owner get offended because the little people can buy a car with the same brand they own. But don’t let that one kill your petro hipster fantasies. Some folks just like big nice cars or SUVS with large engines. You petro hipsters are some of the most classist racist clueless-about-actually-driving-cars car haters on the web, FAR more than your average luxury sedan buyer is.

    And finally, responding to Derek: mostly good points in this one but the CLA won’t do much damage if it flops, really. It will just disappear like the C230 sport coupe did. Crappy S classes will be far more damaging. And you indulge in this fantasy where every buyer of a 60,000 or up dollar car is a classist racist snobby bastard, too, and it is nothing but a strawman. Rolls and Bugatti buyers would be pissed if their brands made 50,000 dollar cars, but Bimmer and Benz buyers already buy from a brand that makes 34,000 dollar cars. Dropping the price of admission to 31,000 will do dick diddly to their preferences, nor will most S class owners give two shits if a CLA owner is sitting in the same room as they are at the parts and service center. Owners of 5,000 dollar old ass Bimmers and Benzes might just be there too.

  • avatar
    Rod Panhard

    This is easily the most pointless conversation I’ve seen on TTAC.

    But first, I’ll state the obvious. BMW already proved that Americans are more than willing to pay premium prices for small very cars (by American standards) when they launched the MINI brand. They started out with selling 25,000 2-door hatchback units per year and have expanded ever since. Lexus hasn’t been tarnished by rolling out “cheap” Lexii.

    So it’s time to invoke Godwin’s Law and make a reference to Hitler. That’s the only way we’ll know this pointless discussion has gone too long. Look at the four rings of Audi. Shouldn’t they expand that to five now that they own Ducati? Hitler would.

  • avatar
    dts187

    I don’t get the hate for the BMW or the CLA.

    Here’s my case for the CLA:

    I haven’t seen the CLA in person. However, I like the look based on pictures. I’m not usually a fan of MB styling but this one works for me. The interior looks like a nice place to be. It’s priced just north of a GLI Autobahn and will likely have similar performance, more dramatic looks, and a nicer interior.

    Where’s the problem? Some notion of cheapening the MB brand? It’s still too pricey for a lot of people out there. It’s probably not going to sell in large volumes due to the size and pricing. However, it does offer an mildly sporty and attractive entry into MB.

    • 0 avatar
      Ciriya.com

      +1 plus if that AMG version performs well enough, it would be a great alternative to sell to people who once loved a Lancer Evo or an STI, and now want something similar but nicer.

  • avatar
    jdmcomp

    All of this assumes that the US market is as you say. But what if the US market is changing? Moving to the Euro program? Makes sense then. I think you have missed the boat through tunnel vision. The US market is changing, and these units fit quite well.

    The other side is that many of these models have been oversold as having mystical attributes they simply do not have. We all would agree that buying a high end Euro sled out of warranty is a gamble of large scale. Yes, Coach is vastly overpriced.

  • avatar
    DenverMike

    I just can’t get past the obscene orgasmic profitability of BMWs & Mercs. Then they build them to fail and fall apart deliberately. Laughing I’m sure!
    I’ll pass on all the intangibles and driving excitement. They’re RWD, yes, but I wasn’t blown away. Parts are parts.

    Price them along the lines of Toyota & Ford and I’ll think about. Then I’d pry off the embarrassing badges…

    • 0 avatar
      Ciriya.com

      How has that conspiracy theory gone on for so long? Is the Illuminati behind BMW and Benz’s profits too?

      • 0 avatar
        DenverMike

        What conspiracy? No, their buyers are highly educated and know exactly what they’re in for and where their money goes. Don’t they? Not that they care… In fact, they even brag/laugh about it themselves!

        Building in reliability isn’t exactly rocket science. You have heard of something called ‘original parts’ and service depts, no???

      • 0 avatar
        28-Cars-Later

        I doubt it, I would pin their profits on excellent marketing and a stupid populace.

  • avatar
    CarsandPolitics1

    Derek hit the nail on the head with his thesis. Lots of you here are missing a multitude of crucial factors regarding the topic.

    1. These brands aren’t just luxury brands. Luxury is subjective, these are premium brands. Something inherent to the term premium itself is exclusivity. Look up the definition if you must.

    2. There are many studies showing that premium buyers DO purchase vehicles based on the brand status. If you don’t like that then you are in the minority. Also many of you should take some time to understand why that is so offensive to you. I know for many of you it upsets your socialized ideals because brand status is indicative some disgust with income inequality but keep in mind that most of those individuals, at their core, are simply seeking to use the premium item to express their individuality and separate themselves from what they perceive as the masses.

    3. Quality in the premium segment is certainly higher but anyone who actually owns one (I own several) would easily acknowledge that their quality, though measurably higher, is not enough to justify the $31,800msrp of a BMW 128i for example. Its just a fact, the quality difference between a Passat and an A6 just isn’t as gross as many of you would like to portray.

    4. The same reason why VW couldn’t sell very many Phaetons is the same reason why vehicles such as the CLA could effect the sales of their more expensive and more profitable models. A recent study released by Toyota on behalf of Lexus indicated that when people purchase a premium vehicle they perceive their purchase as ‘buying into a brand’ even above the specific model they purchase. The same factor that would make the CLA successful is the same thing that could effect the brand, not necessarily sales overall. Anyone who would disagree could simply view Mercedes current sales figures, compare them with figures from the 70′s and then compare the brand perception now as opposed to during the 70′s. Sales significantly increased and perception of the brand is lower.

  • avatar
    threeer

    Late to the ballgame here…but this is a novel concept:

    People will buy what they want.

    I’d love a stripper 3-series. Cloth, manual, crank windows. But I digress, that went away with the E30. Maybe that’s what a base Wrangler (strangely) appeals to me so much.

    Perception is the new norm. If the buyer perceives a difference (imagined or real), then they’ll pay for it. My mother wanted a C-class for the perceived “I made it” factor. But she wound up testing (and loving) a new Verano, which is now parked in her garage. Not sure what that says for her, exactly…:)


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