By on January 22, 2013

BMW’s debut of the American-spec 320i at this year’s NAIAS may have been big news for the American auto press, but up here in frigid Canuckistan, the 320i is old hat. Roughly a decade ago, BMW launched the $33,900 320i, along with an ad campaign touting its price, which was comparable to a well equipped Honda Accord.

Very few Accord customers were poached by BMW; those looking for an Accord wanted the extra space, the power from a comparably-priced Accord V6 and found a BMW a little too obnoxious. Car enthusiasts may have been attracted to the rear-drive dynamics and the silky inline-six engine, but the 170 horsepower figure was considered lacking, and what better way to out oneself as a try-hard striver than to buy the cheapo, leatherette-equipped base 3-Series?

BMW ended up doing fairly brisk business with the 320i, with much of their client base consisting of young, professional women (whether in the workforce or collecting an annuity from the First Bank of Mom and Dad) who also would have carried a Coach handbag. I say “would have”, because at the time, Coach was the bridge between a nasty department store house brand and the absurdly expensive Louis Vuitton, Balenciaga or Hermes bags. Remember, this was a decade ago and we were a few orders of magnitude removed from today. The cheap-credit-and-Kardashian-fueled mental illness that compelled the masses to find one percent aspirational goods essential to one’s well-being was barely in a gestational stage. The idea of spending four figures on a handbag when one worked at an entry-level white collar job would have been seen as irresponsible and reckless at worst, crass at best.

Fast forward a decade; a confluence of societal forces, from fashion magazines to reality TV to rap music, has convinced us that luxury goods are the key to fulfillment and happiness in life. I don’t mean traditional luxury goods, like a mechanical watch, or a well-made pair of shoes or bespoke clothing that requires a significant upfront investment in return for a lifespan of a few decades (or, in the case of a good watch, one that may outlive you by a couple generations). I mean luxury as in lug-zhur-ee, proletarian crap made somewhere offshore and sold for an absurd markup (most clothing items sold in Neiman Marcus, Saks or Bloomingdales), or worse, objects that serve as tokens of social status that masquerade as ethically or morally superior consumption choices  despite evidence that asserts the dubious nature of these claims (any food or clothing item that is “local”, “organic”, “sustainable”, “artisanal” or any combination of these buzzwords).

Left without any sort of moral, spiritual, familial or economically stability in the first quarter of life, Generation Why has become the most aspirational generation of all-time, and the onslaught of smart phones and social media has enabled this disease like a co-dependent parent plying their drug addict child with money for meth and cigarettes. I myself am guilty of this, taking a perverse pleasure in posting photos of press cars on Facebook so that former highschool classmates I haven’t spoken to in years can press “Like” on my photos. But Mercedes-Benz and BMW are far better at making money off this phenomenon.

At NAIAS, the two brands released two cars aimed dead-on at Generation Why members with a bit of money or reasonable access to credit: the newest generation 320i is a novel and exciting foray for BMW USA, but Mercedes-Benz’s CLA is an entirely new frontier for German luxury cars, one that BMW won’t catch up to for a couple more years.

At this point, obnoxious Audi die-hards will note that the A3 and A4 have long been entry-level, front drive options like the CLA, but I’m inclined to dismiss these assertions. The A4’s front-drive layout was a consequence of circumstances, while the current generation A3, fine car as it may be, is a half-hearted Euro-transplant ill-suited for the American market (but great for Canada). The CLA, on the other hand, is expressly designed to be a cut-rate, entry-level Benz, devoid of substance, awkwardly styled and priced just far enough out of reach for a no-credit Cruze customer, but just accessibly enough that a pharmaceutical sales rep or social media brand strategist could afford the $299 a month lease payment.

There is one and only one reason behind the move; volume. The unquenchable quest for volume has led to a sales war between Mercedes-Benz and BMW, with both companies also trying to stave off a full-frontal assault by Audi. All three companies can use their premium positions and scale to capitalize on both margins and volume (Audi may be best suited for this, due to its scale and modular platforms, but that’s another article in itself). And while Europe may be in the toilet, the appetite for premium cars is still strong – hell, why buy a Focus when you can buy a front-drive BMW 1-Series or Mercedes B-Class that costs just as much? Needless to say, the hunger in America has only grown, even as the economy has nosedived. Even if you and everyone else is worse off compared to 2008, god forbid you should display any outward signs of frugality (which is of course, weakness and a loss of social status).

Sounds foolproof, right? After all, Mercedes, BMW and Audi have such strong brands that it will be almost impossible to erode their equity as premium marques, and they can continue to pump out front drive compacts until the Eurozone implodes. If you’re a management track sycophant at one of those companies, then that’s what you’ll tell the board.

Everyone else should take note of what happened to Coach. Their bags, once desirable luxury goods, are now the sort of thing that overprivileged mothers joke about giving to their Filipino nannies as Christmas gifts. Except it’s not a joke – ride the bus near the wealthy neighborhoods of Toronto, and you’ll see Coach bags being carried by the help, even though they live in low-rent walkups.  The rich moms and daughters have moved on to Longchamp bags for every day, and the previously unthinkable Hermes, Louis V, Balenciaga and all manner of obscure boutique labels that nobody has ever heard of and will forget about in six months (what the fuck is a Proenza Schouler bag? I don’t know, but that didn’t stop one girl from telling me how much she paid – as much as a solid NB Miata – and how long she waited for it on a waiting list).

Lest you think this has no relevance to the auto market, think back to when just having a Mercedes was a big deal, how extravagant and expensive it was to have a vinyl-upholstered 240D that took a glacial age to hit 60 mph. But it was imported and foreign and therefore prestigious. Now any of our new age celebrity demigods – think the Kardashians, or Lil Wayne or Dwight Howard – wouldn’t be caught dead in anything less than an S-Class. A Bentley, a G-Wagen or a 458 Italia are really the minimum requirement, and even the Bugatti Veyron, the finest car in the world from a technological standpoint, is the province of D-list rap stars and domestic abusers. The only reason that the top-tier of luxury and performance vehicles is considered the minimum entrypoint for “baller status” is directly related to the erosion of Mercedes and BMW as a brand completely out of reach for the masses. Now that any 9-5 working stiff has “an entrypoint into the brand”, they’re not nearly as special as they once were. They are fast becoming the Coach bags of the luxury car world, and all the pretty rich boys and girls have moved on to the really exclusive stuff, the Bugattis, Bentleys and Birkin bags.

The CLA and the 320i may fool the terminally insecure, regardless of age or gender, but Generation Why, the one that doesn’t care about cars, probably won’t be fooled. If there’s one thing we are good at, it’s detecting disingenuous appeals to our own vanity and self-importance. Personally, I’m hoping for a return to a new kind of luxury, one that is discreet, efficient and pampering to those who are in the know or behind the wheel. The 2013 Accord V6 Touring looks like it would fit the bill quite nicely. And what do you know, it’s only as much as a poorly-equipped 3-Series.

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194 Comments on “Generation Why: BMW And Mercedes Ignore Coach At Their Peril...”


  • avatar
    sirwired

    A couple of comments:

    – Contrary to what you are at least the 2nd TTAC author to assert, a luxury watch is just as stupid a purchase as as snob food. A luxury watch requires regular maintenance, winding, and keeps WORSE time a watch that you can scrounge from a cereal box. You can get a perfectly nice watch that will last at least a decade, maybe two, for well under the price of a single maintenance checkup for a Rolex. (I can see the value of a custom-made suit or pair of shoes… at least those are more functional than their mass-produced counterparts.) I could forgive the high cost if at they least kept better time than literally ANY Quartz watch, but they don’t.

    – It’s my understanding that this cheap BMW will use the same engine as one of its more-expensive brand-mates. If this de-tuning can be “fixed” via an ECU flash, this may turn out to be a very good value indeed. Sure, it’ll wipe out your warranty, but that’s still not a bad price to pay.

    • 0 avatar
      CJinSD

      A BMW without a warranty is a very sorry car.

    • 0 avatar

      I don’t own a Rolex and don’t pay the grossly inflated servicing costs. My watch costs less to service than buying a new Casio G-Shock every 5 years.

      • 0 avatar
        sirwired

        While you can certainly spend more than is reasonable on a Quartz watch, a halfway-decent unit like a G-Shock should last you longer than 5 years as long as you don’t do anything to it that would ruin any watch. And if your needs are different than a Plastic-Fantastic G-Shock, there are other reasonbly-priced quartz units well under $200 that will require nothing other than a $7 battery swap every 3-5 years and can last for 20 years or more.

        I’m an engineer; I can certainly appreciate the effort and craftsmanship required to design and manufacture a precision reliable mechanical movement. I can even see why one would collect and cherish such an item. But I still don’t see how they are objectively superior to a quartz unit, where all the money and effort that goes into the movement can instead go into the rest of the watch (that’s not to say that it does; but you could say the same thing about any luxury good.)

      • 0 avatar
        SpacemanSpiff

        My $60 4.5 year old G-Shock is still going strong. It charges itself from the sun and sets itself from the Atomic Clock. When it dies, I’ll buy another.
        Before buying it, I was heading down the path towards ever more expensive mechanical watches. Now I don’t have to worry about whether I’m gaining or losing time, or whether that scratch on the case was there yesterday or not. I just wear it everywhere and always have the exact time… Corolla of watches?

      • 0 avatar
        HotPotato

        Why do you own any watch? Do you not already own a phone that tells you the time?

        I agree with your points, mostly, but you’ve got a bit of a misogynistic bent here. Let’s face it, nice watches are nothing but jewelry for men. Apparently you like an entry-luxury brand of watch. This makes you neither more nor less shallow than women who like similarly-positioned and equally-unnecessary Coach bags. But you imply that bags are frivolous and watches are not. Buying a nice watch makes about as much sense as buying an Audi A3: approximately none, unless status matters to you.

      • 0 avatar
        noxioux

        I’ve had my two G-shocks for more than 10 years. One for almost 15. I’ve struck one of them a glancing blow with a rock hammmer, and all it did was knock the dirt off. My other one’s been everywhere from the Arabian desert to 130 feet below the South China Sea.

        The only thing I think when I see a gen-why’er in a piece of disposable German automotive garbage is, “Hey, I bet you 50 bucks that pretentious twerp doesn’t know how to change his own oil.”

      • 0 avatar
        jeffzekas

        Hi Derek, well written article- really sums it up- just curious: what kind of watch do you own? What kind of car? I have always been tempted to buy a 4 year old Lexus LS440- the quality and “class” of a Mercedes without the hassle (some would say better quality). Same with Rolex: they seem to be the apex of quality and durability, so why not buy a used Submariner, and keep it forever?- but then, that IS their whole advertising gist, isn’t it? The fact is, folks have always sought out social status, buying objects that are beyond their means (the Cadillac/ big suburban house “status symbols” of the post World War Two generation, or the Porsche 924 mania of the 1980’s Yuppies)- But now, after the Wall Street Crash, we see, ever more clearly, that the emperor has no clothes- Unfortunately, every generation must learn this lesson anew. Cheers.

        • 0 avatar
          Thinkin...

          Buying something incredibly well made like a Rolex and keeping it forever is a idea. In theory. In fact, I was planning to buy a mid-high end swiss watch to celebrate a life milestone, but than talked to my local jewler about it. Here’s two the two reasons not to buy a watch that’s as expensive an old Miata, in automotive terms:

          1) You’ll want a COSC-certified automatic watch, if you’re relying on it for time. To keep it accurate, it will need a full service every 18 months. The Maintenence will be more expensive than the for a car.

          2) How do most watches die? Hint: It’s not due to poor workmanship or lack of water resistance. Most watched reach the end of useful life because they are lost or stolen. Which means that you now will be paying for an additional insurance policy on said watch. Awesome.

          Thus – for for collectors or people who LOVE watches, sure, it makes sense. But for me, that idea of the single one-time cost of buying an incredible timepiece was purely false – the ongoing costs are what instead convinced me to spend 1/5th the cost on a high-end Citizen which is infinitely more functional and durable, with no running costs at all.

          • 0 avatar
            28-Cars-Later

            What does insurance run on a high end timepiece?

            I would apply the same logic to a time-piece purchase as I do a car, try to find the most well made one you want and purchase it once its reached an equilibrium in depreciation. Then you have the style you want at 30%-50% of MSRP of the new one… that’s how I purchased my Omega Automatic and Movados.

      • 0 avatar
        mkirk

        Multiple IED blasts on my GShock. It replaced a Fossil or something that didn’t survive the first blast.

      • 0 avatar
        Power6

        For you Derek it is watch that needs “service”, for others it is a handbag or a nice car. I can’t figure out if that is a huge hypocrisy or merely a tip of the hat that you identify with the status seekers…

    • 0 avatar
      Macca

      Sirwired – I mostly agree with you on the subject of luxury watches. I say “mostly” as I am a mechanical (automatic) watch enthusiast. It’s just that you can get a finely crafted automatic for just a little more than the price of a Chinese-quartz Fossil, as long as you’re not caught up wanting a Rolex or Omega on your wrist (which pale in comparison to some Patek Philippe or Ulysse Nardin creations).

      Yes, there are tiers and certifications regarding the timekeeping accuracy of automatic movements, which is fine – but I actually enjoy that my automatics are imperfect pieces of 18th century technology (with a touch of 19th century ingenuity from Adrien Philippe).

      That some actually spend a couple grand on a plain-jane quartz Tag is a joke – the looks of a metal-band Fossil and “cereal box” quartz watch technology. Lame.

      For me, the answer has been Japanese automatic movements/watches. Just as Japanese cars haven’t traditionally fetched German prices, Japanese watches are quite a value next to a “Swiss” creation (also funny is the 50/50 rule behind the “Swiss” designation, but I digress). So while I agree that the price for a Submariner is laughable, automatic watches can be a sensibly-priced hobby, and uniquely luxurious in their own right.

      • 0 avatar

        You can also buy a Rolex, Omega or other luxury watch on the second-hand market for an incredible discount.

      • 0 avatar
        dejal

        I like automatic Orients. Have 2 of them. Like the them a lot. Nice quality for a cheap price. Owned by Seiko.

        A Citizens Ecodrive BM6400-00E. I love this thing.

        A Casio Mudman and a couple of cheap quartz Swiss Armies.

        I think the most I paid for any of them was $180. The Swiss Armies were under 50.

        I’ll admit they are fashion statements. They don’t cost much and it’s fun learning about a particular watch.

        I’d like to get a Chinese Seagull someday. A lot of Timex watches over the last few years had movements from Seagull. Seagull makes some gorgeous watches. I do like the Seagull 1963 Air Force with Mineral Glass Crystal.

    • 0 avatar
      mrhappypants

      If you can’t see the value in an $800 Oris versus a $200 department-store quartz fashion watch, you shouldn’t own a watch at all.

      • 0 avatar
        sirwired

        Seriously? Because I don’t see the use behind me plunking down $800 on a watch, I shouldn’t own a time-keeping device at all?

        You can certainly argue that I am ignorant of the true value of luxury watches; we might disagree, but that’s still a viable statement to make.

        But I was not aware that fine timepiece-appreciation should be a pre-requisite to owning any sort of watch.

      • 0 avatar
        mrhappypants

        That’s right, because $200 on a piece of junk quartz watch that will last you 2 years, tops, is a waste of money. The $800 Oris will last well past your death. Stick to pulling your phone out of your pocket to tell the time.

      • 0 avatar
        Preludacris

        What about my Timex? It’s obviously not a luxury item and not posing as such, so may not be relevant to the conversation, but I see no reason why it won’t continue keeping good time for as long as I treat it well. It hasn’t even needed a battery since I bought it for $50 in 2007.

        The $800 Oris would have to last far beyond my lifetime to be a better value than that.

      • 0 avatar
        sirwired

        I agree that spending $200 on a 2-yr watch would be stupid, and I’m willing to agree that such watches do exist. But apparently you aren’t shopping very well for quartz watches, because I don’t think I’ve ever owned one (even one that literally came out of a box of Golden Grahams when I was a kid) that lasted only two years. And you can certainly buy a $200 unit that will last a lifetime.

        The $60 watch on my wrist right now has lasted me for a decade of daily use and abuse and other than two batteries, has required no maintenance of any kind. And the only time it needs to be set is to adjust for DST.

      • 0 avatar
        wsn

        mrhappypants “That’s right, because $200 on a piece of junk quartz watch that will last you 2 years, tops, is a waste of money. The $800 Oris will last well past your death.”

        My bet is that the $200 junk is made in Swiss. For that budget, a Citizen will last longer than any Swiss mechanical junk.

        If you are a collector and like mechanical watch, it’s fine. But don’t pretend that they are better in functionality or durability.

      • 0 avatar
        gslippy

        I don’t recognize most of the watch brands mentioned here. Mine is a $36 Dunlop digital that’s maybe 10 years old. It has survived all manner of car repairs, chemical exposure, water immersion, outdoor work, and church. It seems to run fast, and it’s now two-tone due to the plating wearing off. Must be the engineer in me, since I don’t care.

    • 0 avatar
      bumpy ii

      “Luxury watches” are just pieces of jewelry that do a passable job of telling time. Same with BMWs or Ferraris: they’re not bought because they’re the best; they’re bought to show that you can afford them.

      • 0 avatar
        Adub

        Rubbish. I doubt you have spent time in either.

        Name a mass-produced car that looks as good as a Ferrari, that sounds like it, that screams “passion” as opposed to “turd-like appliance.” BMWs and Audis have interiors far above mainstream mongrels. People buy them because at the end of the day, they like sitting in something that isn’t a hunk of plastic and leatherette seating surfaces.

      • 0 avatar
        Macca

        Adub – You’re kidding, right? Many of the BMWs & Audis (not to mention Mercedes’ “MB-Tex”) on the road have “leatherette seating surfaces” (and plenty of plastics, for that matter). (Cue the apologists’ claim that MB-Tex is far more durable and desirable than leather…)

        Heck, I’d wager a Corvette (yes, even the C7) looks quite exotic (perhaps not as qualitatively “good” as some Ferraris), sounds pleasing and “screams passion” all for a fairly bargain price (compared to the exotic Italians).

      • 0 avatar
        Sigivald

        Adub said: “Name a mass-produced car that looks as good as a Ferrari”

        “Almost any of them”, because – and I know this makes me an outlier in car-guy land – Ferraris are *hideous*.

        I’m half with Bumpy – it’s not that a BMW or, for people who like them, a Ferrari aren’t fast and luxurious (they are both of those things).

        It’s that plenty of people *do* buy them, at least the BMWs, because they’re status indicators; it sure ain’t, in any case, because they really want The Ultimate Driving Machine*.

        The Lady Of A Certain Age driving a 750i (poorly) is not doing so because she cross-shopped with an Equus and thought the 750i had a better interior; it’s because the 750i makes a statement the Hyundai doesn’t, and she doesn’t care about the extra $20k it cost.

        Likewise, BMWs don’t scream “passion” at me. Sorry. (M-Coupes and M6s excepted.)

        (* I have repeatedly found myself muttering, while driving, “Get your Ultimate Driving Machine OUT OF MY DAMNED WAY” … and this is in my radically underpowered old 300D, with its 18 second 0-60 time.

        I can only assume that the people driving their BMWs like they’re my grandma driving a Geo Metro with a bad transmission are *not* buying them for performance purposes.)

      • 0 avatar
        Sigivald

        (Also, to reply to Macca, no, MB-Tex isn’t more desirable than leather, at least not to a sane person.

        It *might* be more durable, though, at least if you’re not into religious maintenance.

        I’ll give my old ’76 one thing – the MB-Tex is in fine shape, overall. And I’m not sure that’s true of a lot of 37 year old leather interiors.

        But if I was buying one? Totally leather.)

      • 0 avatar
        wsn

        Adub, “Name a mass-produced car that looks as good as a Ferrari, that sounds like it, that screams “passion” as opposed to “turd-like appliance.”

        Rubbish. It seems that all your justification for a Ferrari is based on subjective matters.

        For instance, in the hands of most drivers, a Corvette is just as good, or even better than an entry level Ferrari.

      • 0 avatar
        CarnotCycle

        I think Tesla has a shot at being a status symbol. It is a sharp-looking car without looking bizarre, its “eco” beyond any hybrid, it is not built like a kit, and all of them go quick, the 80kwh model very quick. They have range enough for what rich people mostly do with cars, which is rarely drive a long ways.

        Reason I say this isn’t just because of those qualities, but I live in Santa Monica and I saw five of the them today. They are trendy among the trendy, at least in West LA. Teslas are what the Prius-elite seem to be rapidly upgrading to, given they genuinely have an upgrade now – both in how much car and how eco said car is.

        And Model S’s are subtle, you don’t pick them out of a stoplight row unless you know cars. They almost look a cross between the new Audi A7 and Ford Fusion ‘hatchedans’ or whatever you call them. They are just right to cater to the crowd that might buy them. Might be worth keeping an eye on Tesla stock.

      • 0 avatar
        ZekeToronto

        Macca wrote: “Many of the BMWs & Audis (not to mention Mercedes’ “MB-Tex”) on the road have “leatherette seating surfaces” … ”

        Not sure about the US market, but it’s been many years since Audi sold a car in Canada with vinyl seats. Even the cheapest A3 has leather standard.

        Also, to HotPotato, who doesn’t understand why anyone would buy an A3: I actually intended to buy a GTI, but found a much better-equipped A3 for nearly the same money. In addition to its more age-appropriate looks, it had a lot of additional equipment, including some features that weren’t available on the Golf at any price. Although the performance is similar (identical drivetrains), its seats and suspension settings result in a more comfortable ride–perfect for me, as it’s my commuter. Since it’s also been 100% trouble-free, I’ll probably buy another.

        Incidentally, I was given a Rolex (Oyster something-or-other) as a gift a few years ago. It has never left my dresser drawer. Despite preferring an Audi to a VW (on the merits), I’m really not into status goods and won’t wear it. However, because it was a gift, I don’t feel like I can get rid of it. What a waste. Meanwhile, like most people, I tell the time with my phone … and on those occasions when wearing a watch is expected, I’ve got a perfectly adequate-looking Fossil–$80 from the outlet :-)

      • 0 avatar
        kmoney

        I would posit that the problem with the whole watches as status symbols thing is that the majority of people can’t really recognize any of the luxury watch brands outside of Rolex — the marketing juggernaut — and the omega Seamaster due to its Bond product placement/association. As someone with several nice mechanical watches(bought second hand or on ebay usually at prices below FMV purely for love of their intricacy and attention to detail etc..)and I can count on one hand the number of times anyone has actually noticed/commented on them.

        Cars are mass marketed enough that everyone knows that someone who drives a Ferrari, Bentley, Aston et al. has achieved “baller status.” If you are wearing a nice IWC, JLC, Patek, or even something considerably cheaper than these, 99.9% of people won’t have any idea of its value or see it as a status symbol.

    • 0 avatar
      bd2

      Buying a luxury watch (meaning actual watch brand and not a designer watch like Gucci) w/ a quartz movement is stupid.

      Buying a luxury watch w/ a mechanical movement is the one form of jewelry for men that is acceptable (note – watches incrusted w/ diamonds or other precious tones, all gold, etc. are tacky).

      One doesn’t buy a mechanical watch b/c of how it keeps time, one buys it b/c one appreciates the artistry and engineering that goes into movement.

      As for Coach, methinks that DK is being a bit harsh.

      Sure, it’s not on the same tier as the top European design houses, but many designers do have lower end lines which the masses can afford.

      Also, Coach does have a higher end line as well.

      Coach is basically the equivalent to J Crew or Banana Republic (actually, a bit higher – a Coach leather jacket will be a good bit nicer than what one could get at JCrew, not counting the other brands JCrew sells, or BR).

      • 0 avatar
        wsn

        I don’t agree. Buying a quartz luxury watch makes the most sense to me. That way, you have the best of both worlds:
        1) Form. I.e. visual design
        2) Functionality. I.e. time accuracy

        Insisting on using a mechanical movement is the same as insisting using air cooled engine for 911. It’s 100% stubborness and 0% rationality.

      • 0 avatar
        Macca

        ^ Comparing a mechanical watch to an air cooled engine is a stretch. The watch is jewelry, we don’t depend on them for anything – the fact that the piece of expensive glittery jewelry tells time is just a bonus feature. A luxury quartz watch is almost an oxymoron; you’re only paying for the brand name and a $0.50 quartz movement.

        To prefer an automatic mechanical watch is to appreciate the craftsmanship of such a tiny, complex machine. In our tech-ed out world, it’s akin to taking the time to enjoy a cup of French press coffee.

        This “time accuracy” we speak of is insignificant for reputable watch makers – an auto might be off all of a few minutes in a month’s time – if you choose to keep it going that long, or keep it on a winder when you wear another watch.

        It’s okay to enjoy anachronisms – even with vehicles, as long as you accept the potential shortcomings.

      • 0 avatar
        bd2

        @wsn

        You are paying top dollar for the mechanical watch b/c of the artistry and engineering of the automatic movement.

        Once can buy a quartz watch from Seiko, Citizen, Victorinox, etc. which looks just as good and costs thousands less.

        Seiko has a line of high end chronograph diving watches which can list for as high as $10k.

        That amount of $$ reflects the intricacy of the movement.

      • 0 avatar
        bikegoesbaa

        Do you contend that there is not a significant amount of “artistry and engineering” represented in the very accurate, efficient, durable, and functional electromechanical machine that is a modern quartz watch movement?

        I suppose you could quibble about the “artistry” aspect, but it seems pretty obvious to me that there is substantially more pure engineering in a quartz movement than in any bent-metal mechanical design.

        While you may not appreciate the aesthetic, a quality multifunction analogue quartz movement represents a tremendous amount of applied engineering skill from multiple disciplines: software, electronics, and mechanical; plus the amount of manufacturing knowledge required to produce them in quantity.

        There may be some valid reasons to look down on quartz watches, but “insufficient engineering content” is not one of them.

        You may want to research the actual cost of a mechanical movement to the manufacturer. They’re not really all that expensive unless you’re talking true handbuilt multicomplication items. Although they’re neat little machines, the ETA movements (or equivalents) used on most mechanical watches don’t represent any artistry or significant cost.

        Seiko can sell 7S26 mechanical movement watches that are reasonably accurate and notoriously durable for less than $100 for the whole watch. What do you think their movement alone costs? Do you think that a commodity ETA movement is substantially more expensive?

    • 0 avatar
      Dynasty

      I inherited a Rolex when I was really young. It wasn’t until I graduated college that I felt I “earned” the right to wear it.

      The watch had sat a better part of 15 years plus before I wore it.

      Took it in to get a tuneup, because it stopped working, and have it sized, as well as an appraisal. I think they may have put a new crystal on it too. Cost 500 dollars!

      Its hidden in a wall in my house now. I cannot remember the last time I wore it.

      I do remember dating a Jewish girl several years ago and I could literally see her eyes drooling when she would look at it though…. Truth.

    • 0 avatar
      racer-esq.

      Mechanical watches are awesome. Especially skeleton versions or versions with sub-skeleton windows. What is pointless are quarts watches, which are completely redundant now that everyone has a cell phone. You don’t need to spend a lot of money to get a mechanical watch. Most “Swiss” automatic mechanical watches use movements from Swatch’s ETA subsidiary that cost about $300, and then get massively marked up in final watches that cost in the thousands.

      But the Swiss aren’t the only people making mechanical watches, just like BMW and Mercedes are not the only people making rear wheel drive performance cars. Seiko/Orient and Citizen/Bulova make great automatic mechanical watches. Or you can get a cool looking Kenneth Cole automatic mechanical watch for under $100. The automatic mechanical movement is Chinese, but who cares. It’s not like to are going to get in a car crash with it or feed it to your dog.

      I want to love the BMW 320i as a bare bones, slow car fast driver’s car. But given BMWs quality issues, and the way that dealers treat people, there is just no reason. Especially when a Hyundai Genesis Coupe or Scion FR-S/Subaru BRZ can be had for $8,000 less. If I wanted to throw away $8,000 to get overrated crap I would buy a Hublot Big Bang off eBay.

  • avatar
    magicboy2

    This is hardly a new thing. 318ti anyone?

  • avatar
    levyej

    Great, great, great points about brand erosion. Excellent read.

    • 0 avatar
      Toad

      Agree 100%. This is the story of Cadillac in the 1970’s, and we know how that movie ends. From prestige to mass market junk in 10 years.

    • 0 avatar
      Syke

      I’ll take it back a big further, and a lot more definitive.

      Packard 120, followed by the Packard 110 (aka, Packard 6). Twenty years later, Packard is nothing more that a glammed out Studebaker. Two years later, Packard isn’t.

      This from the same brand that, back in 1934, was the equivalent in status of Mercedes, BMW and Audi together.

      • 0 avatar
        Toad

        Packard had a good excuse for going down market: the Great Depression. Packard did what they had to do to survive, and it worked for awhile.

        By contrast in 2013 MB and BMW are thriving; their only excuse is short term greed.

  • avatar
    CJinSD

    I think there is a fundamental difference between Scion or Ford trying to appeal to badge snobs and established prestige brands like BMW or Mercedes trying to be more accessible. The latter two struck out with efforts to market the 318ti and C230 Kompressor because they were visibly differntiated from accepted products. Nothing screams cheap like a hatchback. BMW did just fine back in 1991 with the 318i and 318is though, runout E30 models that looked just like their six-cylinder platform mates but were advetised for under $20K. Since the new 320i looks just like any other BMW, I’d say their biggest fear should be canibalizing sales from the 328i. Few fashionistas know or care about track performance. If they did care, they wouldn’t spend their money at a new BMW dealership anyway.

    • 0 avatar
      icemilkcoffee

      Agreed. It’s going to poach sales from the 328i. The 3 series is going to have 4 engine choices: 320, 328, 335 and 335d. The 328 is going to be the middle child who gets no love.

      • 0 avatar

        BMW has a whole other side we don’t get. In Germany, the niche the 320i fills in the US is filled by the five door one series, with a variety of engines…The two door 1 is almost nonexistent over there.

        Likewise, the six cylinder gas motors are almost total non-players in Germany. Everything is either 4 or 6 cylinder diesels. Our 320d rental did way better than our friend’s 318i rental car for fuel costs. I’d not want to flog the gas six in Germany, no matter how sweet. The gas engines in the 3 are basically export only models….few takers in Germany. Likewise all those 6 and 8 cylinder Mercedes E class you see in the states….almost nonexistent in Germany. The E has either a 2.0 turbodiesel 4, or the six we get.

        Driving a gas car in Germany, even one we consider “small”, like the 328, is just like tossing Euro notes out the window while driving the autobahn.

        Imagine if GM to you was only Caddy and Buick. That is what we see for BMW.

        We are missing a five door one series, with a 1.8 liter gas motor, and a small diesel. We are missing a four cylinder diesel 3.

    • 0 avatar
      stuki

      As long as BMWs drive differently (read “better” along some metric) than less exalted brands, selling lopo leatherette (why not cloth? I know of noone other than small-child parents who would prefer leatherette to leather, but many who would pick cloth over either. Do like Honda and call it biocloth, ecocloth, PETA-cloth or something to appeal to the latest graduates of our progressive indoctrination machine) versions still serves a useful purpose.

      As those with the right to Carrol Shelby’s name have demonstrated, the horsepower-price-status correlation is getting a bit weaker these days. Many of those who fancy themselves “in the know behind the wheel” pick Miatas over Mustangs, after all.

      Now, with BMW’s recent move away from driving any different than any other brand, and instead focusing on simply doing what everyone else tries to do, just better, this may not make so much sense anymore.

      As for the Accord Touring, I recently drove it back to back with a $60,000 528i, and while they drive “differently”, the differences doesn’t obviously shout that one is “better” than the other. At some point, getting closer, cars will become like watches. The objectively “best” ones will be cheap commodities, while the upmarket brands are relegated to hawk heavily marketed, occasionally cool looking anachronisms. In the car biz, the sillymoney level above $150,000 is already like that, populated with practical jokes like Rollses, Maybacks, Bentleys and breakdown special “Supercars” that can’t keep up with relatively cheap GTRs and ‘Vettes in any other area than repair bills.

      • 0 avatar
        Sigivald

        Yup.

        I’ve had the same thought spec-and-visual-wise comparing the 535i GT and the Crosstour.

        “Hey, the Honda’s the same thing, except less ugly and $20k cheaper.”

      • 0 avatar
        stuki

        @Sigivald

        Goo to know I’m not the only one who doesn’t find the Crosstour ugly. Everyone seems to pan it as second coming for the Aztec or somesuch, while I personally find it one of the better looking cars released in a long time, particularly in the car-on-stilts class.

    • 0 avatar
      FuzzyPlushroom

      As that goes, I’m not too worried about the 320i as it relates to BMW – as you suggested, it is pretty much the modern 318i. The idea of a cut-rate Mercedes-Benz that shares little corporate DNA… well, that makes me wonder where Mercedes will be in a decade or two.

  • avatar
    Nick 2012

    Excellent post Derek. As a Gen Y’er, though, I’m hopeful there are less of the status obsessed of our cohort than marketers seem to think. Otherwise, I’m scared of the world my kids will inherit.

    Most of my friends make fiscally prudent decisions with some natural variation among the spend vs save spectrum. Maybe I’ve just self selected my friends, but few people I know would buy/lust after a BMW 320i or MB CLA. In fact, we’d be in the black 7th gen Accord V6 6MT sedan laughing at such driver’s conspicuous consumption FAIL after blowing their doors off.

    The recession hit our age group quite hard. While I don’t think we will share all of the same sock-darning habits of our great depression era grandparents, I think most Gen Y’ers have realized that everything you’ve got could be gone in a minute if you’re not careful.

    EDIT: I just googled the 2013 Accord LED headlight feature and stumbled on some Audi forum members flipping out that “their” LED technology is now on some plebeian sedan.

    http://forums.audiworld.com/showthread.php?t=2831394

    • 0 avatar
      Preludacris

      “I’m hopeful there are less of the status obsessed of our cohort than marketers seem to think. Otherwise, I’m scared of the world my kids will inherit.”

      Excellent.

    • 0 avatar
      Lynchenstein

      “I just googled the 2013 Accord LED headlight feature and stumbled on some Audi forum members flipping out that “their” LED technology is now on some plebeian sedan.”

      That makes me grin all over. Suck it, Audi babies!

      • 0 avatar
        FuzzyPlushroom

        Amen! Higher-end cars will always introduce new technology – automatic transmissions, air conditioning, FM radio, power steering, cruise control, power windows/locks, backup cameras – and it will always trickle down to less expensive models over time. You don’t get to keep it just because you paid more, you just get to have it first.

      • 0 avatar
        Dynasty

        Speaking of trickle down.

        When are GMs magnetic shocks going to start making it to sub 22K cars? That is one technology that needs to be made available on more than just Buicks Cadillacs and Ferraris.

  • avatar
    AMC_CJ

    Generation Why here; and I just don’t get it.

    Not so much your article, but my peers. In my college years I was with a girl who had a fairly wealthy background, to her parents credit she wasn’t too over-indulged compared to typical “rich-kid” standards, but she had the taste. Coach purses galore, and that one Louis-Vutton that cost as much as the 71′ Chevy C30 stake bed truck I had at the time. She drove a Corolla, per her parents funding, but she wanted a Mercedes, or a Land Rover. Flash forward several years; now she lives unemployed in a small pre-fab house and carts her two kids around in her parents old Camry they had when we were dating.

    The girl I settled down with after that; her fanciest hand bag is a discount Vera-Bradley and she is in love with the 2012 base model Mustang we got together for her. I couldn’t be happier.

    What I find funny is when I’m at a store and there is girl there. Dressed in what I would consider fine clothing, few hundred dollar handbag around her shoulder. I catch her in the parking lot on my way out, putting the few groceries she got from the organic section in her beater turn of the century Honda Civic. Maybe she keeps a new Mercedes parked in the garage for weekends, but I kind of doubt it…..

    • 0 avatar
      Xeranar

      People value you different things. This whole discussion is superficial in that people are pulling moral outrage on others then making value judgments themselves.

      I can afford a 5-series today and I’m under-30 (Gen Y) and don’t care as my xB Gen 2 is in good shape and I’m waiting for the big switch in the 2015 models to super-efficient engines.

      If anything this is a concious realization that BMW & MB are worried about their future. They each make a single brand of luxury car with some niche brands. The cost of future platforms could break their back without expanding the volume. So they either sell a cheap 3/C series now or suffer the consequences later when the Big 8 can afford to develop platforms that meet the super strict regullations and they can’t.

    • 0 avatar
      stuki

      As Apple, Wholefoods and Starbucks has made fortunes from figuring out, consuming and displaying expensive “cheap” stuff, gives almost as much status as expensive expensive stuff. While Ms. Civic could never afford to buy an expensive car to show her specialness, being nickel-and-dimed one organic soda, latte or cellphone at a time is a much more affordable way of keeping up with the Kardashians.

      • 0 avatar
        Xeranar

        Arguably only Apple fits what you just said. Starbucks serves a higher level of coffee than the slop in the 7-11 and whole foods is overpriced they are once again selling a quality level above the average supermarket. Course nobody seems interested in opening a chain of cheap coffee stores as they would have to compete against starbucks on a slightly smaller margin and whole foods’ competitors are upscae super markets and Trader Joe’s.

        Course we’re making huge assumptions about wide swaths of people. The media’s distortion effect on celebrity and wealth seemed to have rushed headlong in To more concious consumers. Course the salt of the earth talk here sounds more doom prep than enlightened optimism.

      • 0 avatar
        fvfvsix

        Sorry – no one who’s taken a tour at a Whole Foods would walk away calling it expensive “cheap stuff”.

      • 0 avatar
        mkirk

        I think Apple is only correct with regard to the iOS powered devices (iPhones and iPads). I am an IT guy and have owned numerous laptops. None has ever made it beyond 2 years and that one required an expensive battery to get that far. Generally they quit charging long before then. My MacBook suffered from none of these issues and is still going strong. My wife got a 500 dollar Dell when I splurged on the Mac. for 500 bucks she got twice as much computer (literally, it weighs twice as much and is twice as thick) with less than half the battery life even after she bought the high capacity battery after it predictably failed a year in (possibly a Windows 7 issue). The Mac had much more robust hardware. I drive a 93 Land Cruiser and a 90 Miata and while I do own an iPhone, it is a second generation one (still going strong by the way). My wife rolls in an 07 Hyundai so we are hardly the poster family for having to own the latest gadgets, but you will pry my Mac from my cold dead hands!

      • 0 avatar
        stuki

        @fvfvsix

        Even a $2 can of organic soda, 4 times the price of a regular coke, is still only two bucks; aka cheap in any absolute sense. Any old Civic driver can afford that, no Bentley required.

        @Xeranar
        Starbucks sell “higher a higher level of coffee” in just the same way BMW sells a “higher level of car.” More expensive to produce for sure, more expensive to sell, but ultimately brown water with caffeine in it.
        As for Wholefoods, selling locally grown vegetables in an area not particularly suited for growing said veggies, does not necessarily translate to a “quality level above the average supermarket” along every reasonable value scale. Any more than mom-and-pop-made coke is any better than the original.

        Anyway, my point is not to disparage these shops and brands. I shop at Wholefoods myself, and carry an iPhone. But, as everyone else is being officially fleeced to prop up Blankfein’s paycheck and Obamas Pakistani child bombing raids, the market for luxury versions of expensive stuff shrinks, while those who aspire to luxuries are stuck with expensive versions of cheap stuff, like cheese.

        Of course, Obama’s got airforce 1, and Blankfein’s got a Boeing Business Jet or something. Or two or three. So the market for ultra expensive stuff for the bailed out classes are still strong.

    • 0 avatar
      gessvt

      Or maybe she is debt free from driving a 2000 Civic and can afford to splurge on organic food, which may be a luxury but makes a hell of a lot of sense to the truly informed.

      Show me a trophy wife driving a 2013 Range Rover, and I’ll likely show you her husband, saddled with debt and maybe a few paychecks away from being bankrupt.

      • 0 avatar
        fvfvsix

        +1. My wife drives a Civic, and makes enough money on her own to literally drive it through a gen Yer’s living room, yell ‘f^&k you’, and walk away. All this without protest, of course, because she’s also armed :)

      • 0 avatar
        cackalacka

        This. What does one call a woman that drives late ’90s/early 2000’s Japanese beaters, purchasing healthy foods that they will prepare into a meal?

        If one is wise: ‘Desirable.’

      • 0 avatar
        AMC_CJ

        Hey, my daily driver is a beat 78′ Chevy sedan. Some co-workers of my wife thought I was homeless when I met her for lunch one day.

        Some people don’t care about cars, I get it well. I’ve know plenty of older “rich” folks who drove fairly worn out mundane crap. BUT, if you’re the kind of person that likes to wear your money, you’re more then likely aspire to be seen in it too. A lot of those people don’t walk around with several hundred dollar handbags and overpriced wardrobes.

        Me, I like for people to leave me alone, so I just look like a bum mon-fri and drive the appropriate vehicle. Although come Saturday I’ll clean up good and pick one of the nice cars to drive.

  • avatar
    bryanska

    Even then, any watch over $5 is a luxury good. Any watch doesn’t do anything (besides keep time) better than the most bargain-basement cell phone. At least a mobile phone is a necessity. Nearly nobody needs a watch. And for those who do, those people who NEED a watch for some function-related reason, a $5 watch will suffice.

    OK, so I’m leaving out divers and mountain climbers.

    In sum, it remains equally mysterious why anybody would buy a watch, much less an expensive watch.

    At least with a luxury car you have hedonic and functional upgrades: heated seats to relieve the stress of a long commute, etc. Watches are beat on every measure by a cell phone.

    And the CLA is damn pretty.

    • 0 avatar
      stuki

      The article is about how some people will pick a BMW WITHOUT heated seats etc., over a Honda with them :)

      • 0 avatar
        86er

        “At least a mobile phone is a necessity. Nearly nobody needs a watch.”

        I must be getting old.

      • 0 avatar
        wagonsonly

        @86er: You and me both. And I’m in this article’s target age group.

        I’d rather have a decent watch than a cell phone any day of the week. My personal cell phone has been dead in a kitchen drawer since Thursday – but I haven’t forgotten my watch any day this week.

    • 0 avatar
      Preludacris

      This might be facetious, but the watch is on my wrist while the phone is in my pocket. I have both and almost never check my phone for the time. I guess old habits die hard.

    • 0 avatar
      onyxtape

      Because watches are the only acceptable piece of jewelry that men are allowed to have – at least as interpreted in almost all social circles.

    • 0 avatar
      kkt

      As far as I can tell, cell phones need to be charged daily or maybe every other day. Anyone who wants to be able to tell time when they’re not near a charger that often needs a watch.

    • 0 avatar
      baggins

      “In sum, it remains equally mysterious why anybody would buy a watch, much less an expensive watch” . . . “Watches are beat on every measure by a cell phone”

      Wrong

      You do realize that before wrist watches, people used pocket watches. Todays cell phones are larger and heavier than a pocket watch. They also require some sort of action to produce the time.

      a wrist watch was easier to check discreetly and quickly

      Still true today. Imagine you are in a BOD meeting (I am guessing you are about 23, but play along) Its a bit gauche to pull out the cell phone to check the time while the Chairman is making a point.

      Also, the battery life of cell phone is about 1 day – sometimes I forget to charge mine. My quartz watch have about 2-3 year life,and my mechanicals are always good to go.

      • 0 avatar
        silverkris

        Great point about protocol on situations when not to pull out your handphone to check the time. A wristwatch is more instant , and more compact to carry.

        About the only time nor wearing a wristwatch is not practical might be in safety situations, e.g., working with electrical equipment. Years ago my former next door neighbor worked in IT, servicing server and network equipment. He would not wear a watch on the job because he would be sticking his hands into equipment, and there could be electric shock risk if a watch contacted any part of the machinery. So for time he would check his handphone time display (not a smartphone). This was probably 8-9 years ago. Never would have thought not having a WW would be a trend now.

        FTR I have a $120 G-shock, solar powered for the last 6 years. My “dressy” watch is a quartz Longines that I’ve had for 17 years., for professional occasions. Like to use stuff that lasts.

  • avatar
    Pch101

    With most consumer products, “luxury” is at the top of the ladder.

    But with cars, it is “exotic” cars such as Ferrari and Bentley that are at the top of the ladder. Luxury cars are slotted below the exotics. The nomenclature for cars is different than it is for handbags, watches and the like.

    The notion that a luxury car should be virtually unobtainable was tossed out during the 1930s, when GM saved Cadillac from complete failure by moving it somewhat downmarket.

    And BMW built its brand in the US on the back of four-cylinder cars. For some reason, you seem to be intent on ignoring this, but these types of cars are a strong part of their heritage, and a logical response to higher US fuel prices, just as they were in response to the 1970’s-era OPEC crisis. Europeans have long had models such as the 316, which has the smaller engine and reduced power that the designation implies.

    • 0 avatar

      PCH, your trademark contrarianism falls flat on its face here. It has nothing to do with four-cylinders and everything to do with diluting the prestige and exclusivity that made them desirable in the first place. Those four-cylinder cars were still extremely expensive to own and operate, and therefore a marker of status regardless of cylinder count. Without the brand equity that comes from being out of reach, these cars are just another commodity product. A big part of my piece was how the “exotics” have become the minimum price of entry for showing off, since “luxury” cars have become so commonplace. Even a decade ago, this was not necessarily the case.

      Furthermore, your point about Cadillac is incorrect. Even if it was moved downmarket by the lack of V16s, an Eldorado or Sixty Special was still a prestigious car long into the Mad Men era. There was simply no parallel between a junior employee buying a Cadillac back then versus one who could lease an ATS 2.5L for $299 a month with $0 down. The very idea of an entry-level luxury car did not exist. Luxury was luxury and people did not feel such a crushing need to define themselves via consumption.

      • 0 avatar
        Pch101

        “It has nothing to do with four-cylinders and everything to do with diluting the prestige and exclusivity that made them desirable in the first place.”

        There’s no dilution. It isn’t necessary for a luxury car maker to price every single vehicle above every lower-tier mainstream vehicle on the market. It isn’t necessary that every BMW be more expensive than every Honda on the market.

        A brand is defined by its ladder. The top of the BMW ladder is well above the top of the Honda ladder, while the bottom of the Honda ladder is well below the lowest-tier BMW.

        Part of what makes BMW, Mercedes, etc. compelling is that the top of their ladders is so high. Even though most BMW or Mercedes buyers will never have a 7-series or S-class, the presence of those cars in their respective lineups help to make the bottom aspirational. Likewise, the bottom helps to make the top more compelling by reinforcing the 7-series or S-class buyer’s feeling that he has arrived by being able to climb to the top.

        So I’m sorry, but you’ve really missed the point here. You’re staring intently at a single tree, while ignoring the entire forest around it. A near-luxury car should be priced at a point at which a fair number of people can afford it; the key is to make sure that there is a ladder above it that not everyone can climb to the top.

        • 0 avatar

          If you cannot accept the premise of dilution of brand equity (which has happened time and time again) then the discussion is pointless. You can trot out the ladder theory all you want, but if enough of the proles have an entry-point into an exclusive brand, then the idea of buying a top-of-the-ladder product will become less appealing. Why else would Louis Vuitton burn their unsold merchandise rather than send it to the outlet malls and T.J Maxx’s? Why else would rappers start driving Bentleys when in 2003, an E-Class was something to be bragged about?

          • 0 avatar
            iNeon

            “Why else would rappers start driving Bentleys when in 2003, an E-Class was something to be bragged about?”

            The w211 was never brag-worthy.

      • 0 avatar
        stuki

        BMW, and it’s acolytes, have traditionally held that it is how those cars drove and handled that made them desirable. Not their “exclusivity.”

        Also, the general evolution of technology (and it’s close relative, economic growth) means that those things that were once exclusive, become commonplace over time. After all, at one point, simply having a car was a good indication you were a “baller.” Like having a Honda is today, as long as you’re talking about the Jet.

        We’re now at a time when any Chinese ChopShop can slap together something that triples speed limits in reasonable comfort for the cost (actually price, after markup :) ) of the leather upgrade on a middle of the road Lexus. All that’s left differentiating cars, is silliness and frivolity; like “My car’s badge looks like Paris Hilton’s”, or “My car’s badge looks like the one affixed to some car that some supposed expert once drove around some racetrack in Germany, faster than another expert drove another car with a badge looking like the one on your’s..”

      • 0 avatar
        Pch101

        “You can trot out the ladder theory all you want”

        Something that has proven to be true in the car market, time and again, isn’t just a theory. Meanwhile, your premise isn’t supportable with examples in the car market.

        If the 320i proves to be an ugly, poorly equipped POS, then yes, BMW’s brand will suffer in the eyes of Americans. But if it is positioned as a well-equipped stylish competitor to the 2.0 liter turbo A4 and 1.8 liter turbo C-class, then it’s perfectly fine and your observations are totally off point.

        As for Cadillac, you might want to look up the 1936 60 series. It was priced comparably to a well-equipped Buick. Between that and the elimination of Cadillac’s Jim Crow-style sales policies, the brand was saved from complete failure.

      • 0 avatar
        geeber

        Your example of Cadillac during the “Mad Men” era proves Pch101 correct regarding the need for a “brand ladder.” Eldorados and Sixty Specials were a cut above “regular” Cadillacs (meaning, the DeVille series) from the mid-1950s through the mid-1960s.

        The “entry-level” Cadillac in the 1960s was the Calais, which was nicknamed the “working man’s Cadillac.” It was basically a detrimmed DeVille.

        The idea that people didn’t have such a great need to define themselves through consumption of luxury goods prior to the last decade is false.

        In the 1960s, it was not uncommon for middle-class people to scrimp and save to purchase a brand-new Cadillac.

        If they couldn’t get a brand-new one, they would purchase a used one. One of the reasons Cadillacs held their resale value so well in the 1950s and 1960s was because there were waiting lists at dealers of people who wanted first crack at purchasing any 1- or 2-year-old Cadillacs traded in on new ones. (In those days, it wasn’t uncommon for luxury-car buyers to trade annually.)

        The only reason more people didn’t define themselves with a brand-new luxury car was because financing terms were stricter, loan lengths were shorter, and most people did not lease their new cars. They bought them, usually with a loan.

        For that matter, BMW – particularly the 3-Series – was virtually synonymous with “conspicuous consumption” in the 1980s, and not everyone who bought one was rich.

        A better example is Packard in the 1930s and 1940s, when it went downmarket with the six-cylinder 110 in 1937. But, even then, what ultimately killed the brand was the decision to concentrate on the medium-price market, and leave the luxury market to Cadillac. It killed off the prestigious V-12s, and allowed its luxury eight-cylinder models to become dated compared to contemporary Cadillacs.

        When Packard tried to regain its position during 1953-55, it was too late.

        Packard’s story only confirms the need to retain ALL of the rungs in the brand ladder. When Packard discontinued its V-12 models, and allowed its luxury eights to become stale, while focusing on the medium-price market, its luxury image evaporated, and it became just another medium-price car. Cadillac won the luxury-car crown.

      • 0 avatar
        th009

        I agree with PCH here … and I don’t do that all the time. But if you drop that word “luxury” for describing Audi, BMW and Mercedes, and use “premium” instead, I think it makes a lot more sense: you can make a premium car at any size or shape. (The companies themselves use the word “premium”, “luxury” is something that doesn’t really fit them nearly as well.)

        And they have successfully developed, launched and sold premium small cars elsewhere: whether BMW X1, Mercedes A-class/B-class, or Audi A1/A2/A3. None pretend to be “luxury”, or provide huge amount of equipment, but they tend to have premium materials, premium build quality (e.g. panel gaps), sometimes premium technology — and, yes, premium image. And, most importantly, the customers are willing to pay a premium price for those cars.

        Properly done, there is nothing wrong with selling smaller premium cars.

        • 0 avatar

          First of all, I feel that the luxury/premium semantic game is a bit tiresome in this case, since essentially they are interchangeable, but it’s worth noting that many of these OEMs do refer to themselves as premium car makers rather than luxury car makers. You can make a premium car in any shape or size, you are correct – HOWEVER, by making them financially accessible to a greater portion of the populace, you erode the exclusivity. And that factor, more than interior build quality or materials or technology, is what drives purchases. Believe me, the badge is the most important thing, full stop. And once anybody can have a Benz or a Bimmer, then they are no longer special enough to charge the premium price, and this is what I was getting at. Status symbols do not work if they are easily available to the masses. Full stop. There is no counter-argument.

          Look at it this way; BMW built their brand equity on the bunch of compact, 4 cylinder cars. Nobody really wanted the big six cars to the point where the cheapo Bavaria was created. Thus, the small BMW’s like the 3-Series, have become cemented in the minds of the populace that knows a bit about cars as the brand’s core product. One could even argue that an M3 has more prestige than a 7-Series. On the other hand, does the C-Class get a halo boost because of its association with the S-Class? I’m not so sure. The C-Class is still a joke in the eyes of many, whereas an S-Class is the genuine article.

      • 0 avatar
        krhodes1

        I think another point that Derek is missing is that it is not like BMW is suddenly making a car that is massively cheaper than what they have sold before. They have not made a $16K Cruze competitor, it is merely a couple thousand cheaper than the next most expensive 3-series. It’s still a $30K car, and most of them will be closer to $40K by the time the typical options are put on them. No dealer will stock the base model. $30-40K is still REAL money for a car, regardess of whether it is a similar price to a loaded v6 Accord or not. For most folks, times are pretty tough – $30K for a car might as well be $1M for the majority of my friends and family. And don’t forget, 3-series prices went up a couple grand with the introduction of the F30 anyway – this car is really just keeping the true entry-level about where it was with the E90.

        Personally, I would have bought a smaller engined BMW than my 328i. I’ve driven the 150hp 4cyl non-turbo 320i in Europe and found the performance entirely adequate. Once you get to be a certain age and maturity level straight line performance starts to fascinate a lot less. Do I really NEED my grocery getter station wagon to be faster than my Porsche? The 180hp 320i will be more than adequately rapid to be entertaining. The less peaky lower pressure turbo motor might even be nicer to drive – I always found that to be the case with turbo Saabs.

      • 0 avatar
        th009

        I would argue that if you are selling almost 300K cars per year in the US (as both BMW and Mercedes are) and have over a million on the road, there is no real exclusivity today anyway. If you want exclusivity today, you could always buy a Lincoln though!

      • 0 avatar
        ChevyIIfan

        I tend to agree with Pch and the ladder theory. When I see the lower end models from BMW, MB, Audi, etc I am not impressed… but when I see “AMG” I know I am looking at a $100k+ car and can appreciate accordingly, even if it is a waste of money. Seeing the lower end models does not detract from when I see those S class models or G-wagons, as there are still few of them. Comparing to the Coach theme, it’s extremely hard to differentiate between lines of Coach products, so it could be difficult to distinguish. No such problem when seeing S models, G-wagons, or AMGs.

    • 0 avatar
      Type57SC

      Personally, I associate BMW with silky I-6s, not I-4s.

    • 0 avatar
      WaftableTorque

      Brand dilution and the luxury ladder length are interesting marketing concepts. It’s probably a testable hypothesis.

      If both are correct and opposing forces, we should see a no net movement in esteem for Aston Martin with the One 77, offseting the brand dilution of a near luxury Cygnet. Ditto the SLS to offset an A-Class, and an RS8 to offset the A1. So Coach’s remedy to their pricing dilemma? Possibly the creation of an upscale sub-brand (call it Purple Label, ActiveLeather, GT3, V-Spec, etc.)

      If they do not oppose, then we should eventually see a net migration of a “real” Aston Martin or Mercedes Benz towards the higher model range, with lower priced models consider poseurs and a flight from the ballers. Then Coach’s solution is more drastic: a reboot similar to the licensing buybacks such as Gucci in the early 1990’s.

  • avatar
    icemilkcoffee

    Entry level cars need not dilute the brand. Look at the Harley Sportster- it’s been an entry level ‘bargain’ Harley for decades, and it hasn’t diluted their brand. The key is that the entry level product must be a good product that retains the brand’s strengths. The problem with the entry level 320i is that the base model car is a pretty shtty car with no leather, no power or memory seat, no navigation, no backup camera, no sun roof, no heated seats, etc, etc. For that same $33k, you could have bought a fully loaded Accord with all those things plus forward camera, adpative cruise, blind spot monitoring, self parking etc, etc. So in short- the value proposition for the 320i is lousy. The guy who buys a $33k 320i will be one unhappy customer. He gets to drive a BMW- but that’s about it. Whereas the guy who buys a Sportster, is generally fairly happy because he gets to blast around on a torque shaky Harley. He gets a catalog full of accessories and customization parts. In short- he gets the full Harley(R) experience for an entry level price.

    • 0 avatar
      oldfatandrich

      The buyer of a $33,000 320i will be perfectly delighted and consider himself the occupant of a significantly higher rung on the ladder of success. Does no one get the attraction of the BMW roundel or the Benz star ? These are the attractions of the cars; the buyer doesn’t give a tinker’s damn about how well appointed or how luxurious or how reliable a similarly priced Accord may be. It’s time for some of the commentariat to take an elementary marketing course.

  • avatar
    Snaab9-3

    I’d still rather buy a 320i, over an Accord V6 just because the driving dynamics would be so much better. I admit I do prefer European cars, overall and I don’t think I would get as much driving pleasure from an Accord. I’ve heard the V6 Coupe has great power but is rather soft suspension wise.
    As far as brands impressing people. I had more luck in a Plymouth Sundance than I ever did in my other cars. HA HA

    • 0 avatar
      segfault

      As I’ve said here before, the 2013 Accord V6 has extremely numb steering and narrow (215 mm) tires for such a large engine. The lack of steering feel just killed it for me.

      • 0 avatar
        icemilkcoffee

        The F30 3-series is not known for its steering feel neither. Also- the 4 cyl turbo engine is fairly laggy. Unless you are getting the manual trans , otherwise the BMW 320i is not going to be much sportier than the Accord.

    • 0 avatar
      mkirk

      I keep my cars a long time and do my own work and while the BMW may give me some headaches, one day I am going to have to put a clutch in whatever car I own or drop the transmission. I did a FWD clutch once. There are still just too many repairs on a FWD vehicle that begin with “Step 1: Remove Engine and Transaxle assembly from vehicle” for me. Ironically, the 320 is likely one of the few current BMWs that would interest me, but I am the sort that secretly wishes my Miata was an old BMW 2002 so I doubt I fit any current target BMW demographic.

  • avatar
    philadlj

    This Sunday Mercedes heavily teased the new CLA during the AFC and NFC Championship games.

    They only show the blobby headlamp, a bunch of imagery of things “heating up”, and a jukebox coming to life playing, of all things, the Stones’ “Sympathy For The Devil” – not exactly a Gen-Why band.

    Weird how in this age when a 0.001-sec Google image search will turn up countless images of the new CLA, yet the ad seems stuck in a past in which you’ll only be able to see the whole car in the Feb. 3rd Super Bowl ad. (Go Ravens!)

    The choice of the Stones, along with the ad’s implication its audience hasn’t heard of the internet, suggests they’re not targeting the CLA at well-off youths at all. It’s just a strange teaser.

  • avatar
    Austin Greene

    Greed has caused Coach to urinate its brand equity into the wind.

    Other brands have done the same but they are so insignificant today that I can’t even think of their names. But the minute you see a branded product at Costco you know it’s over.

    Snap-on used to be good about this, reserving its name only for products it made and Blue Point for anything else. But even they have fallen. Sony – what happened?

    Rolex, Tiffany, Apple, Agresti, Fogal and Hastens, to name a few, seem to have resisted the urge to whore out their cachet.

  • avatar
    Type57SC

    This is not a really new phenomenon. The Harley example above may be a successful one, but I immediately thought of Jaguar’s X-type – probably the worst offender from Y2K. Many luxury brands have tried moving downscale to make money off the brand premium they had established and get some serious volume. Most succeed in the short term and fail in the long term, particularly if they are only trading off the brand appeal and not bringing something new of value to the game.

  • avatar
    Chocolatedeath

    “Personally, I’m hoping for a return to a new kind of luxury, one that is discreet, efficient and pampering to those who are in the know or behind the wheel. The 2013 Accord V6 Touring looks like it would fit the bill quite nicely”
    Sorry dude but I have to disagree with you on this one. I have had the pleasure of driving several cars of the past two weeks, Fusion, Accord, Passat, even got a sneak peek at the new 6(did not drive) that I was invited to preview at my local North FL Mazda dealer. Although all of these are nice to drive and have good interiors. None and I do mean none scream quiet money. Two months ago had the pleasure of driving a brand new Saab 95 that was left over on the Caddy lot (100 miles on it)To me this is the essence of quiet money. IMO the Saab’s interior was a step below the Audi/BMW/MB folk and two above the plebeian sedans that I spoke of. It just appeared to have a higher level of sophistication. Folks would fined themselves very surprised if they would have driven the turbo one. However it gone now and parts are bound to be expensive, so maybe the Accord will appeal to some looking for what you state but I aint one of them.

    • 0 avatar
      NormSV650

      Did you say Saab 9-5? Thank you. :)

    • 0 avatar

      This is a personal thing.

      The “entry-lux” brands have traditionally been (too) good at quiet money. My favourite is Volvo. Understated yet elegant styling, interiors that rival Audi but are, once again, understated. Nice driving, safe cars. Nobody who wants to throw around a badge is going to buy most Volvo’s (the XC70 or S80 being my favourite), but they buy them to have nice, well-made things.

      Acura, Lexus (previously), SAAB, and Buick did or do this well. But nobody wants that (heck, TTAC itself has been hating on the RLX because of its understated styling).

      But I would disagree with the family sedans. A lot of them deliver good driving experiences, look good, and promise to be reliable and cheap to service where others (like SAAB and Volvo) wouldn’t be.

    • 0 avatar
      mkirk

      I long for the W123 era of luxury. The day when the luxury was not the heated seats, soft touch dash, or integration with whatever phone will be out of faishon before you make the first payment, but the fact that the vehicle was built to last indefinitely.

  • avatar
    mikedt

    Rather than a “cheap” 3 series, how about a decontented one. I don’t really want leather, electric seats, a complicated hv/ac/entertainment center and all the other bells and whistles that make a non-car person go Ooo when they get in a BMW/MB. Give me the good engine and the good suspension and supportive seats and you have a customer. A 3 Series “Track” car?

    • 0 avatar
      Macca

      I’m confused – the ‘base’ 3-series has always been decontented compared to the competition – but never with a justifiably ‘cheap’ price.

      The ‘base’ 328i still lacks any and all trappings of ‘luxury’ (whether you consider them worthy or not) – such as leather, xenons, heated seats, rear-view camera, bluetooth, navigation, lumbar support and a moonroof – these are all part of the labyrinth of options packages.

      The lack of all of these rather mundane features gets you the leatherette-seated $38,295 328i base sedan.

      • 0 avatar
        22_RE_Speedwagon

        There’s a brand new stripper 328 sedan, red, with MT and no options for sale here at 36K. Interested?

      • 0 avatar
        krhodes1

        I would say that the base price of a 3-series is quite a deal for what you DO get. But I have also said on here several times, that if the things that make a 3-series or its various competitors better than a typical $25K mid-size sedan are lost on you, consider yourself lucky because you just saved $15K on your next car.

        It’s certainly not about the toys for me, my BMW has hardly any – it only has leather because it was free on ’11 wagons. It is about the way it drives. And if you think something like an Accord is in the same universe, again, enjoy your Accord!

  • avatar
    northshorerealtr

    “The A4′s front-drive layout was a consequence of circumstances, while the current generation A3, fine car as it may be, is a half-hearted Euro-transplant ill-suited for the American market (but great for Canada).”

    Just what ARE the differences that make the A3 suitable for Canada versus America? Not trying to be a smartass, but just not familiar with the Canadian market. Is front-drive viewed as more desirable? Or are there factors other than front-drive that make it more desirable there?

    I’m reminded of the many, many times the buff magazines would scream “Finally, a Small (Merc, Caddy, Lincoln, inset brand of choice here)!” I think that was the recognition of the challenge of producing a vehicle true to the brand but distinctive from the brand, in terms of pricing, size, features, etc. As I recall, few of these “small” cars were viewed as market successes–and many were perceived as brand spoilers.

  • avatar
    Sigivald

    We’re all forgetting the most important question, though.

    “What the hell is a CLA?”

    I mean, in the Old Times, when Mercedes designation letters almost made sense, it would have been a long-wheelbase compact (C+L), or a luxury coupe (CL-class).

    But what’s the A mean?

    And why the hell does anyone (CLS!) think a “four door coupe” is anything but base insanity?

  • avatar
    Mandalorian

    Many people forget that the cars automakers like Mercedes, Audi and BMW offer in the US are different from what is marketed in Europe.

    The vehicles have many trim levels, and the ones imported to the US are only the top two or three. It might go like this:

    Audi A4
    Base
    Plus
    Touring
    Premium
    Premium Plus
    Prestige

    We only get the top.

  • avatar
    Slow_Joe_Crow

    Part of the problem is the decline in luxury goods. A Coach bag used to be a high quality piece of leather that would last a lifetime, now they are near disposable. In the 70s and 80s a Mercedes was a spartan beast that would run longer than a Volvo as long you serviced it regularly. Now a Mercedes is a 3 pointed star and a bunch of over complicated electronic toys with build quality on par with a 96 Kia. There was actually a book published about 2 years ago studying the decline of many luxury goods makers as they chased volume.

    • 0 avatar
      Macca

      ^ If you haven’t, you should submit to write for TTAC. The part about “build quality on par with a 96 Kia” almost made me do a spit-take on my monitor. Good stuff!

    • 0 avatar
      JuniperBug

      ^This.

      Once upon a time, the higher price of luxury goods reflected greater quality, and along with the prestige came tangible advantages. You got better materials and craftsmanship which resulted in a product that was more durable and did whatever it was supposed to do, better. More and more, now you just pay for the label, and the media-brainwashed consumer whores don’t notice the lack of substance. “German-engineered” lux mobiles fall apart and rust within a decade while barely outperforming their plebian counterparts, $200 jeans wear through the material far faster than a pair of $50 Levi’s.

      The reason that “branding” became such a buzz-word in business is because the media succeeded in convincing the masses that the reputation and what people thought of your purchases was all that mattered. The lack of durability is all the better, because we just go out, zombie-like, and buy more stuff with which to replace it.

      This generation will be bankrupt and still convinced that they need and deserve a new BMW.

  • avatar
    28-Cars-Later

    Superb analysis.

    “Now that any 9-5 working stiff has “an entrypoint into the brand”, they’re not nearly as special as they once were.”

    Precisely, but I suspect this was the plan. Zee Germans are turning their previous prestigious brands into Oldsmobile (minus of course the Olds reliability). Higher quality, trendy, stylish, and attainable in between the common man’s Chevrolet and the true exclusivity of the Cadillac of old (or in today’s world, [insert modern exclusive brand here].

  • avatar
    HiFlite999

    A great book on this subject is “Luxury Fever”. Yesterday’s luxury is tomorrow’s passe.

    When “luxury” has a functional purpose, this transfer of technology downward can be considered a good thing. Perhaps what the original article was trying to get at is that the functional technology is reaching a natural limit; just as in purse technology, modern cars increasingly function equally well.

    What then defines luxury, gets much more amorphous. Gen Y and younger are much better at seeing leather seats or whatever doodad being used to define luxury at that moment, matter not. It’s vaguely possible that a decontented 320 may be more attractive to them than the pimp mobile versions now offered to their elders. However, for most young-uns I know, cars hold little status value compared to the dollar cost of that status.

    Demographics will not be kind to the German automakers, except with the newly-rich brats of China and other such countries.

  • avatar
    thegamper

    I generally try to identify brands and companies that that excell in PR BS with the end of printing money off of stupidity of social climbers and then remove them permanently from my shopping list. The premium car brands are a great example, particularly BMW Merc and Audi.

    Granted, they do make some desirable cars, but you can generally take any “premium” brand vehicle and get 90-95% of the car for half the price by going with a loaded volume brand ride. I think the volume brands have become much better at aping the premium brands in their top end over the last decade. Snob appeal is one of the only things the premium sector has left…..barring of course the very low volume, halo cars that are truly exclusive.

  • avatar
    DC Bruce

    A well-written post, but things are not quite as they seem, if you will admit an old fart’s perspective.

    BMW’s origins in the United States (and I presume, Canada) are not as a luxury car. The original 1600/2002 that came to the US in the late 60’s was billed — and sold — as a sedan that could smoke any existing sports car, with the exception of the E-type, and, possibly, the 911 (if you had enough nerve not to be afraid of horrendous trailing-throttle oversteer). BMW’s hit the big volume in the 1980s when we Baby Boomers came of age economically and invented the term “YUPPIE” (as in “young, urban professional). YUPPIES of both genders started buying 320i’s in big numbers in the 80s. Much lesser numbers of 5 and 7 series were sold. And even the 7 was smaller than the biggest Benz offerings. At the time, an Accord offered similar room, slightly less performance and a fraction of the price.

    It is really Benz that has moved “down market.” Responding to BMW’s invasion in the 1980s, Benz brought over the 320-sized 190. Like all Benzes of the time, it was built like a tank but was underpowered. I do not believe the 190 was a big success: for most, the 320 was the better value.

    So, I don’t think this is anything new. Both BMW made some mistakes: the 318 was underpowered, for the price differential from the 320; and Americans do not like hatchbacks, which both the 318 and Benz introduced.

    For sure, its about building volume, but it’s also capturing a customer when he/she is young by offering an affordable car. The hope and expectation is that, as the customer ages, he/she will move into the more expensive models in the line.

    What is new is that segment of the market catering to the super-rich, whose numbers have expanded in recent years. But, as PCH101 points out, those cars are not luxury; they’re “exotics” (although it is hard for me to say Rolls-Royce and exotic in the same sentence).

    As for expensive mechanical watches — they’re just jewelry like a diamond ring . . . but more expensive to own.

    Or, as I used to say when street crime was worse than it is now: “mugger bait.”

    • 0 avatar
      nikita

      Thank you for writing pretty much the post that I was going to write. I’d like to add that Audi was anything but a luxury car when first introduced to America. This history may make absolutely no difference to the original Generation Y point of this thread. Audi was born of the merger of Auto Union into the VW group in 1965. Audi was not VW’s Cadillac, more like Oldsmobile. The Audi 80 (Fox in the US) was hardly a luxury car by any definition. I have marveled at how BMW, an independent, and VW group’s Audi have carefully positioned themselves upmarket to MB levels of prestige.

      • 0 avatar
        Kevin Jaeger

        Yeah, maybe I’ve spent too much time in Germany seeing a Benz at every corner – the taxi at the airport, the kids’ school bus, garbage trucks, commercial vans, and endless lines of them stuck in traffic. They just don’t seem that exclusive to me – really only the S-Class makes that kind of statement.

        No doubt the next generation will define their social status and tastes differently from their parents. Hasn’t every generation?

        I see idiots riding fixed gear track bikes with ridiculous aerospoke wheels in urban centers and university campuses. These things have no business being outside a velodrome, and without brakes are downright hazardous. But in their social circle this is no doubt some kind of fashion statement.

    • 0 avatar
      silverkris

      Glad that you mentioned how BMW’s image in North America evolved – and yes, the early ones such as the 1600/2002, and even the larger Bavaria-class sedans were oriented towards performance rather than luxury and prestige (being relatively Spartan in their appointments and equipment levels).

      As for the Mercedes 190 (or W201), it was pretty successful worldwide (1.8 million sold in its lifetime) but not so much in the US – probably because of its really cramped interior (I rode in the back seat of one and it has very little legroom). That said, in terms of quality, fit and finish, and materials, it was just as good as its bigger siblings.

  • avatar
    Carl Kolchak

    Another issue that what is considered a “base” model, is as well equipped as a a near-luxury or luxury model of 10 years ago. My new Focus has dual zone climate, Navi, traction, leather, integrated phone and is not the top of the line. This would describe an E- class or 5 series of 10 years ago.
    The trim/equipment levels of lower-end new cars has increased far more in the last 10 years than in the 2-3 decades. To me, this means the German trio has more cars nipping at their heels than before.

  • avatar
    its me Dave

    I guess there’s a whole generation of senior managers too young to remember the Cadillac Cimarron.

  • avatar
    Don Mynack

    Wow. That was 1500 words of bitchy.

  • avatar
    carlisimo

    I feel like this article makes sense for Mercedes Benz, which is definitely less exclusive than it used to be, but I don’t know about BMW. Their brand was based around the 3-series and extended upward. They’ve never been for the richest of the rich. With Mercedes Benz it feels like the opposite is true – the S-class is the “core” of the brand and it happens to extend downwards. The fact that they’ve gone further downwards than BMW is surprising and concerning.

    On the other hand, a cheaper 3-series doesn’t feel like a betrayal of the brand. It’s still RWD, sportier than most of the competition, and it’s faster than base 3-series models from the past. I really don’t see anything wrong with it.

  • avatar
    bd2

    Also, remember that Mercedes is a full-line automaker in Europe – selling everything from the chinzy A (which has been totally redone) and B Classes to commercial vans and trucks (including sanitation trucks).

    And let’s not forget stripped down models such as the stripper E Class that serves as one of the go-to models for European taxi fleets.

    In addition, when BMW and Audi entered the US market, they weren’t exactly looked upon as luxury automakers.

  • avatar
    Spartan

    The automotive consumer market en masse has always been a bit naive. The only difference is now, the luxury car market wants volume and plans to take advantage of it for fun and profit and doesn’t care about preserving their heritage, so to speak. So you know what I say? B-F-D

    I had a entry lux car (in my avatar) for a while. It was fun, but luxury cars are little overrated, especially BMWs and MB. If I buy another lux car, it’ll be an Audi or a Caddy.

  • avatar
    ffdr4

    Not all entry level BMW, Mercedes, etc automotive customers are “seriously in debt social climbers”. This is a pre-conceived notion. I work for a Toronto area automotive new car dealer group and have noticed since 2008 an increased uptick in cash buyers for BMW 128’s, 320’s or Mercedes B Class, etc. These people come in with their CarcostCanada paper work and research, know the wholesale and MRSP, negotiate a cash price and literally write a certified cheque or a get an approved bank draft. I would say in some areas of Toronto, where you have people with old money living(Rosedale, Forest Hill, Hoggs Hollow), large groups of afluent Asians, South Asians and Eastern Europeans, at least 25% and maybe more of sales are “cash” sales on these models and numbers are going up. These people want the prestige and service of a luxury brand, but not the payments or financing charges. They intend to run these cars for 8-10 years. The lower pricing of a B-Class or a BMW 320i lets them literally write a cheque.

  • avatar
    tjh8402

    What’s with all the straight guys on here commenting on fashion, brands, and *gasp* women’s hand bags? Jesus, no wonder people tell me I’m the worst gay man ever. I know less about fashion than the straight guys do. In the immortal words of House, [I] wouldn’t know a Prada if it stepped on [my] scrotum.”

    What would the price of an e30 318 be in today’s $? Or an e36 318ti? I can’t speak as much for Mercedes, but I think BMW’s brand dilution has suffered largely due to the softening of the driving experience of the cars, not a move downmarket. BMW built a legitimate reputation for being the Ultimate Driving Machine. That was the reason to buy a 2002, e30, e34, e36, e39, e46 etc over the competition, or the reason it was worth more than a lesser more pedestrian machine. E30’s and 2002’s were rather spartan cars inside, so I don’t think luxurious interiors was something BMW’s ever made their name with. However, BMW did such a good job of building that brand equity, that now they can make cars that don’t offer that driving experience, and have people buy them to try to project that image anyway. I know it annoys someone like me who drives around in a stick shift e46.

    If BMW still sold the e46 323i new for under $34k, I’d probably have bought that instead of going the used car route. Yes, less HP than my 330i and payments suck, but having a warrant would’ve been nice. If I could manage to tolerate a 4 cylinder in this class without vomiting (an iffy proposition), then the F30 320i becomes a little more attractive option. Yes the ATS is also there, but assuming you can get the 320i with a stick and sport package, I see no reason to spend the extra $ for the ATS (or 328i’s) extra power since I’m stuck with a 4 cylinder either way. Thanks to the EPS and I4s, I had essentially sworn off new BMWs until I saw that Infiniti had discontinued the stick shift option in the G37/Q50. I’m no brand whore. I think it’s too bad Hyundai doesn’t offer a 4 door version of the Genesis coupe, and that the G25 wasn’t available with cloth manual seats, a stick shift, and a Nissan badge. Now I may have no choice but to look at BMW. Who else offers a RWD six cylinder sedan with a proper gearbox?

    • 0 avatar
      Pch101

      When the 320i was launched in the US in MY 1977, the base model had a sticker price of about $8,000. If you put that into an inflation calculator, that works out to be about $30,000 in 2012 dollars.

      The new 320i is effectively priced about the same as the original, adjusted for inflation. The comparison isn’t direct, since the newer base models have far more power and are much better equipped (if memory serves, the original 320i didn’t even include A/C or a radio as standard equipment), but the new car will occupy roughly the same price point as the first. And BMW’s have never been regarded as an affordable car in the US.

      I believe that one thing that Mr. Kriendler misses is that car models are largely priced as they were in the past, when adjusted for inflation and levels of standard equipment; however, more consumers have opted to spend more on them by choosing more costly vehicles. It’s not so much that the automakers are moving their vehicles downmarket, as it is that consumers are moving their spending upmarket, with a greater segment of the population splurging on cars than was the case in previous generations. Consumers use leasing and easier credit terms to increase their spending power, rather than to save money.

      • 0 avatar
        silverkris

        Thanks for mentioning the late 70s-early 80s 320i. I remember the way the radio pointed somewhat upward at an angle in order to accommodate the A/C equipment – presumably it wasn’t designed with factory air in mind originally.

      • 0 avatar
        tjh8402

        @PCH thanks for that info. Definitely confirms my suspicions that BMW hasn’t really moved downmarket in their pricing at all. If you have the stats, I’m curious if the median price of a new car has outpaced inflation in its growth, which would indicate that a greater percentage of the market is spending more $ on new cars. I’m only 28, so I wasn’t around at that time, but was leasing as big of a deal then as it is now? Do carmakers break down their sales in terms of what share are leases? I’d be interested to see which carmakers have the highest numbers there.

        as I said in another post, but that spartan level of standard equipment would certainly support the idea that a main reason for buying a BMW at that time was the driving experience. I know I wasn’t around back then, but were fashionistas of the time really that much tougher than todays that they would accept non standard a/c and awkward fit of the optional unit simply to make a fashion statement? I don’t see the lovely ladies of tri-delta accepting the same compromises now.

      • 0 avatar
        Pch101

        “Definitely confirms my suspicions that BMW hasn’t really moved downmarket in their pricing at all.”

        If anything, they’ve moved upmarket. Most cars have largely been priced to keep up with inflation. But the uber-German cars such as the S-class and 911 have had price increases that have been a fair bit greater than inflation.

        The current 328 is priced a fair bit above the original 320. The new 320 is bringing price levels back to something closer than they used to be. In a sense, this is more of a return to normalcy than it is an exercise in discounting.

        “I’m curious if the median price of a new car has outpaced inflation in its growth”

        Per the BLS, the average price of a new car in 1990 (light trucks excluded) was $15,042. In 2011 dollars, that was the equivalent of $25,888.

        In 2011, the average new car price was $25,048. That was, after accounting for inflation, about the same as in 1990 (although it’s not a direct comparison, given changes in the product mix and a general increase in equipment levels; these numbers may suggest that new car prices have generally lagged the inflation rate.)

        But that doesn’t really explain what is happening with brands such as BMW. To understand what is going on here, you have to look at the market share of the German luxury automakers and their relative growth in the US market. Per Wards:

        -In 1970, Mercedes, BMW and Porsche had a combined market share of only 0.52%.

        -By 1990, that had increased to 1.27%.

        -By 2000, that had grown to 3.08%.

        -During 2012, that peaked at 5.35%, a new record.

        (I excluded Audi because Wards didn’t report the Audi figures separately from the Volkswagen brand.)

        “was leasing as big of a deal then as it is now?”

        Definitely not. Leasing is far more important today, and most consumers use leases to get a car that they couldn’t afford to buy. I don’t have the data handy, but last I checked, more than 50% of the 3-series and C-classes delivered in the US were leased, which is far above the national average.

      • 0 avatar
        28-Cars-Later

        Good analysis Pch101. Do you think the share of the “uber German” models has increased as well in the 1990-present period, or is this growth fueled by lower level decontented models (decontented relative to what they were prior to 1990)?

      • 0 avatar
        Pch101

        Content levels have risen across the board; cars have more features than they once did, and features that were once available only in premium vehicles have now become commonplace. This notion of decontenting is largely a myth; we have more content and performance for the masses than ever.

        The Germans have used their growing brand strength to raise prices. They have managed to cultivate a small percentage of the population that will pay a steep premium to play, in spite of the fact that they have been raising their prices more than their competition.

        The notion that the new 320i is relatively cheap is obviously wrong. It costs pretty much what the original 320i cost, while the other 3-series cars above it have been tacking on a fairly stiff premium for the extra power and equipment.

      • 0 avatar
        tjh8402

        @PCH How much of that market share increase for the Germans has come at the expense of Cadillac and Lincoln? I’m curious if more people are spending more $ on cars than before (hence my interest in the median price of a car, not just the mean). Thanks for that info and analysis though. Very very informative.

    • 0 avatar
      corntrollio

      “until I saw that Infiniti had discontinued the stick shift option in the G37/Q50″

      I assume that’s only for the new Q50 only, not the Q60 — i.e. for the new G37 saloon only, not the coupé. My guess is that the Q60 coupé will have a manual transmission as it always has, although if they keep sharing powertrain parts with Mercedes, that could change too.

      • 0 avatar
        tjh8402

        @ corntrollio. I would assume the same thing. However, if I wanted a 4 door (something I’m ultimately glad I opted for on my current ride as I have used the extra space), my options are now very limited for stick shift RWD (3 series if a 6 cylinder is mandatory, 3 series and ATS if not). If I was ok with two doors, the Q60 will face tough competition for my $ from non premium brands like the Hyundai Genesis Coupe 3.8 and Mustang GT (see not a badge whore), one of which offers much of the same for less $ and the other offering far more performance for the same $. That, and I’m now generally pissed off at Infiniti for dropping the manual option from the sedan and less inclined to give them my $ anyway.

  • avatar
    kuman

    I wonder whats the fuzz about the european cars, i used to own countless peugeot, citroens and audis they are solid cars, given proper care they last for ages. my dad’s daily driver is a peugeot 207 1.4 and his other one is audi a3 2.0 TFSI both are great driver’s car and has been very solid car to own.

    regarding watches… yes they are luxury, but i’ll take seiko anyday :D or skagen if im feeling fancy. but anything more than $200 is just a showoff imho.

  • avatar
    Power6

    I wonder if Coach profits have suffered as a result of their moves downmarket? Maybe it was the right move.

    I always wonder if these stripper versions like a 320i are good for the automaker or the buyer. i.e. did Infiniti take $4000 out of the G37 to make it a G25 and charge $2000 less, or was it the other way around?

    It can’t have saved anything to detune the 320i, remove some equipment and reduce the options but still the same basic car. Being a detuned special though, might make it an enthusiasts bargain secret, throw on a tune and get 328i power in 10 min!

    • 0 avatar
      bd2

      Coach really didn’t go downmarket (in fact they went upmarket w/ a more exclusive/expensive line).

      The problem is – despite the prices staying firm (aside from the discounts at outlet stores), quality arguably went down and it became the go-to brand for anyone who wanted a “name” brand but couldn’t afford a more expensive brand.

    • 0 avatar
      28-Cars-Later

      “Being a detuned special though, might make it an enthusiasts bargain secret, throw on a tune and get 328i power in 10 min!”

      I hope you are right Power6, but I suspect zee Germans thought of that and would protect against it.

  • avatar
    vent-L-8

    this is what happened to Cadillac in the 70s, volume at the cost of exclusivity

  • avatar

    I’m really old school. If I’m going to have a watch with me, it will have a chain and a fob and be sitting in a pocket.

  • avatar
    chicagoland

    DeVilles became too common in the 70’s, and got too extreme with wacky coach roofs. Then seeing 10 year old models in Demo Derbies, or in blue collar towns beat up, did hurt in long run.

    They stole Olds/Buick customers, ignoring imports. Only assuming a Catera is ‘good enough’.

  • avatar
    mypoint02

    I really don’t get the hate for the 320i. While I can see some aspirational buyers wanting it, it’s still a low-mid 30k car. That puts it out of the reach of most Gen Yers these days, many of whom are working service jobs or living in their parents basement. I actually see it capturing some enthusiasts, many of whom would like the option of foregoing the bells and whistles in favor of the sport package and manual – and for thousands less than the base on a 328 or 335. I’d agree that it’s probably going to hurt sales of the 328 more than anything.

    When I was in the market last summer I looked at new options like the Optima, Sonata, Accord, and Passat. At the end of the day I opted for a slightly used 5 series. It’s not because I’m a brand snob, but rather because the BMW drove like nothing else I compared it to, was far and away more comfortable, had more features, and I wasn’t worried about maintenance because I can do most of it myself. I’d had BMWs before so I knew what to expect. I’ll admit that from time to time I still consider something like an Accord for worry free transportation. There’s nothing special about it though – it’s just a competent machine. Nothing wrong with that. But I still want something a little more engaging right now. The BMW puts a smile on my face every time I drive it. Maybe down the road my priorities will change. To each their own…

  • avatar
    McGilligan

    Derek,

    What you fail to realize in mocking “luxury brands” like Coach and BMW is that they exist to make money for their owners, not maintain their exclusivity or any other ideal. Per Wikipedia, Coach has grown from a value of $30 million 30 years ago to a current market cap of $17.2 billion. While you’re laughing at how their products are now gifted to maids and daughters, their shareholders are giddy.

    If you owned either of these companies privately (in their entirety), would you rather they be niche brands known only to a select few and bought by even fewer with dubious financial futures, or mass market brands with loyal customers and enviable margins? Keep telling yourself you’d prefer they be smaller.

    On a side note, “enthusiasts” whine that cars are loaded with unnecessary options and features. For whatever their motivation, BMW offers a rear-wheel drive car, manual transmission available, efficient engine, non-luxury appointed, driver focused car to mollify their bemoaning fans and they get panned for eroding “brand equity”. If they imported the wagon version, these same “enthusiasts” wouldn’t know whether they should rejoice or boycott!

    • 0 avatar

      That’s a false dichotomy; you don’t have to choose between being GM or Pagani.

      • 0 avatar
        McGilligan

        Of course they don’t have to choose between those two. What both Coach and BMW have accomplished is to design and manufacture products that appeal to an ever-widening customer base. That they can consistently sell them for more than it costs to produce means they are nothing like GM.

        BMW will earn profits from selling (or leasing) plenty of 4 cylinder 3 series’ while “purists” whine about it not having an inline 6. If you owned BMW, you would do as they are doing.

      • 0 avatar
        28-Cars-Later

        I would do the opposite, I would push the 1 series as the entry level cheapee 3-4 cyl special, and turn the 3 into that aspirational car the 5 series is to current 3 owners. Not cheapen the 3, and be vague on what the 1 series is supposed to be in the lineup.

    • 0 avatar
      tjh8402

      @ McGilligan: I’m not whining for the reasons you listed. For those reasons, I’d still have to give BMW a serious look. However I’m doing it because it’s now a choice of the lesser of evils (with the competition offering no stick shifts, too many features, no RWD, worse value, etc), and if I’m spending up to $35k on cars, I should be buying a car because I want it, not because it’s the lesser of evils. I have two main complaints with modern BMWs (although disclaimer I’ve only driven e36, e46, and e90 cars, not f30s).

      First, On the E90s, I felt they had numbed and dumbed the driving experience too much. The steering was too light, too numb, not enough feel, not enough heft, not enough chatter. The ride was too smooth, not enough communication. The engine was too quiet (except on the 35 series models). The visceral edge had been taken off vs the e36 and e46 (the former of which my dad owns and the latter I ended up buying), much less a G37 which while a little rough around the edges, had more character and felt much more like a “real machine” than the e90s. Every review I’ve read of the f30 says this trend continues and it’s even worse than the e90.

      Complaint #2 is the engine. Gas mileage be damned, the car should still have a straight six motor. It churns my stomach to think that I’d have to give up my I-6 sound and smoothness, much less that I have to put up with the working class sound and feel of an I-4 in a over $30k car that’s the size of a 3 series. Lotus Elises and Honda S2000’s are another story, and a sub $30k stripper 120i (hatchback please) would be another story. This car would also make more sense as a 318d or 320d. No that doesn’t fix my complaints about the 4 cylinder, but then at I’d get a significant boost in fuel economy as compensation. I’ve said it in other stories about BMW, but I wish they’d gone the Ford route and offered the normally aspirated less efficient engines alongside the turbo motors so customers had a choice.

      • 0 avatar
        McGilligan

        There’s more money to be made catering to customers who tell themselves they make more money now than they did 5 years ago so they can afford to buy a BMW to replace their Accord (even though they cost the same) then there is catering to people who compare and complain about the steering feel between different generations of the same car.

      • 0 avatar
        tjh8402

        @McGilligan. I don’t disagree with what you say here. Clearly from a sales perspective, what BMW is doing is working. I was addressing your point in your first post where you said

        “For whatever their motivation, BMW offers a rear-wheel drive car, manual transmission available, efficient engine, non-luxury appointed, driver focused car to mollify their bemoaning fans and they get panned for eroding “brand equity”.”

        What this “bemoaning fan” is upset about is not eroding “brand equity” due to a move downmarket (I don’t think it would hurt the BMW brand one bit to launch a Miata or FR-S/BRZ fighter in their price range and with similar stats), but due to eroding quality in those areas that were the whole reason the brand was desirable to begin with.

    • 0 avatar
      azmtbkr81

      I think Derek’s point is that once you’ve reached the summit where popularity and cachet meet there is no easy way down. Being a mass-market “luxury” brand is not a sustainable position even if it may be profitable in the short term. If I were an investor in Coach I would have sold long ago; upper-middle class housewives are fickle and I’d hate to be invested when they decide that Coach bags are beneath even the hired help.

      • 0 avatar
        McGilligan

        If you were an investor in Coach and sold long ago, you would have missed out on massive stock price appreciation. Today it got hammered for lackluster sales. It ONLY made $353 million this quarter with a gross margin of 72%. I don’t know about you, but I’d hate to own a company like that. I’d be embarrassed to think who my customers have become!

        And that my friends is the difference between business in the real world and the ideals espoused online. Both companies are doing quite well for their owners while supposedly being abandoned by their “core customers”

  • avatar
    TonyJZX

    outside of US there’s been the BMW 318i and the Mercedes C180 for decades… that an the basic 1.8 Audi A4

    the entry luxury cars are de rigeur everywhere

    its always been the case that these cars have been sneered at by people as “badge snob cars”

    it is what it is

    the big three want to chase volume

    put it this way, where I am the AMG C63 seems to be the most common luxury car for middle management… it is the entry AMG, does that make it “too cool for school”?

  • avatar
    Rod Panhard

    With all due respect Mr. Kriendler, you’re too young on this topic to really know what you’re writing about. Keep trying.

  • avatar
    Dave M.

    “The guy who buys a $33k 320i will be one unhappy customer. He gets to drive a BMW- but that’s about it.”

    Maybe that’s the point. Whether it’s for the image or supreme driving experience, he wants to drive a BMW.

    I’m car shopping, and all I want is: power driver seat, heated seat, sunroof. No leather, no nav, no parking aids. Impossible sadly.

  • avatar
    Maymar

    BMW has averaged more than 100,000 3-Series sales in the US per year for the past decade. If you want a RWD sedan with “exclusivity,” try a Dodge Charger.

    Even the C-Class has averaged more than 60,000 cars per year (with a noticeable spike up to more than 80,000 units for 2012). If exclusivity’s what the market wants, I suppose Audi can deliver (38k A4s, 8k A3s), to say nothing of Jaguar or Volvo.

  • avatar
    Synchromesh

    It’s amazing to see people still caring about watches. I haven’t had one ever since I bought my first cell phone circa 2000. What’s the point? The cell phone will show time and date just the same if not more accurately. Why even bother with another piece of useless jewelry?

    As for 320i I’m sure it will be a smash hit here. All the posers who had to get the 328 can now finally own a BMW for even less! There is a good chance they’ll outsell the 328 soon.

    • 0 avatar
      bd2

      That’s the whole point – it’s the only universally accepted form of jewelry for men.

      • 0 avatar
        hubcap

        “That’s the whole point – it’s the only universally accepted form of jewelry for men.”

        Think about that for a moment. You’re allowing what others, and by others I don’t actually know who just “them”, dictate what you wear and I presume what you do.

        So one day, when a wild hair germinates from places civilized people don’t mention in public, you decide that maybe, just maybe you’d like to wear a bracelet (gasp!.. I know… the horror).

        What will you do? After all its not universally accepted.

      • 0 avatar
        CJinSD

        So wearing a watch is really about a desire to wear jewelry combined with timidity about being judged for wanting to sparkle like a woman? This actually makes sense.

    • 0 avatar
      silverkris

      Well, as another poster has mentioned above, it’s sometimes a bit tacky to pull out your phone to look at the time, such as at a very formal business meeting. My wife gets upset at me looking at the handphone at times. The wristwatch is right on your wrist and you don’t really have to break eye contact too much to glance at it.

    • 0 avatar
      28-Cars-Later

      Much like a Cadillac or Mercedes USED to say about you and your career, a fine watch can say the same. Maybe this is/will be lost on Gen Y and younger?

      • 0 avatar
        hubcap

        “Much like a Cadillac or Mercedes USED to say about you and your career, a fine watch can say the same.”

        I’m assuming (and I’m well aware of the pitfalls) that you’re serious. There are a lot of people wrapped up in supposed signs of wealth and success.

        Here’s the rub… you just don’t know what somebody’s accomplished (or hasn’t) by the indicators you seem to think are so important. All you do know is that they possess the item and possession (or purchase) does not equal a high powered career.

      • 0 avatar
        28-Cars-Later

        “There are a lot of people wrapped up in supposed signs of wealth and success.

        Here’s the rub… you just don’t know what somebody’s accomplished (or hasn’t) by the indicators you seem to think are so important.”

        I like this, you are spot on. For the record I personally don’t see these as signs of success, but ask say ten people if they think they are… I would wager around 50% would agree. Cadillac has been a joke since the late 90s and Mercedes no longer impresses me mostly due to their numerous maintenance issues and other proprietary bits (although the latter isn’t anything new).

        What impresses me? Owning things… house/land, car, other investments. Show those to me and I’ll sincerely tip my hat. In our society (US) the sad truth is so few own everything and the vast majority cannot afford to *own* their possessions, with endless taxes to help keep us from the dream of ownership.

  • avatar
    FJ60LandCruiser

    I want the opposite. I want the 4.4L V8 from the 550 in a bare bones 5 series, without any of the luxury cameras, sensors, and other crap–for about 50 grand.

  • avatar
    carguy

    Derek – there is definitely a danger for a luxury brand when moving into entry level products as it can tarnish the more high end offerings. But while good a luxury brand allows for better margins, it also restricts the potential consumer base. Both BMW and MB are not in the business of being a luxury brand nearly as much as they are into making money for their share holders. Having done the sums, they realized that if they stayed a luxury brand, opportunities for revenue growth would have been harder to find and they may have even lost their independence.

    The folks who run BMW, MB and Porsche know about brand management and are aware of the brand erosion dangers. However, they have also done the analysis and broadening their customer base and diversifying their product portfolio is simply a better long term strategy.

  • avatar
    izzy

    Well done, Derek!

  • avatar
    bluestar

    After reading these comments I’m going to smash all my watches!!!


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