Back in the day, a discerning motorist rocking-up in a Mercedes Benz 300 SEL 6.3 was in no danger of encountering an equally-horsed "baby Benz." These days, the power-crazed pistonhead can purchase a 6.3-liter engine in any one of seven Mercedes body types. And while I'm sure an S-Class sedan has some fancy gizmos you can't buy in a C-Class, I'm not sure they're worth mentioning. But Mercedes' and its luxury competitors' slink downmarket IS worth examination. Are volume sales a form of luxury brand suicide?
I reckon the whole thing started with "feature creep." And why not? Why shouldn't a reasonably-priced car offer dual-zone climate control, satellite navigation, leather seating and a fine engine? If customers are willing to pay extra for their pleasure, why not sell it to them? And it was only natural for luxury brands to see the trend as a golden opportunity to reach down, add a little "prestige" to the mid-market mix and bank some big bucks. And so they did.
While Mercedes and Lexus had the longest journey down from their mechanical Mount Olympus, Audi and BMW quickly joined the corporate colossi's mass market migration. All four brands found riches refashioning their upmarket cachet into more affordable packages. Today, Americans can buy a Mercedes-Benz for $31,975 (C300), an Audi for $25,340 (A3 2.0T), a BMW for $33,175 (328i, soon less for a 1-Series) and a Lexus for $30,790 (IS250).
There is, of course, a flipside to this "downward line extension." Call it the Groucho Marx effect. Just as the legendary comedian "wouldn't want to join any club that would have me as a member," consumers in search of brand cachet tend to shun products that are widely available. Examples of companies producing upmarket and/or trendy goods that bet their life on the mass market and lost, abound– especially in the automotive arena.
Today, you can buy a Cadillac for $32,500 (CTS), a Jaguar for $34,995 (X-Type 3.0), a Lincoln for $29,305 (MKZ) and a Saab for $26,995 (9-3). That's before discounts. Discounts that reflect the fact that these formerly upmarket brands have squandered their allure to the point where their dealers wish their inventory had ten foot pole marks on it. For these former luxury car playas, moving into the mass market signaled the beginning of the end.
So how have the luxury Gang of Four avoided the same fate? You could argue they haven't. Their current success may be sewing the seeds of their eventual destruction. Perhaps Audi, BMW, Mercedes and Lexus' sales embody former NBC Prez Bandon Tartikoff's "Least Objectionable Theory of Programming." In other words, their products are popular simply because they're less bad than the other guys'.
Alternatively, you could say these companies make damn fine automobiles. Suggesting that the average car buyer is savvy enough to recognize and appreciate a given model's adherence to its maker's brand values may be something of an intellectual leap, but there's no doubt that the lowest priced U.S. Mercedes still has a certain "Mercedes-ness" to it. The other marques are equally unmistakable.
That said, these luxury brands' bean counters have severely stretched their products' DNA. Merc's bank vault gestalt took an enormous hit over the last twenty years. Bimmer's SMG gearbox, iDrive multi-media controller, run-flat tires, SUV and dumbed down steering are a worrying divergence from their Ultimate Driving machine ethos. The aforementioned Lexus IS' harsh driving dynamics bear scant resemblance to their magic carpet LS flagship. Only Audi creates a range of automobiles with brand-faithful consistency.
George Petersen of Autopacific consultants provides the bottom line: "Entry-level luxury cars need to demonstrate the capability of their brand–just as the more premium entries do." As the unforgivable Cadillac Cimarron and execrable Jaguar X-Type proved, a fancy badge can't compensate for product malfeasance. In fact, a lousy mass market line extension is the worst of all possible vehicles. It kills a brand's value for both financially-challenged aspirants and the well-heeled brand faithful.
All of which bring us to a piercing glimpse into the obvious. No matter where they're offered in the price spectrum, "luxury" automobiles that rigidly adhere to their manufacturer's core values bestow honor and longevity to their brand. Crap upmarket luxury cars are bad for business; but lousy mass market versions are lethal.
By this logic, an affordable Cadillac is not a bad thing per se. But you know what? I still can't get my head around it. As GM Marketing Guru Mark LeNeve said, "A Cadillac is something a kid should aspire to. Not something he should be able to own." Call me a snob, but my gut says he's right.
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I agree the cars should be priced up there with the status they infer. There are always used cars available for the masses
I think they’ll be fine as long as they don’t put out any junk. Everybody’s real psyched for the bmw 1-series, myself included. It just fills a good empty spot. I don’t think anybody will think less of the 6-series just because there’s a great 1-series. However, hypothetically, if the 1-series was garbage, then yes, it would tarnish the brand.
Years ago, Cadillac had an “entry luxury” marque-mate called the LaSalle. It was supposed to serve as another step up on the GM “status ladder” just below the top rung Cadillac. It never sold in big numbers, and a case could be made that LaSalle just pilfered sales from Buick and Olds. When the LaSalle was replaced in 1941 by a new entry Cadillac, the Series 61, 61 sales were higher than anything LaSalle achieved.
A good gauge of “luxury-ness” I’ve developed is to drive a car in traffic in San Francisco. For some reason, that city has a high number of “car haters” and you can get a sense of this when you are the first car waiting for a crosswalk, by the dirty looks a given car gets from pedestrians. Far and away the worst glares are reserved for BMWs (or is it BMW drivers?) with a close second to Mercedes-Benzes (even a 190 or C Class). For some reason, Audis and Lexuses (Lexi?) get a pass.
I may seem like I’m arguing with myself, but I did learn a great lesson from my first job, a rug import company. The owner showed me this amazing rug that he just brought back from the middle east. He said he bought it for next to nothing, although it was one of the finest rugs he had, he priced it accordingly. It didn’t sell for about a month. He then told me that, sadly, as he was an honest man, if he wanted to sell the rug, he would have to raise its price. I couldn’t understand it, but he raised the price from $600 to $1400, and it sold that week. That’s how I learned how people (especially rich people) have no understanding of value, they only wish to buy what others cannot afford. Pretty disgusting if you ask me.
Great editorial. I think MB is a very typical example. Not sure how many customers they lost but I am definitely one of them because of what they did to the “entry-level luxury” C-class, at least the mid-90s version of the C-class was absolutely a mockery to the MB brand, in every respect. When the time came to replace my S-Class two year ago, I simply did not even consider the new MB.
I think what is an Oxymoron is a “mass marketed Luxury brand”. Lexus in the UK, for me, partially damaged their brand. When they first entered the UK, there were VERY few on the road. Entry prices started at around £50,000 (remember, this was in 1989. So allowing for inflation, the current day price would be £65000). But then, they introduced the IS range. This range allowed people to get a Lexus at around £20000. Surely, the whole point of a luxury brand is the knowledge that you’re buying a cut above the rest? No-one looks at a VW the same way as an Audi. But if you allow a brand to be accessible to the mass market, then expect your brand image to go with it.
BMW is considered to be a luxury car maker, yet according to recent sales figures, in the UK the BMW 3 series outsold the Ford Mondeo! How can you take a manufacturer like that seriously as a luxury brand?
That’s why luxury makers have to go down one of 2 routes:
1: Expect to be a small player, but try to retain as many shares as possible within the company to avoid takeover.
2: Affiliate or join a mass market maker to have the clout on prices and size. Just like Porshce did with VW.
Another thing that luxury brands must never do (especially, if they affiliate with a mass car maker) is allow platform sharing and dilute their technology. As much as Mercedes Benz were considered brutal to Chrysler, they were absolutely right to refuse platform sharing. Audi platform share with VW (and their other brands). Which begs the question, what are people buying? A more expensive version of their mass market affiliate?
As much as I hate to say it, Luxury car brands need to retain their snob value and keep themselves exclusive. Otherwise, what are you aspiring to?
Incidentally, this isn’t unique to the car industry. The fashion industry go through this almost cyclically. A new CEO comes into a fashion house, announces their intention to bring their clothes to the mass market and ruins the brand.
So, dalava, what did you buy to replace your S-class?
Is everybody forgetting the 1990 ES250? Lexus hasn’t moved downmarket at all, since their inception they have offered a downmarket model (based on the pedestrian Camry of all vehicles). When Lexus started, even the LS was not as expensive relative to other vehicles as it is now. Neither were the SC or GS when they were first introduced. The amazing thing is how Lexus has managed to build a luxury image while at the same time offering (and even relying on-the ES and Camry-based RX are their best selling cars) relatively cheap cars.
Likewise, Audi and BMW have relied on cheaper priced cars for a long time. Jaguar, Mercedes and Cadillac are really the best examples of the danger of moving downmarket, but Mercedes has somehow managed to (mostly) avoid the fate of the other two. That’s perhaps because Mercedes is an independent company (the average car buyer probably didn’t know that Mercedes and Chrysler were once tied together, and even after the merger Mercedes pretty much did what it wanted). When you buy a C-Class it’s a real Mercedes, not an upgraded version of anything, unlike buying an upgraded Mondeo/Lincoln LS (X-Type/S-Type) or Buick/Cavalier (Deville/Cimmaron). I can’t count how many people (people that have never even heard of a Mondeo mind you) that have told me Jags (not just the X-Type, but the XJ and XK as well) are just upgraded Ford Tauruses.
One last thing, I mentioned this in the Buick article, but a great car is sometimes able to truly transcend a downmarket brand. The best example of this is the Corvette, when I drive my Vette around nobody dares to suggest that its just a Chevy. But the Corvette has been around for over 50 years and it is so far out of touch with the rest of the Chevy lineup that it’s probably the exception to the rule
KatiePuckrik, i thought the chrysler 300 was built upon a Merc chassis? isn’t that platform sharing?
Phil: the 300s suspension (possibly subframes) are shared with an older E-class design. Platform sharing between the current 300 and E-class isn’t really happening.
I’m all for low-end luxury cars.
In my experience from 2003, if you buy a Passat 4Motion, you’ll end up paying something like $32K. You get a V6, AWD, and leather.
Buy a BMW 325XI for $35K and you get an I6, AWD and Leather.
The difference is one is a tarted up passat that uses parts from the $15K golf, and the other, well, doesn’t.
The thing that sold me on the baby Bimmers was the size of the rear brake rotors. In my mind, a 325Xi has no sporting pretensions, and instead delivers what appears to be a GOOD car with minimal embarassing cost-cutting. (please don’t flame me for that one).
I can’t WAIT for the 1 series. too bad it’s fugly.
Phil,
I believe that was on a redundant platform. Mercedes Benz didn’t let Chrysler use their active platforms.
I’m sure an executive was quoted as saying “A Mercedes will stay a Mercedes.” A reference to platform share with Chrysler.
Some do down market pretty well. You can’t spot MB’s badge engineering/homely roots in America, because the C-class isn’t used as a taxicab here. The Infiniti G35 is a Nissan Z, but its really hard to tell. Both are good cars for that price range, and that’s how you do it.
The Americans don’t. Cadillac could move up (sixteen?) and give the CTS to Buick (or Pontiac?) in the time-honored GM tradition of brand aspiration.
Lincoln can get Continental-like again now that Jag is (almost) out of the portfolio. By the same token, the MKZ’s unique interior/powertrain goodies would make a very fine Mercury Milan indeed.
Who knows what will become of Chrysler and Jaguar. Besides the 300C, both have been wrong for this market for years now.
phil:
Platform sharing is not a problem when a platform engineered from the start for a luxury brand is passed onto a ‘lesser’ brand. Especially if that platform is from the last generation and the new car looks nothing like the older one. The Chrysler Crossfire also used the last gen SLK’s chassis but not many outside of enthusiast circles knew that
Platform sharing is a problem when it’s the other way around, when a common platform is used to provide the basis for a ‘luxury’ car, especially when that platform has minimal changes and/or the premium model looks nearly the same as the downmarket model.
I think the real danger for luxury carmakers is not from moving downmarket, but rather from mainstream brands moving up.
These days, M-B, Lexus and BMW do not have a significant lead over mainstream players in terms of reliability, capability, safety and features. The differences between a $25K Honda and a $50K Mercedes are really quite subtle — the feel of the leather, the shininess of the chrome, the prestige of the brand.
I think a lot of luxury car buyers would consider buying 80% of the car for 50% of the money, so long as the dealership experience was respectful.
Are luxury makers going down market or are they just continuing to increase the size and price of their models as time goes on? There was a time that a 3 series was the size of the soon to be 1 series and had an affordable price. As the 3/5/7 have continued to grow in size and price a hole has been created at the bottom of the lineup. The 1 series will prove very lucrative for BMW in NA as long as they do a good job which I think they will do. The 135 specifically is going to be a milestone, a return to “The Ultimate Driving Machine” a return to the core design principles and many enthusiasts are very eager to get their hands on it.
I think Audi will do better with the A3 cabrio and coupe than they did with the hatchback. I do not know if the A1 will be a smart decision as the A3 is easily in VW territory how much more so would be an A1?
I wouldn’t be surprised to see MB come out with a B-Class to fight the 1 series. The C-Class is not a small car by any means.
If done properly, “affordable” or “entry level” luxury cars get you accustomed to the brand and you will want to step up for your next vehicle.
How many people just buy another Toyota because that’s what they had before and it was good to them?
I’m sorry but this argument is lost on me. BMW has a long tradition and has not always produced what is being termed “luxury” here. What they do need to do is produce great driver’s cars that can be taken into the countryside or to a track for some level of exhilaration and driver satisfaction.
IMO – the X5, X3 SAVs are the oddity in the BMW lineup but hey those strange high center of gravity Americans want ‘em so why not…
The 1 series will be the great tradition of the 2002 and E21 and E30 3 series and will not damage the brand unless they lose sight of quality.
Please read Roundel or attend a BMW CCA event to find out what BMW drivers want from the brand – not what pundits expect after they’ve pigeonholed the brand.
The last paragraphs of this op-ed are 100% right on the money.
No matter where they’re offered in the price spectrum, “luxury” automobiles that rigidly adhere to their manufacturer’s core values bestow honor and longevity to their brand. Crap luxury cars are bad for business; but lousy mass market versions are lethal.
The problem with a mass market company owning a luxury brand is that they have the crap to “steal” from. Pure-play luxury automakers don’t, which makes it that much harder to screw up. Also, why the fact that Audi hasn’t succumbed to “quick & dirty” up-market rebadgification all the more remarkable. Better management, or just the residual effect of Germany Inc.?
Interesting to see that Porsche seems to survive just fine without a single offering below 40K… An entry level Porsche is a used one ;)
I certainly wouldn’t buy a Mercedes anytime soon. The quality advantage is long gone, and now the snob factor is gone, too. Hopefully the Italians will see the opportunity to take over the high-end market.
I have to disagree with Saab’s inclusion as “near luxury” failure – they’ve always been (well, at least since they ditched the 2-cyl engine) slightly past the top of the affordable mid-range (the Saabaru 9-2 excepted).
Saab’s problem today is purely shitty products and lack of dealers. Outdated (9-5), useless (9-7), and unreliable (9-3). For all intents and purposes, they’ve been replaced by Subaru, Prius, and Audi on the college professor list.
Why is it Volvo blossomed under Ford but Saab wilted with GM?
Finally, BMW has always amazed me – questionable reliability (several friends really know what the B, M & W stand for), high-end prices, and plenty of poseurs…but yet sales increase every year. I do know that they are a pleasure to drive as an enthusiast, so maybe it’s because, like Honda, they know their purpose in life. It will be interesting to see how the 1-series affects their chi.
Alex:
Porsche plays in a different segment, but you can argue that it suffers from the same problems. The Boxster and to a lesser extent the Cayman are ‘entry’ level. The same way a potential S Class owner might not want to be associated with Mercedes after seeing a C230 hatcback on the road, does a potential 911 Turbo/GT2 driver really want to spend $150k for a car from the same brand as the lowly Boxster (or spend that much to get a car that looks just like a $75k 911 Carrera2 to everybody buythardcore enthusiasts)? Especially when he can spend a little (OK, only a ‘little’ in relative terms but still) more and get a Ferrari or Lambo that carries much more prestige.
Nobody has yet mentioned the biggest down market car ever, mainly because nobody now thinks of this brand as luxury any more, merely because this car exists.
Have you guessed what it is yet?
It’s the Chrysler PT Cruiser.
It’s current MSRP is $15,530, although you can probably find some for five digit price tags after all discounts and rebates and crap.
People forget that, at one point, Chrysler was at least an equal to Cadillac and Lincoln, if not Mercedes or BMW.
What happened was that the PT Cruiser was supposed to be a Plymouth, but they eliminated that, so they gave it do Chrysler at the last minute.
Entry level luxury is a market segment coveted by all manufacturers. The original idea was to come up with a lesser priced model to get customers into the “family” and hopefully this customer would stay with the brand. Does it sound like Alfred Sloan?
When brand loyalty still had value. Today brand loyalty is highly diluted in the entry level luxury segment. Its a game of stealing business from your competitor, and the product reflects the fact that its destined to steal business, in a price and subsidy sensative market.
The brand loyalty is as long as the lease term, and 3 months before the end of the lease whoever has the next car with “buzz” and “subsidised” lease rate will win over the customer.
Every manufacturer wants to be there to “play the game”, Hyundai is attempting to get in.
BMW is the master in that segment with the 3 Series, the upcoming 1 series will win over some new converts for the duration of a lease. The risk for the established luxury manufacturers being that they lower they go in the market, the more dilution there is in loyalty.
It is all about a company’s center of gravity. For Mercedes, that center of gravity is the S Class and Cadillac is in a similar proposition with whatever their high end luxo-barge is (the De Ville?). In comparison, the center of gravity for BMW has always been the 3 Series. For Lexus, the center of gravity is more amorphous as their brand has been built on selling a high-end, worry free luxury car backed by Toyota resources and build quality.
Mercedes and Caddy have been relatively unsuccessful in their downmarket moves because trying to translate snob appeal to the mass-class is a tactic that is fraught with danger and both of these companies stepped on land mines. Mercedes downmarket move was timed perfectly with the huge hit their bulletproof quality reputation has taken over the last decade (and the rise of Lexus). Caddy got killed because they did things like the Catera and other badge engineering projects. The kind of people who drop $60K to hold their heads above the proles have an innate ability to sniff this sort of inauthenticity out and the sales numbers for both brands prove that those customers have turned to other alternatives.
BMW is in a much different position. They cut their teeth on selling high-performance versions of the appliance vehicles every Tom, Dick and Harry drives daily. BMW’s snob appeal was never something organic to the company- the market projected that image onto the cars based on the kind of people who bought them, not because BMW tried to establish the company that way. This isn’t to say that the 7 and 6 series are not important products, but BMW can play in the Luxury class without the pressure of needing to live up to some snob appeal pretense. The 3 Series is what makes or brakes BMW (for comparison, notice how Mercedes has been working their German asses off to show off the new S Class and how great it is as a way to try to claw back some reputation?).
Lexus is a different animal because they don’t have a legacy built up from a single automobile platform that has 50 years of history behind it (like the BMW 2002/3 Series and the S Class). Lexus has always presented themselves to the market as the bulletproof, value alternative to German/American luxury car buyers. In whatever segment of the market Lexus competes in, they live or die based on the mistakes made by other brands sort of like sharks sniffing out blood in the water. This is why Lexus is so successful in poaching Mercedes business (due to Benz’s quality foibles and perceived lack of value) while they have been unsuccessful in putting a dent in the 3 Series (BMW hasn’t really messed up that car, aside perhaps from the styling).
I don’t know if this model is available elsewhere, but in Canada Jag sells and X-Type Vanden Plas. (cue derisive laughter) If that’s not an oymoron, I don’t know what is.
I remember BMWs last downmarket foray, the two door 318 of about 1990. My boss had one. It sucked!
Well, at first I was kinda put off by this article, but I think I see the point in the last paragraph. I can’t imagine a worse example of this than MB. In Clevo, a MB dealer has been running a “Mercedes for the price of a Camry” commercial. Seems to be working in the amount of new C-Class I have seen cruising the streets. They have also been heavily promoting the R-Class and that too seems to be working I have seen at least three Passports and Siennas replaced with a shiny R-Class. Will these people be moving up after the kids leave? Probably not, but Mercedes seems to like the Mercedes for everyone deal. Okay, the corporate marketing department probably doesn’t like it at all.
K.
omnivore:
I replaced the two MBs I had with a BMW M3 and Subaru Legacy GT Wagon. I might’ve sacrifice a bit in luxury and “status”, but I can’t be happier as a driver and owner, not having to go to the MB dealer once every month.
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^ Are people around here ever gonna read a proper piece of article ?!
Why did the existed ?!
Answer: because there were cars like 170D/170E and MB badged trucks, buses and Co. witch saved MB bacon after WWII.
BTW wasn’t back then and entry level Porsche worth 20 000 USD in today’s money ?!
The Cimaron and X type were a rebadged Chevy’s and Ford Mondeo.
Ive been a reader for some time, but was prompted to register in order to second dolo54’s comment about the rugs. In 1977 approximately, the head of Oldsmobile Quality control confided to me an intersting result of a survey GM had taken of Cadillac Seville owners. The Seville was a new vehicle at the time, based on a heavily modified chevy nova platform. The Number One Complaint the buyers of this vehicle had, was that “It Didnt Cost Enough” !
Like Dolos rug tale, this has stuck with me all these years. Rugs, Cars, diamonds etc – it all connects. Thus down market brand migration seems very dangerous. The 76-77 Seville introduction was handled pretty well -features, engineering, promotion and market niche wise. The Cimarron 5 years later was a complete disaster as has been well documented.
Carmakers need to go downmarket to sell to Americans because we’re such an aspirational country. As a member of the great unwashed, I’m tantalizingly close to being able to afford a CTS or 3-series, and may someday buy one. Money for Cadillac! It’s great to sell a few cars to a few rich-rich people, but it is better to sell the millions of middle and upper-middle class people a vehicle at the top of their price range.
Another problem: no matter what you price something at, people will stretch to buy it if they want it, no matter how disastrous it’ll prove. Hence the looming real estate fiasco as everybody used ARMs to get into $800,000 houses they didn’t need for the last 5 years. You can’t price poor dopes out of a car, creative financing has leveled the field.
You wanna piece of road candy to flaunt at the poor? Buy an Porsche. Careful, though, people making less than $100,00/year can afford a Cayenne. There’s still room for ultra rich snob-mobiles, but don’t we already cater enough to rich jerks? I think so. Sell ME a car, I’m moderately well-off and willing to buy and appreciate a nice vehicle.
Hurrah for entry-level luxury cars, says I.
SherbornSean has it right. The mainstream cars are becoming far more luxurious with every redesign…At little or no price increase. People are starting to question if a 100% premium is worth it so it is forcing the luxury makers to move down-market to capture the 20-somethings into the brand.
If it were not for wrong-wheel-drive, I would choose an Accord over a C-class. (I prefer $50 scheduled maintenance charges rather than $600).
Ultimately, how far does the “entry-level” deviates from what the brand stands for is the question. If executed properly and the “entry-level” adheres to the brand value, the brand and the car will do well and achieve the intended purposes. Case in point, the Boxster, in my mind, is Porsche’s successful entry into the “entry-level”, while the Jag X-Type is not, for all the reasons we all know.
Thanks Luther. As you point out, RWD is the last unique selling proposition that MB and BMW have. I’m very curious to see what happens when Hyundai starts selling a nice RWD sedan for $25K.
All of this mess is a result of psychologists in the marketing department. They figured out some of what motivates us and the way we perceive ourselves in the world and we haven’t been the same since.
Why it used to be that people with money bought luxury cars and the rest of us bought whatever we could afford. Seems somewhere along the line power windows were no longer exclusive to Cadillacs and Lincolns and now everyone has a luxury car with PW, PS, PB A/C and auto transmission.
Don’t underestimate the influence different cultures have on our perceptions and desires. As more Europeans and Asians made their home in the US they brought to the workplace notions from their cultures that are quite different from our own notions. One example that illustrates this difference is from a German that told me in the 1970’s that depending on your position in the company certain cars were appropiate for purchase. I being an American purchased a Porsche. My German friend who could have bought 10, he was quite wealthy, would not because it would make him appear irresponsible. He bought an Opel instead, because that was consistent with his position. Later when he was promoted he bought a MB, not that he could not have purchased one when he bought the Opel. Some people make choices by what they think others think, rather than rely solely on their own criterion.
Of course we know that image and brand are becoming our reality more each day. Once we succumb entirely to brand we will loose our souls.
The US market is merely a (large) window into the global market. Globally Audi sells/sold the A1 & A2 below the US entry level A3, M-B sells the A-class in Europe, VW still sells the Phaeton everywhere else, the X-type was a success in the UK and the IS is probably the only Lexus most Japanese could ever even dream of owning. “Downmarket” is an arbitrary threshold set by a particular country’s economy that can never map exactly to the product portfolio of a global manufacturer.
“A Cadillac is something a kid should aspire to. Not something he should be able to own.” Call me a snob, but my gut says he’s right.
My gut tells me the same thing.
I am hopeful for a downmarket move from BMW. Get rid of all that excess weight, electronics, sunroof, sound proofing, seat cushioning, etc. and make a pure drivers car with that TT I6 for
BMW will sell all the 1-series it can build for a good while. There are no players in the RWD 4 seater compact car space. Also dont forget that the 3 series pricing can easily hit 50k and close to 60k for a 335i convertible. There is plenty of pricing room under the 3 series to still leave the 1 series upmarket.
This is so true it hurts. Brand extension downward is long-term suicide. I thought Toyota and Nissan had figured this out by establishing Lexus and Infinity as separate brands, but the low end of their lines is pretty low. Mercedes and BMW have really messed up; it is no longer prestigious when someone says “I have a beemer” and you have to ask “which one” to be impressed… On the other hand Jaguar has messed up at both ends, because their high end isn’t high end anymore, even though their low end is too low. Brand suicide.
This happens sideways, too; I mean, a Cadillac SUV? A Volvo SUV? A Porsche SUV? (911 owners, I feel your pain)
Of course, what you’re writing about is nothing new.
Can you say Packard 120? 110?
“Carmakers need to go downmarket to sell to Americans because we’re such an aspirational country. As a member of the great unwashed, I’m tantalizingly close to being able to afford a CTS or 3-series, and may someday buy one. Money for Cadillac! It’s great to sell a few cars to a few rich-rich people, but it is better to sell the millions of middle and upper-middle class people a vehicle at the top of their price range.”
But that is the purpose of brands, isn’t it? You sell Caddys to the rich, in relatively small numbers. You sell a downmarket luxury car as a Buick (to use the old GM ladder systerm). You get the sales w/o destroying the image of the high end brand.
Another way of looking at it: Social mobility in America is way down from what it used to be, so instead of selling aspirational products for people on the way ‘up’, the makers are positioning themselves to track a member of a social class from youth to grave.
Hence, it is OK for BMW and Audi to sell less than camry priced cars as long as they are small and targeted at upperclassmen in their youth. By the time they need a camry sized car, these peoples budgets have room for a 5/A6. And when they retire, they’ll do so in a 6/7/A8.
Hence, the 1-3-5-7 / A3-A4-A6-A8 buyer generally belongs to a different social class than his scion-corolla-camry-avalon / fit-civic-accord-? counterpart, despite the facts that there is some price overlap.
An M-B 300SEL 6.3 was a serious hot rod for the rich at the time, followed by the 450SEL 6.9 another serious performance car. Today a bi Turbo S600 is the equivalent serious performance car.
Who remembers the M-B CL230 Coupe/Hatchback which did reasonably well in the market until sales started inexorably declining.
In Canada M-B is selling the B Class, on a Powerpoint it looks good, in practice if they “juice up the B with incentives” it takes sales away from the C, the following month they “juice up the C” and so it goes.
BMW might experience the same, where the 1 Series cannibalises 3 Series sales.
Years ago, my uncle bought a 3 series BMW while he was starting up his businesses. That was all he could afford at the time. Now, 20 years later, he’s loaded. The entire time he was growing his business, he owned a BMW that was nicer (and more expensive) than the last.
His first 3 series treated him right, so he rewarded BMW with much repeat business.
While in college, I thought I might move from owning a couple of VWs to owning an A4 or an A6. After a bum VW Jetta and Golf, I’m not going to dump $40,000 on an Audi….not out of spite….I love the new Audis….I’m afraid of them now.
My next car will either be a G35 or IS250. You can be sure, if I like those cars, I’ll be back in the showroom for an upgrade later on.
Do smaller, lighter cars from luxury makers have to be perceived as “downmarket”? I’ve always thought that one of the most glaring examples of Detroit’s disfunctional thinking is the notion that small = cheap. The new 1 series is more intriguing to me than, say, the 6 or 7 series, not due to price but rather the potential for fun in a small(er), light(er) BMW. Likewise, the Cayman is in many ways at least as enjoyable to drive as the (justifiably) pricier 911 due to its extra helpings of smallness and lightness.
As Americans we tend to think in terms of more-better, but Goldilocks was on to something with her notion of “just right.” Just as a smaller better designed house can be far more enjoyable than a McMansion and a Nano can be better to live with than an 80g Ipod, so can a 3 series or C class be more appropriate choices than their larger brethren, regardless of ability to pay.
So, do smaller, lighter cars from luxury makers have to be perceived as “downmarket”?
To be honest, yes. Luxury isn’t just about the driving experience, but about the comfort you get from just sitting in that car. It doesn’t matter if they made a Smart car with Alacantra leather, burled wood, and brushed aluminum on every surface of the interior, it won’t create an atmosphere of luxury because it feels so claustrophobic inside.
I’ll put it to you this way: if First-Class seating on an airplane was as cramped as it is in Coach-class, would it still feel like it was first-class, even with the luxury appointments that a first-class passenger pays for?
“Of course we know that image and brand are becoming our reality more each day.”
I think the opposite is true that most Americans care about value and not brand/image now. I live in an upper-class area and most vehicles are Tahoe/Suburban and Explorer/Expedition and secondarily Odysseys and Siennas…There are very few MB, BMW, Lexus or even cars (My neighbor has a Rolls). Nobody really cares what others drive and they drive what they want. Of course the 2.801 vehicles are short-term leased :)
Leasing has made luxury cars easier to obtain. Go to a BMW dealer and all they talk about is lease and monthly payments. (Even if you say you’re interested in a cash price.) For $700/mo you can get a fully loaded $50K 3-series. For $900 a Boxster S. Other makes are similar. If you have a reasonable job, you can get into one of these for 3 years. Even though you’ll never own it, you’ll drive (flaunt) the luxury for less than a grand a month.
On the other hand, your run-of-the mill cars have moved uptown once options are added. Take the inexpensive $18K MINI, add a few option packages, and all of a sudden you’re over $25K. For a bit more you can get a year or two old Audi or BMW.
Basically you can take and make any car luxury-esque.
I’ll just restate and reorganize my thoughts as posted in the previous Buick Ain’t No Lexus (No Matter What Bob Lutz Says) discussion:
-I think that there is some confusion here between “luxury” and “exotic”. The nomenclature used in the world of consumer products is somewhat different from cars, in that the top of the heap in typical consumer goods (think Gucci, Rolex, etc.) is often termed “luxury”, whereas in cars, “luxury” typically covers just the upper-middle portion of the spectrum, and does not include the top.
In the car world, the top of the pile is termed “exotic”, and BMW, Mercedes, Lexus, etc. don’t belong in that category. That space is occupied by Aston Martin, Ferrari, Rolls, Bugatti and all the other stratospherically priced chariots that almost no one can afford. The semantics are different.
-In many cases, the lower end products of the “luxury” brands are not just gateway products, but are where most of the money gets made. Most BMW sales are 3-series; most Audis sold are A4’s, etc. The upper end provides the halo, image, and higher margins, but the “near luxury” cars are what brings most of the actual cash in through the door. The upper and lower ends are both vital to the luxury brand — SAAB, Acura, Lincoln and Cadillac illustrate what goes wrong when you dwell at the bottom without anything better above it.
To add a new point, I think that GM’s branding history is a unique case that does not parallel that of most other automakers. With the exception of VW in Europe since its acquisition of SEAT, Skoda, etc., only GM has gone down this road of progressive marketing via numerous different marques, at least to this extreme extent.
Most of the other major automakers have never followed GM’s path in this respect, limiting the progressive marques to a chain of two or three badges, i.e. Ford, Mercury and Lincoln; Toyota, Scion and Lexus, etc. What most other automakers have done with nameplates to build progressivity, GM is fairly unique in having done it largely with badges.
In the old days, this GM strategy was quite successful when the large number of badges was offset by limiting the number of nameplates. (It was possible to carry just a few models with a variety of body styles under each brand.) But it then evolved into a huge mistake, bloating the number of nameplates without offsetting that increase with a decrease in the number of badges.
Aside from the Big 2.5, the big losers in this sweepstakes have been SAAB and, to a lesser extent, Acura. SAAB has made the mistake of trying to play “luxury”, even though all of its offerings barely enter the threshold of “near luxury” — without a halo, the brand creates confusion, as there is no aura emanating from a higher-end offering.
Acura’s mistake was to play it too safe by starting with the Integra, which was too low on the pricing totem pole and had too much appeal to boy racers (the wrong demographic for a luxury brand), which ultimately tainted the whole brand by moving it downmarket, and taking cars such as the RL out of serious contention. (And to be fair, the upper end products also aren’t good enough to do the “luxury” message justice.)
To do luxury right, the last thing you should try to do is to appeal to kids who are trading in their skateboards for their down payments. It has proven to be a marque with one or two well-branded nameplates (TL comes to mind), but not much more to it than that. Once you go TL, there’s no where else worth climbing to, so it’s a dead end marque.
Let’s not confuse “high-end” with “luxury”. This is a nice article, but it conflates a number of different issues. Whoever said that BMW is not a luxury brand is right – they are a high-end brand, and there is a difference. I think they can absolutely succeed with the 1 series in a way that Mercedes (or, say, Bentley) never could with a line of compacts. Don’t think for a second that the 1 series will be cheap compared to vehicles of similar size.
Some auto brands have succeeded in promoting a sporting image, and some have not, but not all need to. Those that have can successfully sell smaller vehicles on performance (I think). Of course, if BMW pushes 1 series models out of the factories like they’re making Corollas, then yes, they will irreparably damage their brand.