Automotive "Downscaling" Reveals The Importance of Being Frugal. Or Not.

Robert Farago
by Robert Farago

Automotive News [sub] offers-up the not-so-startling fact that luxury car buyers are trading down. “Downscaling.” Common sense suggests the number one reason not to buy a high-priced luxury car: the buyer can’t afford it. As any good car salesman will tell you, “afford” is an entirely subjective, infinitely malleable term. Hence the term “consumer confidence” as a measurement of whether or not people think they can afford something. You know; even if they can’t, really. And while you’re contemplating what all that means for the American economy, how about this: the “Power Information Network” (J.D.’s mob) reckons the move down the automotive food chain is a reflection of buyers’ psychological need to NOT impress the neighbors. “Especially in this recessionary period, neighbors may not want to show up one another as ‘For Sale’ signs go up everywhere,” [PIN general manager Geoff] Broderick said.” I call bullshit. Since when do Americans tailor their consumption patterns out of sensitivity to their neighbors’ financial distress? The whole stealth wealth thing is a myth. A California Mercedes dealer disagrees . . .

George Grinzewitsch Jr. owns three Mercedes stores in Sacramento and is a partner in one in Reno, Nev. Grinzewitsch, Haines’ dealer, is beginning to see signs of a recovery, but he is cautious.

“Conspicuous consumption is definitely verboten right now, he said. “I’m seeing lots of trades of S class for E class, or a certified pre-owned from someone who would normally buy new.”

AN assembles a chorus of experts to affirm the article’s central thesis: nouveau riche has suddenly become unacceptably gauche.

Flagrant opulence is on the way out, said Lincoln Merrihew, an analyst with Compete’s automotive consultancy in Boston. “I expect folks would be proud to show neighbors they went new — as long as they traded down in size,” he said . . .

Scott Keogh, Audi of America’s chief marketing officer, is playing on the trend to show Audi as a savvy luxury choice compared to its rivals.

That’s one reason he thinks Audi’s sales are off just 10 percent so far this year, compared with the luxury segment’s decline of about 29 percent.

“There is affluence, and consumers have means, but frivolousness has gone away,” Keogh said. “We’re seeing movement away from the old-world luxury of focusing on the badge and flaunting what you have.”

Badge snobbery is out? Sure, just as soon as the manufacturers manage to change human nature. Meanwhile, did I just hear the E-Class product manager wince?

So, how does eight-time Mercedes owner Haines feel about driving a lesser vehicle?

“I was comfortable moving down,” he said. “The car I had was really, really, really nice, and the car I have now is just really nice. But I don’t know if I’ll move back to the big one.”

Robert Farago
Robert Farago

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  • Segfault Segfault on Oct 13, 2009

    I'm not seeing any more heavily-subsidized "bargain" luxury car leases like there were in 2006-07. This was a lot of why I bought a less expensive car when the lease on my Audi was up.

  • VanillaDude VanillaDude on Oct 13, 2009

    Since when don't people want to look successful? If you are in business, you need to look like you succeed in business. What kind of people "downscale"? Losers! BMW has been airing a whole series of ads that tell us that buying a BMW is good for the environment. To all those moronic tree huggers out there, who have cash - they can buy a BMW and feel good about it, is what these ads are saying. And that is what will work. The Japanese brands are dull and appeal to the old Cadillac crowd. Grandpa is trading in his Camry and moving into a Lexus, just as his father traded in his Oldsmobile for a Cadillac or a Mercedes. Considering the size of the Boomer generation, this is a growing geezer market. These people still think it is cool to drive Japanese and will end up with their oxygen tanks in a Lexus or an Acura. Even the Japanese have been trying to keep their luxury brands out of the hands of the gnarly-fisted geezer, and failing. They might have switched blue hair for ponytails, but they are AARP lemmings, just the same. But the successful businessperson will choose a brand that is aware of the needs of others in their community. Not only does BMW do this better with their stupid ads, but it helps businesspeople to justify their BMW purchases in light of some kind of weird environmental view still being popularized.

  • Varezhka The biggest underlying issue of Mitsubishi Motors was that for most of its history the commercial vehicles division was where all the profit was being made, subsidizing the passenger vehicle division losses. Just like Isuzu.And because it was a runt of a giant conglomerate who mainly operated B2G and B2B, it never got the attention it needed to really succeed. So when Daimler came in early 2000s and took away the money making Mitsubishi-Fuso commercial division, it was screwed.Right now it's living off of its legacy user base in SE Asia, while its new parent Nissan is sucking away at its remaining engineering expertise in EV and kei cars. I'd love to see the upcoming US market Delica, so crossing fingers they will last that long.
  • ToolGuy A deep-dive of the TTAC Podcast Archives gleans some valuable insight here.
  • Tassos I heard the same clueless, bigoted BULLSHEET about the Chinese brands, 40 years ago about the Japanese Brands, and more recently about the Koreans.If the Japanese and the Koreans have succeeded in the US market, at the expense of losers such as Fiat, Alfa, Peugeot, and the Domestics,there is ZERO DOUBT in my mind, that if the Chinese want to succeed here, THEY WILL. No matter what one or two bigots do about it.PS try to distinguish between the hard working CHINESE PEOPLE and their GOVERNMENT once in your miserable lives.
  • 28-Cars-Later I guess Santa showed up with bales of cash for Mitsu this past Christmas.
  • Lou_BC I was looking at an extended warranty for my truck. The F&I guy was trying to sell me on the idea by telling me how his wife's Cadillac had 2 infotainment failures costing $4,600 dollars each and how it was very common in all of their products. These idiots can't build a reliable vehicle and they want me to trust them with the vehicle "taking over" for me.