Guard Your Grille: It's the End of the Road for Fake Luxury

Jack Baruth
by Jack Baruth

Ding dong, fake luxury is dead. I should be more specific — I don’t mean Fake Luxury in the Caddy-Calais-vs-Ninety-Eight-Regency sense. I mean just plain old fake luxury. You know what fake luxury is. Invicta watches, Michael Kors suits, everything you could possibly buy at the Pottery Barn or in most American malls. Mass-produced sweatshop junk gilded and pimped for the administrative assistant nervously considering how to spend a $250 Christmas bonus.

Real luxury is on a roll everywhere from Savile Row to Maranello, swept away on a wave of Gilded Age cash and the ever-increasing leverage power of capital, but fake luxury is in a tailspin. Patek and Vacheron will thrive, Rolex will hold steady, Breitling will collapse. Airlines are feverishly revamping their widebodies into “super-high-J” configurations, replacing rows of packed prole seats with sleeper beds and sliding-door suites. It’s a good time to be a private jet pilot, a good time to be an UberPool driver, hell on earth to be anything in between.

Two weeks ago I told you about the Chinese Volvo S90, the Volvo S90 that is built in China. It’s the equivalent of a department store suit “designed in Sweden” but constructed by the lowest bidder. I told readers on my site that the market would adjust for this, that the price of Chinese Volvos would quickly drop into the basement while Swedish Volvos stayed strong.

I was right, young Skywalker… about a great many things.

You can argue the precise mechanisms of internecine placement, but few doubt that there are two distinct tiers of mass-production “luxury” automobiles in the marketplace. The first tier consists of vehicles which require no explanation and no excuses when displayed to neighbors or rivals. It consists of Mercedes-Benz, BMW, Audi, and Lexus. Not everything they make is admirable and not everything they make is class-competitive but that’s like saying that Sub-Zero refrigerators aren’t always the quickest-chilling options out there. Nobody wants to hear it. These four brands are going from strength to strength in the modern world, regardless of what old codgers like me think about the current 3-Series or the humpback GLE “coupe”.

The second tier consists of Acura, Infiniti, Cadillac, Genesis, Lincoln, Volvo, Jaguar, and Land Rover. Some of their products are excellent — I would have a Continental Black Label in a heartbeat if I could even remotely justify having a four-door sedan taking up driveway space — but the brands themselves are tarnished to varying degrees. Outside certain college towns, nobody thinks a Volvo is equal to a Mercedes-Benz. Outside Detroit, nobody thinks a Cadillac is equal to a BMW. You can lecture your friends and neighbors about how the Jaguar XE has more soul than a C-Class and a Continental has a better sound system than an LS460 but it doesn’t really matter. Branding, like cocaine, is a hell of a drug.

It wasn’t much different 40 years ago, but back then you didn’t have every automaker firing shotgun blasts of products at every potential minor niche. The Volvo 240 didn’t necessarily compete with the BMW 528i which didn’t necessarily compete with the Cadillac Fleetwood Brougham. Today, everybody fields a full line and offers no quarter. In 1982, the customer who couldn’t afford a dismal diesel W123 Benz was shown the door without ceremony; today they stuff that mook into a CLA lease before you can say, “It’s what-wheel-drive?” As we recently learned at the auto show, Lexus is no longer willing to lose seven-seater CUV business. If you have thirty grand in cash or the ability to make a $500/month payment, you can have a car from any of the four top brands, no problem.

Which puts the second-tier automakers in a bit of a quandary. They can’t sell on price, product, or position any more. There’s just one thing left to sell — the deal. The only way somebody’s going to select the second tier is if they think they’re getting away with something. This has been true in the clothing and timepiece business for quite some time now: who’s gonna buy a Ralph Lauren anything unless it’s on sale? You see anybody paying full whack for a Bell&Ross watch lately?

We’ve kinda-sorta seen this movie before: Lee Iacocca was the pusher-man who got the whole domestic industry hooked on rebates. But that was all relatively tame stuff. Five percent of sticker. Maybe 10 in dire straits. Employee Pricing For Everyone in an era where most vehicles don’t have 12 percent of gross margin. That’s not cutting the mustard for Volvo and Infiniti. Now we’re talking 20 percent. 30. They hide it in the fine print of lease deals and they have a half-dozen different names for the incentives, but in the final analysis Volvo understands that a Chinese S90 isn’t worth much more than the average retail price of a new automobile (which is to say $34,000). The true and actual price for a Chinese S90 — or a just-as-you’d-expect-Japanese Infiniti! — is one long Vegas weekend away from a Honda Accord Touring.

Oops. So much for “upscale.” Looks like a Coach purse isn’t worth much more than a Wal-Mart one.

But there’s no need to worry, because no matter how low these brands stoop, they’ll still have Buick to pick on.

Twelve grand off, or between seven and nine dollars a day, and who’s interested? Nobody? I want to put this in perspective. Today I went to Jimmy John’s and got a sub sandwich that tasted like ocean plastic, a small bag of chips, and a soda. It cost me $8.22. The American consumer, by and large, has decided that the value of a Jimmy John’s sub exceeds the value of a new Buick. Thirty years ago, bank presidents drove Electra “deuce-and-a-quarters” — but thanks to a generous helping of Far East sourcing and possibly the most fecklessly inept marketers on the planet Earth, the Tri-Shield products are now a no-sale, even at fast-food prices.

Mark my words, there is yet another ruthless consolidation coming for the present-day automakers. And this time it will target the slowest gazelles on the savannah, the near-luxury brands that need $15,000 discounts just to get people into a showroom. This isn’t necessarily a product problem. The current Infiniti sedan is very good. And you can have a brilliant product fall apart without branding:

Forty-eight grand on perhaps the most innovative and fascinating sporting car to appear in a decade. If you had a chance to drive an Acura NSX, you’d get out of the car a passionate evangelist for the thing. I’ve seen it happen a dozen times. But the branding and the market position don’t support it. It’s more than a shame — it’s a tragedy, because marketplace failures like this discourage the development of great new product. Every time an NSX fails, a sickeningly cynical compact luxury SUV product plan gets its wings.

What’s the fix? You might as well ask me, “So what is the color of the boathouse at Hereford?” I don’t pretend to have the answers. All I can tell you is how Lexus broke into that top tier. They sold a very good product with an outstanding customer experience at a low, low price, and they kept the price low for a long time, and they didn’t play too many games with incentives or discounts. That’s a tough road to take — but, like they say, it’s a long way to the top if you wanna rock-and-roll with the big boys.

[Image: Volvo Cars]

Jack Baruth
Jack Baruth

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  • Jc77 Jc77 on Dec 11, 2017

    Nicely written article. I agree with most of it, except for one thing: dude, you can't really put Lexus in the top-tier together with the Germans. An important condition for a brand to be called luxury is its global presence: it has to be universally recognized as prestigious. Now, Toyota's "Luxury EXport United States" line of products has been very successful in the US, but everywhere else, it's made very little impact. In Europe it's a dud (they've been trying to sell it there for ages, but the very few Lexuses you can see are mostly taxicabs); in Japan it was only introduced in 2013, and is often laughed at; in China it still sells much less than the Germans; even in Canada its market share is inferior as it is south of the border.It takes much more than being successful in one country only (even a large country as the US) to truly build a luxury brand. Even among the Germans, you might want to place MB slightly on top of the others. After all, they invented the car itself, and it's the only company that has constantly built high-quality, true luxury cars through their entire history. Neither BMW nor Audi managed to do that (and I own an Audi myself, so I'm not an MB fanboy :) ) I'd finally like to say a word about the CLA, which happened to gather a lot of hate in the comments. Granted, it's not as high-end as a C-class; it's got a transverse engine and FWD, and it's pretty small inside. However, from here to say it's worse than a silly Honda Civic... Come on. I rented both a CLA and a Civic time ago, and I can tell you the CLA is a much, much better car. Quicker, more responsive, more refined, more fun to drive (especially when you compare MB's dual clutch gearbox to Honda's tragic CVT - and yes, I did rent a new, 2017 Civic). Again, probably not a true Merc, but still no match for any Japanese car.

  • Sst Sst on Dec 18, 2017

    I think all the information in this op-ed needs to put in perspective. The reference is with respect to the US market. In the global market economy of luxury cars, BMW, Mercedes-Benz and Audi own 80% of the share in that order. If Lexus is only part of the other 20%, where does that leave the rest of the players? In a small part of the market. It still is a stable one though. The "fake luxury" market is really the opportunity for people to find luxury where a consumer would not previously afford it. This market is a niche much like the luxury market. To say it is dying is maybe a little short sighted. Instead it might be emerging.

  • Hermaphroditolog Good hybrid cars use ICE implosion mode.Mercedes-EQXX uses implosion turbines (turboexpanders) for regeneration from heat losses.
  • Kosmo I, for one, and maybe only one, would buy a 5.0 L, stickshift variant of the sedan/hatchback that is Ford's "Not A Mustang EV" tomorrow.I'd buy the sportwagon version yesterday.
  • Akear I am counting the days when Barra retires. She has been one long nightmare for GM. People don't realize the Malibu outsells all GM EVs combined.
  • Redapple2 you say; most car reviewers would place it behind the segment stalwarts from Honda and Toyota,........................... ME: Always so. Every single day since the Accord / Camry introduction.
  • Akear GM sells only 3000 Hummer EVs annually. It is probably the worst selling vehicle in GM history.
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