If you drive a Mercedes-Benz, you drive a luxury car, correct? Any BMW is a luxury car, agreed? Lexus? Luxury, without a doubt. Audi? Why even ask the question? Infiniti, Cadillac, Lincoln? Give me a break. Of course, of course, of course.
Not so fast. Lexus sells a $30,950 front-wheel-drive hatchback called the CT 200h. Is this hybrid a luxury car? Really? Is it a luxury car when you and I can buy a mainstream, mid-size sedan such as a Hyundai Sonata or a Honda Accord listing for more money?
What about the Audi A3 hatchback? The base version of this four-door hatch stickers for $34,100. Like the CT 200h, the A3 is a smallish ride from a premium brand, which begs the obvious question: Is luxury exclusively about the brand, not specific models?
Pause and consider Mercedes-Benz’s B200 four-door hatchback, a family runabout that is more station wagon/minivan than car. At $29,900, the B lands right smack on top of the average transaction price of a passenger car in Canada. Is luxury about price or something else?
“Doesn’t one of the fundamental definitions of luxury include the word ‘exclusive,’ ” asks auto analyst Dennis DesRosiers in a note to clients. “Isn’t it true that once a vehicle becomes a mass-market vehicle, then by definition it is no longer ‘luxury?’ ”
Fair questions. What we know is that based on traditional definitions, the luxury vehicle market has exploded in Canada and also around the world. Since 1990, DesRosiers Automotive Consultants notes that the luxury share of the new-vehicle market in Canada has tripled, from 3.1 per cent of the market in 1990 to 9.4 at the end of 2010 (146,618 units sold in all).
The trend has continued through 2011, too: BMW sales were up 10.5 per cent through the end of November, while also up were Mercedes-Benz (6.5 per cent), Audi (17.0 per cent), Land Rover (21.4 per cent), Porsche (14.9 per cent) and Volvo (3.3 per cent).
True, there are some laggards in luxury-land. Acura, Jaguar, Lexus and Infiniti are all off this year (by 11.8 per cent, 2.5 per cent, 8.6 per cent and 16.1 per cent respectively) though a significant reason for flagging sales had everything to do with supply problems in the wake of the earthquake and tsunami in Japan last March. Obviously, not all the woes here can be blamed on natural disasters, but some, for sure.
What we can all see is that luxury vehicles have been going in two directions for 20 years: up in terms of sales, down in terms of pricing for a growing list of pretty mainstream-like models. DesRosiers is part of a growing chorus of observers and experts who wonder if the down-market push from luxury car brands is a case of chasing sales gains at the expense of brand health.
“By telling your customer base that you can now afford ‘XYZ Luxury Vehicle’ because it is in the same price range as a mid-sized, mass-volume intermediate car, are you not undermining your core brand values?” he asks.
“And in essence telling those same consumers to buy the mass-market vehicle instead of the niche luxury vehicle? I could argue that one of the kicks a luxury buyer gets out of embracing a luxury vehicle is the signal to their neighbour that they can afford to ‘overpay’ for their vehicle and their neighbour can’t.”
The obvious question: Has the definition of a luxury car changed over the past 20 years, thereby explaining this boom in demand and the drop in prices? A USA Today roundtable of marketers suggests that there is a new definition of luxury out there, that the traditional measures of a luxury car are still in the mix, but less important now.
Where size, space, comfort, price and presence defined luxury cars in the 1990s and before, luxury cars in 2011 are now about the driving experience, in-car technology, vehicle design and customer service or the “overall experience” of owning a vehicle.
That is, says U.S. Lexus sales chief Brian Smith in USA Today, a luxury vehicle is defined by a combination of factors – the car itself, the dealer and the brand’s reputation, image and placement. Emotion also factors in when distinguishing a luxury car from a mainstreamer, adds Ludwig Willisch, president of BMW of North America.
Interesting, but some might wonder if all this equivocating (fudging?) around the definition of a luxury car might be just a little self-serving and ultimately an act of survival. Here’s the key point: Luxury car makers must meet the same fleet-wide fuel economy targets as mainstream brands starting in 2016. That’s when an auto maker’s overall fleet will need to average 6.67 litres/100 km or 35.5 miles per U.S. gallon. To get there, luxury manufacturers simply must downsize their fleets while also introducing new, fuel-thrifty technologies, designs and models.