Allpar Forums banner

1 - 20 of 202 Posts

·
Moderator
Joined
·
10,409 Posts
Discussion Starter #1 (Edited)
Hey guys, here is an article we published on luxury, and the challenges and opportunities that the ongoing shifts (1) from cars to trucks, and (2) from Boomers to Millennials as the engine driving sales, represent to both established luxury and non-luxury automakers.

These shifts open opportunities for Ram and Jeep --if executed correctly, and challenges to Alfa Romeo.

Here is a link to the article published on LinkedIn: LinkedIn: Redefining Luxury

below is the text for those who prefer to read it here.

As always, feel free to comment.

Enjoy!


REDEFINING LUXURY

Apparently the first luxury goods appeared in the 17th century to cater to the sophisticated tastes of the French aristocracy. And while there seems to be disagreement on how the term luxury originated, it is clear that it now represents a $1.5 trillion global industry.

LUXURY IN AUTOMAKING

When the automobile first appeared it was a luxury only the most affluent could afford. But over the years automakers have developed a passive-aggressive relationship with luxury. On the one hand, they covet the high margins that come from selling premium automobiles. On the other, automakers do not like being confined to the exclusivity and lower volumes that consumers expect in exchange for the higher prices they pay.

Perhaps surprisingly, the auto industry measures success, even in luxury, by sales volume. Indeed, when everything is said and done, auto making is so capital-intensive that the search for greater manufacturing efficiencies never ends. This ongoing search lures luxury manufacturers to seek greater volumes, which rarely stops before the market saturates. In my lifetime, I have seen luxury marques swing between “chasing volume” and “refocusing on their exclusivity” more times than I remember.


WHAT IS LUXURY ANYWAY?

The industry has always used an artificial definition for luxury. For instance, why is a $35,000 Mercedes CLA considered “luxury” but not a $70,000 Dodge Hellcat? Or why is a $60,000 Ford F150 Platinum pickup considered “mass” while a $30,000 Acura ILX is considered “luxury”?

A few years ago now TrueCar published this table that caught my attention:




According to this data, Ford and Ram make more money selling full-size pickups than Mercedes selling E-Class luxury sedans; Chevrolet makes more money selling full-size pickups and SUVs than BMW selling 5-series luxury sedans. If nothing else, this table illustrates a shift by which automakers are reaching into higher price points, seeking better margins wherever they can find them.

LUXURY DEFINED

Unlike mass brands, which are defined on the market by their volume model, luxury brands need prestige to justify the price premium. Luxury works very much in a “trickle-down” manner by which a flagship vehicle sets the level of prestige –and premium positioning—for the entire brand.

Consumer research consistently shows that brand prestige is established by delivering a superior experience across five key areas:

1. Styling and design –inside and out

2. Performance –in acceleration, ride and handling

3. Quality and craftsmanship –reliability, quality of materials, fit and finish

4. Comfort and convenience –in terms of interior space and innovative features

5. Customer service – in terms of the purchase and service experience

Over the years German automakers have delivered a customer experience that more consistently focused across these five areas. Thus, Mercedes, BMW and Audi have come to define luxury better than anyone else. As a result, other automakers like Lexus, Infiniti, Acura, Alfa Romeo, Cadillac and Lincoln have found themselves having to out-German the Germans. Unfortunately this is a losing battle: these brands will never be as authentic as the real thing. So the challenge is how to define luxury in an authentic and relevant way to consumers.


OPPORTUNITY TO REDEFINE LUXURY

For most of the past century luxury automakers established brand prestige through their flagship sedans. These were the large, powerful and luxurious sedans that were the envy of the world. But with the ongoing shift in consumer preferences from cars to trucks, the definitions of three of these five areas, Design, Performance, Comfort and Convenience, have to evolve.

Could a redefinition of the luxury flagship be underway?



Germans’ traditional dominance has been on cars more than trucks, thus creating an opening for others. For instance, as fast, powerful and competent as German cars have been known to be, they were also notorious for going nowhere the moment a few snowflakes fell on the road. Trucks, on the other hand, have never been particularly nimble or fast, but they are seen to be able to go anywhere, no matter the conditions and, in times of YouTube and social media, pull stunts few vehicles can.

A Jeep Wrangler on YoutTube pulling two skiers through one of NYC’s worst snowstorms


Trucks also offer more physical space than a comparable sedan to provide the comfort levels luxury buyers seek. Styling is perhaps where the differences between cars and trucks is most obvious, thus offering opportunity to redefine that as well.

Truck brands like GMC, Ram, Jeep, Chevrolet, Ford and Toyota have been offering superior levels of design, performance, comfort, features and craftsmanship, effectively opening the opportunity to compete as luxury marques. But trucks sales are notorious for declining the moment the economy slows down. The overall customer experience will need to come up to match the other four areas if they are to earn the necessary prestige to justify the price premiums sustainably.

As Millennials replace Baby Boomers as the engine behind new-vehicle purchases in North America, automakers have a unique opportunity to redefine the elements that establish brand prestige, and to redefine luxury itself.

The challenge now is to identify more precisely how Millennials want those elements redefined.
 

·
Super Moderator
Joined
·
6,895 Posts
Hmm, it seems possible that the Wrangler could end up on the list of the top ten vehicles transacting over $50,000 if that study is done again.
 

·
Registered
Joined
·
1,059 Posts
I'm struggling with this article. It's as if they're ignoring that the luxury manufacturers have all pivoted to focusing on SUVs. Further, AWD has proliferated across all of their lineups so the weather comment doesn't make much sense to me either. Mercedes doesn't even offer RWD on some of their cars now.
 

·
Moderator
Joined
·
10,409 Posts
Discussion Starter #6 (Edited)
Hmm, it seems possible that the Wrangler could end up on the list of the top ten vehicles transacting over $50,000 if that study is done again.
I'm guessing the threshold would have to be increased from $50,000 in 2014 to at least $60,000 in 2018.

But your point remains: Wrangler is coming pretty close to that threshold.
 
  • Like
Reactions: Ryan

·
Moderator
Joined
·
10,409 Posts
Discussion Starter #7 (Edited)
I'm struggling with this article. It's as if they're ignoring that the luxury manufacturers have all pivoted to focusing on SUVs. Further, AWD has proliferated across all of their lineups so the weather comment doesn't make much sense to me either. Mercedes doesn't even offer RWD on some of their cars now.
That is a very good question.

We tend to think of CUVs as trucks, but in reality CUVs are an in-between a car and a truck.

To keep it apples-to-apples, let's look just within the Mercedes-Benz lineup: Mercedes can charge a LOT more money for a G-Wagen SUV than it can for a GLS CUV. The G-Wagen is older technology and less efficient, but from a capability standpoint it can do much more that any CUV can. I have seen many times Mercedes CUVs with the 4-Matic AWD system get stuck in 2-3 inches of snow.

It appears that today's consumers are willing to pay a premium for capability. This in itself represents a shift from before, when for decades consumers were willing to pay a premium for the sportiness long exemplified by Mercedes, BMW and Jaguar high-end sedans.

It is this same willingness to pay for capability rather than traditional sportiness that is allowing consumers to justify paying $60,000+ for Ram, Ford and Chevy pickups.

The AWD CUVs being introduced by luxury automakers are there simply to grab volume. I don't see any of those CUVs ever becoming Mercedes or BMW's flagship vehicle. Acura tried with MDX and the brand floundered.
 
  • Like
Reactions: UN4GTBL and DAGAR

·
Registered
Joined
·
1,059 Posts
That is a very good question.

We tend to think of CUVs as trucks, but in reality CUVs are an in-between a car and a truck.

To keep it apples-to-apples, let's look just within the Mercedes-Benz lineup: Mercedes can charge a LOT more money for a G-Wagen SUV than it can for a GLS CUV. The G-Wagen is older technology and less efficient, but from a capability standpoint it can do much more that any CUV can. I have seen many times Mercedes CUVs with the 4-Matic AWD system get stuck in 2-3 inches of snow.

It appears that today's consumers are willing to pay a premium for capability. This in itself represents a shift from before, when for decades consumers were willing to pay a premium for the sportiness long exemplified by Mercedes, BMW and Jaguar high-end sedans.

It is this same willingness to pay for capability rather than traditional sportiness that is allowing consumers to justify paying $60,000+ for Ram, Ford and Chevy pickups.

The AWD CUVs being introduced by luxury automakers are there simply to grab volume. I don't see any of those CUVs ever becoming Mercedes or BMW's flagship vehicle. Acura tried with MDX and the brand floundered.
Well, we'll see. The next-gen GLS will be getting a Mercedes-Maybach trim just like the S-class, BMW is bringing out their X7. I also don't think Mercedes traditionally sold on sportiness, as the prominence and proliferation of AMG models (and subsequent rebranding as Mercedes-AMG) is more recent.

I'm shocked that you've seen 4-matic vehicles get stuck in that little of snow; I think that may be a consequence of some of these vehicles driving around on summer or high performance all season tires rather than system incompetence. They do have 4 different kinds of 4-matic in use right now, so I suppose your results will vary based on what system is used as well. Interestingly enough, the sales figures for off-road package equipped (low range, skid plates, etc.) ML/GLE's and GL/GLS's were extremely low. I believe the G-wagen commands its price not just due to its capability, but the fact that it's an icon.
 

·
Premium Member
Joined
·
3,285 Posts
Could one argue that in certain parts of the country luxury now often includes electric propulsion? Given the sales of Tesla Model S and X vehicles? I see a lot more of those than the latest gen 7 series for example...
 

·
Registered
Joined
·
1,059 Posts
Could one argue that in certain parts of the country luxury now often includes electric propulsion? Given the sales of Tesla Model S and X vehicles? I see a lot more of those than the latest gen 7 series for example...
I think so. While the Model S and X lack the quality and [some] features expected out of a car that expensive, its price put its firmly in the luxury car stratosphere. I hope Tesla enjoys the fun while it lasts, all of the Europeans are starting their onslaught in 2019. Jaguar is starting now with the i-Pace actually. Going to be a fun next couple of years.
 

·
Moderator
Joined
·
10,409 Posts
Discussion Starter #11 (Edited)
Well, we'll see. The next-gen GLS will be getting a Mercedes-Maybach trim just like the S-class, BMW is bringing out their X7. I also don't think Mercedes traditionally sold on sportiness, as the prominence and proliferation of AMG models (and subsequent rebranding as Mercedes-AMG) is more recent.

I believe the G-wagen commands its price not just due to its capability, but the fact that it's an icon.
Mercedes were sporty compared to Cadillacs and Lincolns, back when the domestics dominated luxury. Cadillac and Lincoln emphasized ride comfort to such an extreme that their lack of handling became embarrassing. Even against BMW, Mercedes was seen to deliver competent handling. German automakers cultivated a performance mystique based on their country's autobahn culture.

Adding an X7 is not going to do anything for BMW but give them more volume. Three-row CUVs in general, regardless of automaker, are bland people movers. Their focus is too domesticated to play a serious aspirational role.

BTW, I hope FCA has picked up on this, given that it plans to issue a 3-row version of every Jeep short of Wrangler.

Where does G-Wagen get its iconic status from...?
 

·
Registered
Joined
·
1,059 Posts
Mercedes were sporty compared to Cadillacs and Lincolns, back when the domestics owned the luxury market. Cadillac and Lincoln emphasized ride comfort to such an extreme that their lack of handling became embarrassing. Even against BMW, Mercedes was seen to deliver competent handling. German automakers cultivated a performance mystique based on their country's autobahn culture.
Fair point.

Adding an X7 is not going to do anything for BMW but give them more volume. Three-row CUVs in general, regardless of automaker, are bland people movers. Their focus is too domesticated to play a serious aspirational role.
There's a 4-seater version still on the table that has yet to be green-lighted apparently. But yes, no need for BMW to be seriously aspirational when they have Rolls-Royce in their portfolio. Speaking of which, the Cullinan is so uninspired and ugly in my eyes. Such a shame.

BTW, I hope FCA has picked up on this, given that it plans to issue a 3-row version of every Jeep short of Wrangler.

Where does G-Wagen gets its iconic status from...?
From having its same basic shape since 1979 and being used as a military vehicle globally. I'd like to say "pfft, that's not enough" but apparently it is. Mercedes has tried to kill the G-wagen twice (early 90's, mid 2000's) yet people demanded it stay in production. And here we are today where the Mercedes-AMG model outsells the standard issue G550 in the U.S. Must be the side pipes. That's why no one should surprised the brand new (finally) 2019 model looks so similar, despite finally getting some creature comforts like an independent front suspension and a widened body. Still has three locking diffs though!

Land Rover realizes they have a similar gem in the stable with the Defender, which will be unveiled soon after many rejected designs. I haven't seen any pictures of the final model due to my lack of contacts there but I'm personally not confident it's going to be great.
 

·
Moderator
Joined
·
10,409 Posts
Discussion Starter #13 (Edited)
Could one argue that in certain parts of the country luxury now often includes electric propulsion? Given the sales of Tesla Model S and X vehicles? I see a lot more of those than the latest gen 7 series for example...
EVs will only appeal to luxury buyers as long as there are no compromises made to the five areas of prestige: design, performance, quality, comfort and customer service.

So far, Tesla has been able to hit all nails on the head and has been rewarded. But the moment Mercedes or any other established luxury automaker can deliver an EV that can do everything a traditional luxury sedan or SUV can do, Tesla's days will be numbered.

Just like Tesla was on no one's radar when it only had a roadster, no one pays attention to EV supercars from Ferrari and Porsche. The day an electric S-Class or Cayenne hits 0-60 in 3 seconds, a 300-mile range and a full charge in 10 minutes, everyone will notice.
 

·
Moderator
Joined
·
10,409 Posts
Discussion Starter #14
Speaking of which, the Cullinan is so uninspired and ugly in my eyes. Such a shame.
Yup. It seems design and styling lose every time in the transformation from sedan to CUV.
 

·
Registered
Joined
·
1,114 Posts
EVs will only appeal to luxury buyers as long as there are no compromises made to the five areas of prestige: design, performance, quality, comfort and customer service.

So far, Tesla has been able to hit all nails on the head and has been rewarded. But the moment Mercedes or any other established luxury automaker can deliver an EV that can do everything a traditional luxury sedan or SUV can do, Tesla's days will be numbered.

Just like Tesla was on no one's radar when it only had a roadster, no one pays attention to EV supercars from Ferrari and Porsche that appeal at the 1% of the 1%. The day an electric S-Class or 7-Series hits 0-60 in 3 seconds, a 300-mile range and a full charge in 10 minutes, everyone will notice.

So what happens when a ChevyFordDodgeHondaToyota/Nissan EV hits 0-60 in 3 seconds..maybe 4. And charges in 20 mins. And offers plenty of gimmicks to appeal to many people....at half the price?

EV is another massive competition killer. Right now marquee brands (and all brands) offer more than just luxury and speed. They have soul, different engine options and tons of gadgets...and they still struggle to keep their edge.
The only thing that will keep EVs competitive is how many gimmicks they can cram into them. They can’t bank on that forever #gimmickfatigue
 
  • Like
Reactions: UN4GTBL

·
Moderator
Joined
·
10,409 Posts
Discussion Starter #16
So what happens when a Chevy EV hits 0-60 in 3 seconds..maybe 4. And charges in 20 mins. And offers plenty of gimmicks to appeal to many people....at half the price?

EV is another massive competition killer. Right now marquee brands (and all brands) offer more than just luxury and speed. They have soul, different engine options and tons of gadgets...and they still struggle to keep their edge.
The only thing that will keep EVs competitive is how many gimmicks they can cram into them. They can’t bank on that forever #gimmickfatigue
The same that will happen the day an electric Dodge Challenger hits 60 in 3 seconds, charges in 15 minutes and the price difference is nil.
 

·
Registered
Joined
·
1,114 Posts
The same that will happen the day an electric Challenger hits 60 in 3 seconds, charges in 15 minutes and the price difference is nil.
Don’t bank on it being one model capable and don’t bank on price difference being nil. Gimmicks, performance and pricing, in that order, will be the very last bastions of competition in an EV world.
 

·
Premium Member
Joined
·
4,969 Posts
True luxury was originally defined by a bespoke automobile. Think Dusenberg. This began to change in 1927 with Harley Earl's LaSalle which led the way for factory premium automobiles which we now call "luxury". This when the redefinition of luxury cars occurred.
 

·
Registered
Joined
·
4,688 Posts
The same that will happen the day an electric Dodge Challenger hits 60 in 3 seconds, charges in 15 minutes and the price difference is nil.
.

Not to drag ( no pun intended ) Challenger in with this; however, given your thoughts, Aldo : I'm wondering if the real 'challenge' is matching or bettering the energy replenishment time / fill-up time. If you can fully charge your EV faster or at least equal the time to fill-up the average ICE automobile ( at ~ somewhere between 14 to 20 gallons of gasoline/Petrol * ).

Then you have hit the point of being able to integrate the more traditional fuel-up time on the way home from work, or from the game, or after your work-out, or getting groceries ... etc. It would be far closer to established traditional behaviors, leaving fewer negatives against an EV.

= = = =

* - Certainly, some cars have fewer than 13.5 and some others have greater than 20 gallons capacity; point being that if people's established fuel-up times are met or are bettered in favor of EV's - the day that happens could easily be a notable point in automotive history.
 
1 - 20 of 202 Posts
Top