REPORT: "Lesser luxury" is the new black
by Jonathon Ramsey on Oct 14th 2009 at 1:59PM 
Up until very recently, the reason that you bought a BMW 3 Series or a Mercedes-Benz C-Class was to prepare you to buy a 5 or an E in a few years. You know, ladders to climb, blowing up to do, de-luxe apartments in the sky to own. These days, according to a new study, that is less and less the case: fewer premium buyers are moving up and more buyers are actually moving down.
According to numbers compiled by the Power Information Network, in 2006, nearly 16% of new car buyers moved from a compact to a mid-sized car, but through the first half of this year, only about 11% did so. And compared to 2006, this year two other categories showed 4% gains: people moving from large to mid-sized cars, and those moving from mid-sized to compact cars.
Gas prices have a bit to do with that, as does the democratization of high-end features, but the real story appears to be that unless David Stern signs your paychecks, being a baller is out. Customers don't want to look like they're flaunting their money, or they simply don't want to spend it. Even brand-loyal buyers are either keeping their cars, or instead of buying new ones they're going for pre-owned certified or an off-lease deal. Even Acura and Lexus are seeing their customers turn their aspirations downward.
According to Automotive News, brands that appear to be poised to benefit from this trend include Hyundai and Audi. The Korean firm's Genesis sedan is an all-the-luxury-you-want option for $10,000 less than most comparable brands. Less flashiness and an engineering-led message could also be the catalyst for Audi, whose sales declines are a third of the luxury market's overall. Said Scott Keogh, Audi's chief marketing officer, "There is affluence, and consumers have means, but frivolousness has gone away."
[Source: Automotive News, sub. req'd]
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Reader Comments (Page 1 of 4)
Neil41487 6:08AM (10/15/2009)
I was first considering a 3-Series, but with news and reports of the new VW Golf TDI, my tastes have swayed significantly. I'm a fan of small cars and utility, but also having a statement behind my car. I believe the Golf will rest better (on my wallet too) than the BMW, and will be more fun and reliable in the long run.
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Mark K. 8:28PM (10/14/2009)
Neil 41487:
"I was first considering a 3-Series, but with news and reports of the new VW Golf TDI, my tastes have swayed significantly. I'm a fan of small cars and utility, but also having a statement behind my car."
I hope you are aware of something called BMW123d. You are getting (at best) medium-low-level technology in Glof TDI, if it ever gets here medium-technology in Golf GTD.
Now, if anybody in BMW U.S.A. had a minimum of good sense, they would import unbeatable (read: highest technology available diesel) 123d. Costing, compared to European prices of BMW 130i, around 28-30k$ here. That is to say, 3-5 thou more than Golf GTD.
Forget it. It seems pretty obvious to me that American-schooled MBAs have a lot more business knowledge than their European counterparts. This is the reason why American car industry prospers and is most profitable business of them all, while European carmakers (offering those unprofitable and brand-damaging "thingies" like 123d) are going bankrupt at a rate of one every month.
James 11:20PM (10/14/2009)
Mark K,
Your comment was caked in a layer of sarcasm so thick, I don't think I can see straight.
Listen, it doesn't take an MBA to realize BMW has enough trouble moving 3-series diesels in the states (no matter how amazing the car is), so I don't think we'll be getting an 123d's anytime soon. Besides, isn't BMW taking enough risks with the 5 GT and other outrageous models in its US lineup?
Anyway, I love this new "lesser luxury" fad.
Who needs a Benz and a Burberry purse? Soon all the nouveau riche will be driving their Genesises (Genesi?) to Target!
miles 2:41PM (10/15/2009)
HaHa!
My Chevy Metro is the new black!
Neil41487 2:48PM (10/15/2009)
I would love to have a BMW 1-Series diesel, but the fact is, with any added options I like, a diesel BMW would easily rocket past the $30k mark (around what I'm willing to spend) and have LESS utility IF it was even offered in the states.
Mark K. 7:00PM (10/15/2009)
@James
Yes, I was extremely sarcastic but with a good reason/reasons.
First, we will never know what would happen to BMW123d hatchback because we will never have it. I would (maybe) even settle for 123d coupe, but how would that fare here in US will remain a mystery forever, won't it?
Second, company like VW already homologated 2.0 TDI engine for sale in US. It was offered as an engine in Jetta and now in Golf. And that's it? VW sold numerous Beetles and Passats with TDI engine in the past, but somehow those extremely learned American-bred executives in VW USA can't find the reason to offer at least 10% (yes, that's TEN %) of Beetles and Passats with that engine?
How can you not be sarcastic when those clueless personalities pocket huge paychecks for selling London Fog in a can back to VW headquarters in Wolfsburg with nicely appointed and (as always) meaningless Power Point presentations?
I wouldn't really mind - hey, it's their money to lose. The problem is that ALL of them are getting the same BS which, in turn, extremely limits my new vehicle purchase options.
As excessive as it is, selling both current cars (one diesel, one not) for nice one-two year old Cayman and another falling-apart-POS just to go to work and back sounds now extremely appealing to me. Their loss, but it didn't need to be so. Screw them.
Tim 2:15PM (10/14/2009)
As I look at The badge engineering of the "new" Gm (Vue is warmed over 2-3 times across the lineup) and compare it to what Hyundai VW Ford have at about the same price points and you have to wonder if GM is even competitive anymore in the sub 40k category.
Cadillac, the Silverado/Sierra and the Corvette aren't large enough pillars for GM to stand on. Expect more taxpayer "investment" soon
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apearlman 4:23PM (10/14/2009)
I don't think you're being fair to GM. To cite just two large-volume examples, the current Malibu and new Equinox are very competitive in their segments. Those aren't badge-engineered. Even the Traverse-Enclave-Acadia (which really ARE badge-engineered) are quite good and selling well, considering the lousy environment for big cars.
GM has some good mainstream products right now, even if you're not a fan.
amg 6:32PM (10/14/2009)
Don't forget the Cobalt. That car is supposed to drive very nicely and even won a couple of comparisons with its peers.
Jerry 2:18PM (10/14/2009)
I've noticed this trend for quite some time now. Our TSX is selling like crazy. Great luxury car, 4 cylinder, 30 MPG, 5 star crash rating (all catagories) all the bells and whistles are standard all for well under the $30,0000 mark. Our Genesis, is also selling hot.
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Mark K. 8:40PM (10/14/2009)
Jerry:
"Our TSX is selling like crazy. Great luxury car, 4 cylinder, 30 MPG, 5 star crash rating... "
I certainly do hope you realize you are driving/selling a *proper* Honda Accord. The same Honda Americans refused to buy above X dollars. Actually, since I do have a little bit more faith in Americans then in their car executives, let's say they were *induced* to believe that X dollars was WAY too much to pay for a Honda.
Another infinite wisdom of American Business School - trained executives. Why pay 28 thou for an Accord (God forbid you pay that much for a HONDA?!?!) when you can pay 34 thou for an Acura that is (in this case completely accurate term - 99.5% minus the badge itself) rebadged Accord?
Rick 2:47PM (10/15/2009)
Acuras aren't what I consider luxury cars, especially a TSX. They, and Infiniti, are more entry luxury in my eyes, there's just no refinement or detail there.
b33gee 2:24PM (10/14/2009)
I guess I foreshadowed this trend. I went from an E34 535i to a B5 A4 1.8. 10 years older and somewhat more financially secure, I still see no need to 'upgrade' to a Mid-Size luxury car like a 5-series or A6. The 3-series and A4 have plenty of options for me. In fact, if VW brings the R20 to the US, I might be looking at another 'downgrade'.
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Polly Prissy Pants 2:24PM (10/14/2009)
"Customers don't want to look like they're flaunting their money"
I can buy that. People always seem to look at you weird when you drive a $60,000 BMW and they're driving an Accord, kinda like deep down they think you're some insecure doosh who needs to inform people that you have a lot of money. Inside you say to yourself "Who cares what they think" but in all honesty we all do to a certain degree whether we've matured to the point of being able to admit it or not.
I think it also has a lot to do with the fact that your $26,000 Accord is all the car a Lexus is that costs twice as much, so why throw your money away trying to impress your friends and neighbors?
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audi_arena 3:20PM (10/14/2009)
I think you've hit it on the head. I sell Audis, a brand known for thier well-educated customers both in general and about the product itself. However, when I started this job several years ago, I was blown away by two things; First, that the vast majority of luxury buyers are motivated ONLY by the percieved prestige of whatever brand they decide fits thier image. And Second; just how many hundreds of thousands of new BMW's/ Mercedes and Lexus's are sold per year- how can you consider your car 'prestigious' when EVERYONE has one??
Audi has signifigantly cut back it's production for the US market; I am one of the few that thinks it was a wise decision.
Jerry 3:25PM (10/14/2009)
Please do not confuss the Accord, Altima and Camry (although very fine cars) with the likes of ANY luxury sedan!
chconline 3:43PM (10/14/2009)
A loaded Accord has pretty much all the features the Honda Inspire has in Japan, which is a luxury sedan. (Other than CMBS, adaptive cruise, etc, but it's 95% the same car feature wise).
Sal Collaziano 10:59AM (10/15/2009)
Do you REALLY believe that a $26,000 Honda Accord is everything a Lexus is?! If so, pinch yourself because you're dreaming. Go drive a Lexus LS and tell me what Honda compares. In fact, go drive ANY Lexus and tell me the same.. It's nice to think that when we're driving cheap cars, they're as good as the more expensive ones - but in most cases, they're not. Especially when comparing Honda and Lexus.
Sal Collaziano
http://www.madisonross.com
Polly Prissy Pants 11:03AM (10/15/2009)
"Go drive a Lexus LS and tell me what Honda compares"
I don't have to go drive an LS, I owned one for 3 years. Very nice car, but it did nothing a nice Accord won't do.
mk15 2:25PM (10/14/2009)
Cars aren't the only status of symbols anyway. There are yachts and mansions. Of all the status symbols, I would probably try to spend as much on would be a nice property and a house, at least those are more of an investment than being frivolous.
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