What's Happening To This Once-Exclusive Segment?

These days, luxury makers seem to have an adversity to white space.

What comes before "A"? That's the problem Mercedes-Benz apparently has to cope with as it works up plans for an all-new premium minicar that's currently being referred to as the X-Class.

It's been three decades since the German maker first introduced – after much internal debate – the original "Baby Benz," the line that became today's C-Class. It's more recently added downsized B- and A-Class lines, as well, the X- expected to be even smaller. And that's on top of all the other new models that have rapidly fleshed out the Teutonic marque's lineup, from the G to the GLK, not to mention CLS, CLA (above) and SLK.

It's an alphanumeric soup, and Mercedes isn't alone, as a quick perusal of the BMW and Audi lineups – never mind the expanding mix at Cadillac, Lincoln, Lexus and Jaguar – reveals. These days, luxury makers seem to have an adversity to white space. They're struggling to fill in every possible gap in what is a luxury market that is both rapidly growing and quickly changing.

Paul Eisenstein Paul A. Eisenstein is Publisher of TheDetroitBureau.com and a 30-year veteran of the automotive beat. His editorials bring his unique perspective and deep understanding of the auto world to Autoblog readers on a regular basis.

It used to be easy to define a luxury car. They tended to be big, heavy, powerful and loaded with lots of leather and wood. Sure, there's a new S-Class coming, and Bentley has just launched the massive new Flying Spur. But luxury cars are no longer measured by the pound or inch. Indeed, whether you call it the compact or entry-luxury segment, some of the fastest growth is occurring in the most downsized luxury segments.

That's a real problem for mainstream makers who're finding that a sizable number of buyers would rather stretch their budget to get into something with a Three-Pointed Star or a Roundel badge. On the other hand, the traditional boundary between luxury and mass market marques has gotten a lot more blurry in recent years.

The barrier to entry into the once-exclusive luxury club has been steadily coming down.

You can order a Kia or a Chrysler with leather and many of the other accoutrements traditionally associated with only the most exclusive of brands. Ford has declared a strategy of "democratizing luxury," and that's especially apparent with the various high-tech features it has been rolling out, from the high-tech Sync and MyFord Touch infotainment system to advanced safety hardware like the cross-traffic alert system that debuted on the Taurus a few years back, mere months after BMW added it on the then-new 7 Series.

While there's still a cachet that consumers are willing to pay for with traditional luxury brands like Mercedes and BMW, the barrier to entry into the once-exclusive luxury club has been steadily coming down. Few believed the Japanese could challenge the vaunted Germans until Acura, Infiniti and, with particular success, Lexus came along.

Hyundai's upscale aspirations drew catcalls when it first announced the Genesis sedan. The skeptics were muted when, months later, the first version captured the coveted title of North American Car of the Year. The Korean carmaker reached even higher when it introduced the premium-luxury Equus, targeting the likes of the benchmark S-Class and 7 Series, and Hyundai's success with luxury cars has caught even senior company officials by surprise.

Hyundai's success with luxury cars has caught even senior company officials by surprise.

We've now seen the updated version of the Equus at the New York Auto Show this week, little more than a month before Mercedes has hinted it will unveil the new S-Class. Hyundai, meanwhile, is working up a number of other luxury options, possibly including a production version of the HND-9 sports coupe concept it recently unveiled at the Seoul Motor Show.

Big sedans like the S-Class, Audi A8 and Bentley Flying Spur still serve as halo cars for luxury brands but, cautions Joe Phillippi, of AutoTrends Consulting, "That's not where the growth is."

Those compact sedans, coupes and crossovers are steadily gaining traction – notably in markets as diverse as Berlin, Boston and Beijing. They are, as previously noted, within reach of some mainstream buyers. But they also reflect other key changes transforming the luxury market.

The new CLA will offer a range of features you might once have expected only in a well-optioned E-Class.

Competitive pressures, economies of scale and new technologies are all helping to lower the cost of many once-exclusive features, whether leather seats or advanced features like cross-traffic alert. That's why the new Mercedes CLA will offer a range of features, starting at under $30,000, you might once have expected only in a well-optioned E-Class at twice the price.

That is, of course, a serious challenge for luxury makers. It's why you see them raiding higher-volume mass-market segments – and forming unexpected partnerships, like the one pairing Mercedes' parent Daimler AG with the Renault-Nissan Alliance. The X-Class is expected to be based off a Renault platform even as Nissan's Infiniti brand borrows Mercedes' latest compact platform for several of its own models.

Luxury makers are also facing formidable challenges meeting increasingly stringent global safety, emissions and mileage requirements. Europe's tightening CO2 mandate led Aston Martin into an unusual alliance with Toyota. The result is the Cygnet, a well-outfitted Aston version of the Toyota/Scion iQ microcar that sells for barely a quarter the price of the next-lowest model in the British maker's portfolio.

Back then, you could count Mercedes' models on one hand. Today, you need a scorecard.

It should be no surprise that makers as diverse as Audi and Cadillac have just introduced new plug-in hybrids, the A3 e-Tron and ELR, respectively. Tesla has been buoyed by some high-profile customers who show that even the affluent have embraced the concept of green motoring.

The good news is that "electrified" vehicles don't have to be stone ponies. Both the new LaFerrari and the McLaren P1 will integrate its Formula One hybrid system called HY-KERS. Also unveiled at the Geneva Motor Show last month, the production version of the SLS Electric Drive, a full battery-electric version of the Mercedes two-seat supercar.

Few of these new products – or brands – might have seemed possible when the original Baby Benz made its own, controversial debut. Back then, you could count the maker's models on one hand. Today, you need a scorecard. And the changes in the luxury market are only likely to continue at an ever faster pace.

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