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As luxury reaches masses, will auto brands lose prestige?

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American consumers have a taste for luxury and automakers are rushing to deliver by upgrading interiors, loading up on fancy features and expanding their offerings with stylish new models.

Some analysts warn that the line between the mass market and premium brands is blurring as automakers vie for attention in a bustling and highly competitive industry.

Voice-activated 'infotainment' systems, leather seats and rear-view cameras are becoming standard options even in entry-level cars. And the speed at which innovative features migrate downward is accelerating.

While the options race has increased pressure on luxury brands to innovate, the prestige associated with their brands is what truly sets them apart.

"You can get a Nissan Maxima or Buick LaCrosse with an extraordinary amount of content. But the one thing you're not getting is the image," said Tom Libby, an analyst with IHS Automotive.

Hyundai introduces 2015 Genesis at the North American International Auto Show on January 13  2014 in...
Hyundai introduces 2015 Genesis at the North American International Auto Show on January 13, 2014 in Detroit, Michigan
Scott Olson, Getty/AFP

"That's why people aren't driving the Genesis -- it's put out by Hyundai."

The real danger comes from the introduction of down-market models being introduced by premium brands to capture new customers with a lower price point.

"The thing you have to be careful of is if you sell too many vehicles, you're not premium anymore," said Dave Sargent, vice president for global automotive analysis with JD Power.

"Because if everyone's driving a BMW, you're not special anymore."

There is also the risk that instead of capturing new customers, existing ones will simply buy the cheaper models, he added.

Mercedes shook things up last year with the CLA, a sleek but small sedan offered with a base price of just $29,700.

The BMW 235i is presented during the press preview at the North American International Auto Show Jan...
The BMW 235i is presented during the press preview at the North American International Auto Show January 13, 2014 in Detroit, Michigan
Stan Honda, AFP/File

The German automaker insists its "breakthrough" car is no threat to its prestige or its previous entry level option, the best-selling C class. Some 80 percent of CLA buyers were new to the brand and most were much younger than the typical Mercedes customer.

"The huge excitement which goes around the CLA is beneficial for the brand altogether," Mercedes-Benz chief Dieter Zetsche said as he unveiled an updated -- and upgraded -- C class at the Detroit auto show.

"It brings more dynamics, more coolness to the brand."

Luxury carmakers aren't just chasing new customers with their down-market options, said Bob Carter, head of automotive operations for Toyota Motor USA.

They're also being forced into introducing smaller cars and less powerful engines in order to meet upcoming regulations tightening corporate average fuel efficiency standards, Carter said.

Lexus introduces the new RCF at the 2014 North American International Auto Show in Detroit  Michigan...
Lexus introduces the new RCF at the 2014 North American International Auto Show in Detroit, Michigan on January 14, 2014
Geoff Robins, AFP

Unlike its main competitors, Lexus doesn't need to downsize its engines and options to meet the new rules. The Japanese automaker is able to get its overall numbers down with the smaller vehicles sold by the Toyota and Scion brands.

"The advantage of having three brands, as we have, is we're able to keep clearly succinct brand clarity," he told AFP in an interview on the sidelines of the auto show.

Going small -- or even less expensive -- doesn't have to mean going down-market, insisted Andy Goss, head of global sales for Jaguar and Land Rover.

"We're packaging luxury in a different way with smaller vehicles," he told AFP.

The key is to maintain the same level of quality and stay true to the "DNA of a Jaguar or Land Rover," he said in an interview on the sideline of the Detroit show.

There are many ways to improve fuel efficiency without damaging the brand, Goss said.

The Porsche 911 Targa 4 is introduced at the 2014 North American International Auto Show in Detroit ...
The Porsche 911 Targa 4 is introduced at the 2014 North American International Auto Show in Detroit, Michigan, January 13, 2014
Geoff Robins, AFP

The Tata-owned luxury carmaker managed to lower the weight of the new Range Rover by 800 pounds (360 kilos) by incorporating more aluminum into its body and streamlining parts and components.

It is also exploring hybrids and the possibility of introducing diesel options in the United States, he said.

The German automakers who dominate the luxury market -- Mercedes and BMW, followed by Volkswagen's Audi and Porsche brands -- have already introduced a number of hybrid and diesel options and are also bringing electric and eventually hydrogen-powered vehicles to market.

They have also been improving fuel efficiency and performance by taking weight out of their vehicles and integrating carbon fiber and other materials into their frames.

The Audi S8 sedan is introduced at the 2014 North American International Auto Show in Detroit  Michi...
The Audi S8 sedan is introduced at the 2014 North American International Auto Show in Detroit, Michigan, January 13, 2014
Geoff Robins, AFP/File

It's not yet clear if this will be sufficient to meet the new standards while also maintaining premium performance.

Despite the intense competition in the luxury market, German automakers posted record sales in 2013 of 1.3 million vehicles, a five percent increase.

Germany's VDA automakers association expects luxury sales to expand to 11 to 12 percent of the US market from 10 percent in 2013

"We are confident the premium market, which we dominate, will be growing," VDA president Matthias Wissmann told reporters.

American consumers have a taste for luxury and automakers are rushing to deliver by upgrading interiors, loading up on fancy features and expanding their offerings with stylish new models.

Some analysts warn that the line between the mass market and premium brands is blurring as automakers vie for attention in a bustling and highly competitive industry.

Voice-activated ‘infotainment’ systems, leather seats and rear-view cameras are becoming standard options even in entry-level cars. And the speed at which innovative features migrate downward is accelerating.

While the options race has increased pressure on luxury brands to innovate, the prestige associated with their brands is what truly sets them apart.

“You can get a Nissan Maxima or Buick LaCrosse with an extraordinary amount of content. But the one thing you’re not getting is the image,” said Tom Libby, an analyst with IHS Automotive.

Hyundai introduces 2015 Genesis at the North American International Auto Show on January 13  2014 in...

Hyundai introduces 2015 Genesis at the North American International Auto Show on January 13, 2014 in Detroit, Michigan
Scott Olson, Getty/AFP

“That’s why people aren’t driving the Genesis — it’s put out by Hyundai.”

The real danger comes from the introduction of down-market models being introduced by premium brands to capture new customers with a lower price point.

“The thing you have to be careful of is if you sell too many vehicles, you’re not premium anymore,” said Dave Sargent, vice president for global automotive analysis with JD Power.

“Because if everyone’s driving a BMW, you’re not special anymore.”

There is also the risk that instead of capturing new customers, existing ones will simply buy the cheaper models, he added.

Mercedes shook things up last year with the CLA, a sleek but small sedan offered with a base price of just $29,700.

The BMW 235i is presented during the press preview at the North American International Auto Show Jan...

The BMW 235i is presented during the press preview at the North American International Auto Show January 13, 2014 in Detroit, Michigan
Stan Honda, AFP/File

The German automaker insists its “breakthrough” car is no threat to its prestige or its previous entry level option, the best-selling C class. Some 80 percent of CLA buyers were new to the brand and most were much younger than the typical Mercedes customer.

“The huge excitement which goes around the CLA is beneficial for the brand altogether,” Mercedes-Benz chief Dieter Zetsche said as he unveiled an updated — and upgraded — C class at the Detroit auto show.

“It brings more dynamics, more coolness to the brand.”

Luxury carmakers aren’t just chasing new customers with their down-market options, said Bob Carter, head of automotive operations for Toyota Motor USA.

They’re also being forced into introducing smaller cars and less powerful engines in order to meet upcoming regulations tightening corporate average fuel efficiency standards, Carter said.

Lexus introduces the new RCF at the 2014 North American International Auto Show in Detroit  Michigan...

Lexus introduces the new RCF at the 2014 North American International Auto Show in Detroit, Michigan on January 14, 2014
Geoff Robins, AFP

Unlike its main competitors, Lexus doesn’t need to downsize its engines and options to meet the new rules. The Japanese automaker is able to get its overall numbers down with the smaller vehicles sold by the Toyota and Scion brands.

“The advantage of having three brands, as we have, is we’re able to keep clearly succinct brand clarity,” he told AFP in an interview on the sidelines of the auto show.

Going small — or even less expensive — doesn’t have to mean going down-market, insisted Andy Goss, head of global sales for Jaguar and Land Rover.

“We’re packaging luxury in a different way with smaller vehicles,” he told AFP.

The key is to maintain the same level of quality and stay true to the “DNA of a Jaguar or Land Rover,” he said in an interview on the sideline of the Detroit show.

There are many ways to improve fuel efficiency without damaging the brand, Goss said.

The Porsche 911 Targa 4 is introduced at the 2014 North American International Auto Show in Detroit ...

The Porsche 911 Targa 4 is introduced at the 2014 North American International Auto Show in Detroit, Michigan, January 13, 2014
Geoff Robins, AFP

The Tata-owned luxury carmaker managed to lower the weight of the new Range Rover by 800 pounds (360 kilos) by incorporating more aluminum into its body and streamlining parts and components.

It is also exploring hybrids and the possibility of introducing diesel options in the United States, he said.

The German automakers who dominate the luxury market — Mercedes and BMW, followed by Volkswagen’s Audi and Porsche brands — have already introduced a number of hybrid and diesel options and are also bringing electric and eventually hydrogen-powered vehicles to market.

They have also been improving fuel efficiency and performance by taking weight out of their vehicles and integrating carbon fiber and other materials into their frames.

The Audi S8 sedan is introduced at the 2014 North American International Auto Show in Detroit  Michi...

The Audi S8 sedan is introduced at the 2014 North American International Auto Show in Detroit, Michigan, January 13, 2014
Geoff Robins, AFP/File

It’s not yet clear if this will be sufficient to meet the new standards while also maintaining premium performance.

Despite the intense competition in the luxury market, German automakers posted record sales in 2013 of 1.3 million vehicles, a five percent increase.

Germany’s VDA automakers association expects luxury sales to expand to 11 to 12 percent of the US market from 10 percent in 2013

“We are confident the premium market, which we dominate, will be growing,” VDA president Matthias Wissmann told reporters.

AFP
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With 2,400 staff representing 100 different nationalities, AFP covers the world as a leading global news agency. AFP provides fast, comprehensive and verified coverage of the issues affecting our daily lives.

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