MSNBC: Luxury car market may never look the same
09-29-09, 11:56 AM
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MSNBC: Luxury car market may never look the same
http://www.msnbc.msn.com/id/32860931..._drivers_seat/
Luxury car market may never look the same
The Great Recession may have forever altered demand for high-end brands
Some of the sharpest drop-offs in the market are the uber-luxury segment where cars such as the BMW 2009 7-Series AG sedan is sold.
By Paul A. Eisenstein
msnbc.com contributor
updated 8:10 a.m. ET, Mon., Sept . 28, 2009
Timing is everything, or so goes the old saying. And the timing couldn’t have been worse for BMW when it launched an all-new version of its flagship 7-Series, late last year.
Though the big sedan won praise from reviewers, sales fell way short of the luxury automaker’s expectations. It didn’t help that the big Beemer's debut coincided with the collapse of Lehman Brothers, and the sharp economic downturn that followed.
“Given we have an all-new 7-Series, it’s clearly not doing as well as we wanted,” said Jim O’Donnell,” CEO of BMW North America. “I think some people can still afford it, but when you’re a CEO of a company and you’re laying people off, do you want to be seen driving a new 7-Series?”
Story continues below ↓advertisement | your ad here
Luxury manufacturers have been unexpectedly hard-hit by the global economic downturn. BMW has seen its sales in the United States, the world’s largest market for premium automobiles, plunge more than 25 percent so far this year.
Other makers, such as Jaguar and Land Rover, have suffered even bigger declines. Notably, some of the sharpest losses have come at the top end of the luxury market, the rarified strata of the 7-Series and the Phantom, sold by the BMW’s British subsidiary, Rolls-Royce.
While it’s not the first time that luxury car sales have slipped, high-line manufacturers normally fare better than their mainstream counterparts. The unusually sharp decline seen during this recession has many observers wondering if there’s a more fundamental shift reshaping the luxury automotive market.
The word “value” is something one hears with uncommon frequency. Even the most prestigious marques are rejiggering their economic equations. In May, Mercedes-Benz announced an unexpected 10 percent cut in the price of its all-new, 2010 E-Class sedans, with the E350 falling to $48,600 from the ’09 model’s starting price of $53,200. Since then, Mercedes has cut prices another $5,000.
Mercedes is having a hard time “command(ing) the premium that consumers long were willing to pay,” contends Johan de Nysschen, CEO of Audi of America.
The luxury market is by no means going away, says analyst Dan Gorrell, of the consulting firm Autostrategem. There's growing interest in Ferraris, Porsches and Bentleys in emerging markets such as China and Russia. But luxury brands are facing an unprecedented assault, Gorrell adds.
For one thing, mainstream makers are fighting back. They’re loading up on traditional high-line features, such as leather and wood. And they’re also taking advantage of falling prices for the high-tech hardware that’s come to define a luxury car.
When the first anti-lock brake systems, or ABS, debuted in the mid-1980s on products like the BMW 7-Series and Mercedes S-Class, they were $2,000 options. Today, they’re all but standard on the most inexpensive vehicles. The new 2010 Ford Taurus, meanwhile, is offering the same cross-traffic monitoring system – which watches for passing traffic when you back out of a parking spot – that first debuted on the new 7-Series last autumn.
Compounding the problem, an array of new players are hoping to enter the luxury segment. The recession of the late 1980s provided a perfect opportunity for Toyota and Nissan to move up-market with their Lexus and Infiniti brands, which were priced thousands of dollars less than the traditional German offerings.
Now, Hyundai hopes to do much the same thing.
Best known for cheap-and-cheerful products such as the $10,000 Accent, the South Korean carmaker scored an unexpected success with its Genesis sedan. It was named North American Car of the Year by a panel of 50 U.S. and Canadian auto writers early this year.
Genesis took aim at the BMW 5-Series. Hyundai plans to aim even higher with Equus. Set for debut in 2010, it will target the 7-Series and Mercedes’ own flagship, the S-Class. But like the early Lexus LS400, Hyundai hopes a relatively low $60,000 price tag will grab the attention of today’s more cautious luxury buyer.
For his part, BMW’s O’Donnell downplays the challenge. He insists premium luxury buyers “want more than just product” and factors like heritage and the somewhat intangible head-turning power of a familiar logo also count.
Hyundai is betting heritage is mattering less and less. “Now, there are the diehards who just won’t look at us,” acknowledges Marketing Director Joel Ewanick. “But there are enough others who will (because we’re) offering a value that can’t be ignored.”
Even if the established order persists, the luxury market will face some significant challenges and changes, if for no other reason than tightening fuel economy and emissions regulations, experts say.
On Sept. 15, the Obama administration unveiled a plan to improve gas mileage for cars and trucks that call for new vehicles to average 35.5 miles per gallon by 2016.
Makers like Porsche, Mercedes and BMW are pushing their diesel products, and all are getting ready to launch new hybrid-electric vehicles in the coming year. Cadillac is seriously considering the Converj, a more lavishly-outfitted version of the Chevrolet Volt, a plug-in hybrid due to debut in late 2010.
Story continues below ↓advertisement | your ad here
Mercedes, among others, is also planning a pure electric vehicle. But the challenge is finding a way to differentiate itself from more pedestrian brands using essentially the same battery drivetrain.
That’s a similar challenge for luxury makers as they downsize with such pintsized models as the BMW 1-Series, Audi A3 and Cadillac’s planned ATS. Such offerings could become the norm, suggests one-time designer and now Cadillac General Manager Brian Nesbitt. But when you are “no longer measuring luxury by the foot or pound,” he asks, how do you justify a traditional luxury price?
From top to bottom, the luxury auto market is unlikely to ever look the same again.
Luxury car market may never look the same
The Great Recession may have forever altered demand for high-end brands
Some of the sharpest drop-offs in the market are the uber-luxury segment where cars such as the BMW 2009 7-Series AG sedan is sold.
By Paul A. Eisenstein
msnbc.com contributor
updated 8:10 a.m. ET, Mon., Sept . 28, 2009
Timing is everything, or so goes the old saying. And the timing couldn’t have been worse for BMW when it launched an all-new version of its flagship 7-Series, late last year.
Though the big sedan won praise from reviewers, sales fell way short of the luxury automaker’s expectations. It didn’t help that the big Beemer's debut coincided with the collapse of Lehman Brothers, and the sharp economic downturn that followed.
“Given we have an all-new 7-Series, it’s clearly not doing as well as we wanted,” said Jim O’Donnell,” CEO of BMW North America. “I think some people can still afford it, but when you’re a CEO of a company and you’re laying people off, do you want to be seen driving a new 7-Series?”
Story continues below ↓advertisement | your ad here
Luxury manufacturers have been unexpectedly hard-hit by the global economic downturn. BMW has seen its sales in the United States, the world’s largest market for premium automobiles, plunge more than 25 percent so far this year.
Other makers, such as Jaguar and Land Rover, have suffered even bigger declines. Notably, some of the sharpest losses have come at the top end of the luxury market, the rarified strata of the 7-Series and the Phantom, sold by the BMW’s British subsidiary, Rolls-Royce.
While it’s not the first time that luxury car sales have slipped, high-line manufacturers normally fare better than their mainstream counterparts. The unusually sharp decline seen during this recession has many observers wondering if there’s a more fundamental shift reshaping the luxury automotive market.
The word “value” is something one hears with uncommon frequency. Even the most prestigious marques are rejiggering their economic equations. In May, Mercedes-Benz announced an unexpected 10 percent cut in the price of its all-new, 2010 E-Class sedans, with the E350 falling to $48,600 from the ’09 model’s starting price of $53,200. Since then, Mercedes has cut prices another $5,000.
Mercedes is having a hard time “command(ing) the premium that consumers long were willing to pay,” contends Johan de Nysschen, CEO of Audi of America.
The luxury market is by no means going away, says analyst Dan Gorrell, of the consulting firm Autostrategem. There's growing interest in Ferraris, Porsches and Bentleys in emerging markets such as China and Russia. But luxury brands are facing an unprecedented assault, Gorrell adds.
For one thing, mainstream makers are fighting back. They’re loading up on traditional high-line features, such as leather and wood. And they’re also taking advantage of falling prices for the high-tech hardware that’s come to define a luxury car.
When the first anti-lock brake systems, or ABS, debuted in the mid-1980s on products like the BMW 7-Series and Mercedes S-Class, they were $2,000 options. Today, they’re all but standard on the most inexpensive vehicles. The new 2010 Ford Taurus, meanwhile, is offering the same cross-traffic monitoring system – which watches for passing traffic when you back out of a parking spot – that first debuted on the new 7-Series last autumn.
Compounding the problem, an array of new players are hoping to enter the luxury segment. The recession of the late 1980s provided a perfect opportunity for Toyota and Nissan to move up-market with their Lexus and Infiniti brands, which were priced thousands of dollars less than the traditional German offerings.
Now, Hyundai hopes to do much the same thing.
Best known for cheap-and-cheerful products such as the $10,000 Accent, the South Korean carmaker scored an unexpected success with its Genesis sedan. It was named North American Car of the Year by a panel of 50 U.S. and Canadian auto writers early this year.
Genesis took aim at the BMW 5-Series. Hyundai plans to aim even higher with Equus. Set for debut in 2010, it will target the 7-Series and Mercedes’ own flagship, the S-Class. But like the early Lexus LS400, Hyundai hopes a relatively low $60,000 price tag will grab the attention of today’s more cautious luxury buyer.
For his part, BMW’s O’Donnell downplays the challenge. He insists premium luxury buyers “want more than just product” and factors like heritage and the somewhat intangible head-turning power of a familiar logo also count.
Hyundai is betting heritage is mattering less and less. “Now, there are the diehards who just won’t look at us,” acknowledges Marketing Director Joel Ewanick. “But there are enough others who will (because we’re) offering a value that can’t be ignored.”
Even if the established order persists, the luxury market will face some significant challenges and changes, if for no other reason than tightening fuel economy and emissions regulations, experts say.
On Sept. 15, the Obama administration unveiled a plan to improve gas mileage for cars and trucks that call for new vehicles to average 35.5 miles per gallon by 2016.
Makers like Porsche, Mercedes and BMW are pushing their diesel products, and all are getting ready to launch new hybrid-electric vehicles in the coming year. Cadillac is seriously considering the Converj, a more lavishly-outfitted version of the Chevrolet Volt, a plug-in hybrid due to debut in late 2010.
Story continues below ↓advertisement | your ad here
Mercedes, among others, is also planning a pure electric vehicle. But the challenge is finding a way to differentiate itself from more pedestrian brands using essentially the same battery drivetrain.
That’s a similar challenge for luxury makers as they downsize with such pintsized models as the BMW 1-Series, Audi A3 and Cadillac’s planned ATS. Such offerings could become the norm, suggests one-time designer and now Cadillac General Manager Brian Nesbitt. But when you are “no longer measuring luxury by the foot or pound,” he asks, how do you justify a traditional luxury price?
From top to bottom, the luxury auto market is unlikely to ever look the same again.
09-29-09, 12:43 PM
#4
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But anyway. I can see this being the landscape for many years to come as even the economic scene will take that long to get back to where it was (if ever it does). It may slowly recover but this recession has changed many things that were thought of as stable pre-recession.
09-29-09, 01:18 PM
#6
Lexus Test Driver
Nothing new here. Same history repeats: Recession, slow sales, less luxury anything, market rebounds, people get hungry for "stuff", luxury sales prosper.
History is a fine tool or I am just getting real old.
History is a fine tool or I am just getting real old.
09-29-09, 01:38 PM
#7
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09-29-09, 05:30 PM
#8
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i believe luxury makers will still find new ways to differentiate themselves. for example, making a car from exotic materials may offer benefits not possible in an economy car.
things will go way beyond a nav system and fancy seats.
cars that really 'think' and do a lot more than just A to B are right around the corner.
things will go way beyond a nav system and fancy seats.
cars that really 'think' and do a lot more than just A to B are right around the corner.
09-29-09, 06:14 PM
#9
Lexus Fanatic
i am glad other auto makers are bringing value
that just means Lexus will have to stop being complacent, and start bringing new cutting edge high tech crap to their cars if they want to continue to be called a luxury brand.
it would be a shame if a run of the mill hyundai surpassed a Lexus in features.
My 3GS is pretty much a joke with the casette deck, and low resolution console screen, and no other bells and whistles
that just means Lexus will have to stop being complacent, and start bringing new cutting edge high tech crap to their cars if they want to continue to be called a luxury brand.
it would be a shame if a run of the mill hyundai surpassed a Lexus in features.
My 3GS is pretty much a joke with the casette deck, and low resolution console screen, and no other bells and whistles
09-29-09, 06:42 PM
#10
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i am saddened by the direction the US government is pushing automakers... i love big cars with a lot of horses, and am willing to pay extra to have one and drive one. these eco-boxes will probably kill my passion for cars. lame.
09-29-09, 06:54 PM
#11
09-29-09, 08:11 PM
#12
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i am glad other auto makers are bringing value
that just means Lexus will have to stop being complacent, and start bringing new cutting edge high tech crap to their cars if they want to continue to be called a luxury brand.
it would be a shame if a run of the mill hyundai surpassed a Lexus in features.
My 3GS is pretty much a joke with the casette deck, and low resolution console screen, and no other bells and whistles
that just means Lexus will have to stop being complacent, and start bringing new cutting edge high tech crap to their cars if they want to continue to be called a luxury brand.
it would be a shame if a run of the mill hyundai surpassed a Lexus in features.
My 3GS is pretty much a joke with the casette deck, and low resolution console screen, and no other bells and whistles
1. Lexus is the first Japanese brand with an IS-F to fight the M3 etc
2. Lexus has F-sport parts
3. Lexus has more hybrids than the other luxury marques combined
4. Lexus vehicles continue to debut with world firsts.
5. Lexus enform, remote touch, LEDs becoming more available, etc
As for the GS, it offers best in class acceleration and economy with the 535 in the GS 350. The GS450h is a techno marvel and 4 years later STILL THE ONLY ENTRY IN CLASS.
6. The LF-A is debuting, the first Japanese luxury exotic supercar.
Seriously WHAT ON EARTH are you talking about?
09-29-09, 08:56 PM
#13
Lexus Fanatic
Some of this was inevitable. In today's world, with finite oil resources, tightening CAFE/emissions rules, increasing traffic congestion, and limited parking space, you simply can't have millions of single people running around any more in big SUV's and luxury cars, driving alone. There are some in the public resisting this trend, but reality is going to force it.
09-29-09, 09:06 PM
#14
Lexus Fanatic
That's just what I thought, too, back in the 1970's, when CAFE, emission rules, higher insurance rates, and increasing congestion on the roads killed off many of the big luxury and muscle cars I liked so fondly in the 1960's. But I learned, back then, that there was a lot more to cars than just size and power. Eventually, I became enamored of car-based AWD....something that didn't even exist back then. The 70s and 80s also brought a host of major vehicle improvements, like electronic ignition, electronic fuel injection, computer controls, clearcoat paint, disc brakes, rack-and-pinion steering, and many others. So, the moral is: don't always keep looking backwards......you never know what lies ahead, or how you are going to like it.
09-29-09, 09:54 PM
#15
Lexus Test Driver
