The day could be fast-arriving when a new breed of car buyer
considers a new generation of cars, and wrestles with a choice something
like: "Hmmm, $30,000. Should I get that loaded Ford Focus, or this new
mini-size entry BMW?"
Absurd? Not necessarily.
brands already are making a living in the U.S. on their smaller models -
BMW's 3-series is the best example. Now, they're easing more into the
compact- and even subcompact-size market segments and have begun to show
teaser versions of remarkably small cars on the auto show circuit.
the same time, mainstream automakers - Ford Motor premier among them -
are adding equipment to their smaller cars and trying to boost the
prices. Detroit makers, especially, hope to increase small-car profits
enough to make up for losing some of the huge earnings they've gained
through the years from big trucks and SUVs, which are less popular now.
Thus, the luxury brands' move down in size and price is a direct threat.
more and more will decide whether they value a premium brand name
enough to sacrifice size and possibly features they could get for the
same price on a larger, well-equipped, non-luxury-nameplate car.
a weird area. Absolutely it puts a ceiling on what mainstream brands
can charge," says industry expert Jim Hall at 2953 Analytics. At the
same time, it's treacherous ground for pure luxury brands. A very small
car that's relatively inexpensive "may not work, and taint, or
depreciate, the value of the luxury brand by making it less exclusive."
Los Angeles Auto Show, which begins with press previews on Wednesday,
will host debuts of several high-end and mainstream small cars,
illustrating the industry's battle for dominance in the fuel-efficient
Ford thinks that design and execution, rather than the status of a high-end badge on the hood, can carry the day.
automaker says its redesigned, 2013 Fusion midsize sedan, for example,
has been luring a notable number of trade-ins from Acura, BMW and Audi
owners. Half of Fusion's early sales are to non-Ford owners, and most of
those are former luxury brand customers, the automaker says.
to the top version of the Fusion, the Titanium model, Frank Davis,
executive director of Ford's North American product programs, says, "Our
Titanium buyer is the luxury buyer - the Acura, the Audi, the BMW
The Fusion Titanium midsize starts at about $31,000 and
can tickle $40,000 loaded with options and fitted with optional
all-wheel drive. A size down, Ford's Focus compact has a Titanium model,
too, for nearly $30,000 with all options.
BMW's 128 small coupe
starts at about $32,000 by comparison. And a new line of smaller BMWs is
in the wings, based on a front-drive chassis shared with the brand's
Mini models. Those might be designated 1-series models, making the
current 1, in effect, a 2-series.
Name aside, a front-drive BMW would be radical for the brand with rear-drive religion.
bit embarrassing, too, as BMW a few years back made fun of front drive
in ads. BMW, in fact, acquired the British-based Mini brand precisely to
give the German maker entree into the front-drive subcompact segment
without resorting to a front-drive BMW-branded car.
Such a switch
would be a dramatic demonstration of how desperate the high-end makers
are to play in the lower end. They'll need to in order to meet U.S.
mileage rules that require a company's vehicles to average 54.5 mpg in
2025, about twice the current level. And it's a way - risky for the
image, perhaps - to boost sales.
A-class subcompacts rolling out in Europe are U.S.-bound and likely to
spawn a variety of spinoffs as even the brand known for its big, stolid
sedans shoulders into the mpg-oriented small-car segment.
Audi has a line of A1s, about Mini Cooper size, that it has said will include a U.S. version in the future, but timing's murky.
luxury market has become a blur," says Art Wheaton, auto expert and
industry education specialist at Cornell University. Already, in his
view, "There's small difference between Honda and Acura. Maybe nicer
Honda bristles at such characterization, but it's
undeniable at its Acura brand's lower reaches, where the ILX entry sedan
is a jazzed-up Honda Civic. That's well known, and effectively ensures
that Honda couldn't successfully field a high-end Civic.
Some elements that will affect how the battle plays out between low-luxury and high-mainstream models:
Regional preferences. "In areas such as L.A. and New York and
big metropolitan areas, which are image-driven, the entry-luxury models
do pretty well," says Jesse Toprak, industry analyst at TrueCar.com.
Though it's less so in Middle America, the coastal ethic "puts a premium
on the brand. People want to be seen in a BMW, in a Benz. Even though
from a value perspective, you're better off getting a non-luxury
That presages success for the new low-luxe entries because of the status badges they wear.
believes automakers are expecting regional strength rather than
nationwide success and have factored that into their business plans.
"It's mainly to get people into the brands" in areas where they're likely to stick with those brands, he says.
Luxury backlash. "There are buyers who don't want premium cars
because they come with premium maintenance, and a premium image that
some people don't want," says Rebecca Lindland, director of research at
consultant IHS Automotive.
Research by General Motors' Buick unit
- which considers itself a luxury brand - found a deep pool of
potential buyers who "were unpretentious. They were successful, could
afford to buy any car they want, within reason. But they didn't want to
make an overt statement," says Craig Bierley, Buick's marketing chief.
hopes to be a home for those people it sees as luxury buyers in
disguise, but others, such as Lindland, see them as more likely to opt
for well-equipped mainstream models.
Premium purgatory. Lower-end models from luxury brands risk
being considered not-quite-real-luxury; more like "premium." And that,
at least according to Bierley, is "where brands go to die."
either a luxury brand and appeal to those customers on the level of
features and treatment they want. Or you don't. There's nothing in the
middle," he says. That's why Buick decided to define itself as a luxury
brand and match the way those brands operate - emphasizing leasing, for
On the other hand, he sees no contradiction between
small size and big image. "Luxury doesn't have to be big. Luxury is
really a personal thing, how a customer defines it," Bierley says. If
they are done right, the new small low-luxe models can upset entirely
"the perception that if it's small, it can't be luxury."
Will size actually matter?
the end, whether the small, high-mileage, highbrow, low-luxe cars have a
future in the U.S., and whether they threaten some mainstream brands'
plans to get rich on high-end models, might depend on history more than
Americans' historical preference has been and continues
to be for bigger cars, for their greater comfort and ability to swallow
the country's vastness in relative ease.
"No American is asking for a smaller car," says Hall, whether it's a silk-stocking brand or not.
"Americans want better fuel economy" and car companies that confuse the two - mileage and size - do so at their peril, he says.
first manufacturer, luxury or otherwise, "that can make a midsize
sedan, or one perceived as midsize, that gets 40 real-world miles per
gallon on the highway, without being a hybrid, that's probably the guy
who'll own the market."