Report: More Masses Mull Luxury Cars

LONDON--Luxury brands, once restricted to a privileged few by high prices, are attracting new buyers in the United States through new “entry level” models, according to Just-Auto.com, a UK-based Internet site.

Entry-level luxury cars, priced mostly in the $30,000 to $40,000 bracket now account for nearly 70 percent of the U.S. luxury car market, Just-Auto.com says, with brands like Mercedes-Benz and Jaguar “aggressively ramping up production” of models much more affordable than before.

Thanks to a strong economy and the “baby boomers” of the 1950s and 1960s reaching their high-earning 40s and 50s, about 1.6 million luxury cars will be sold in the U.S. this year, says industry expert Susan Jacobs of Jacobs & Associates.

That gets close to the all-time record of 1.66 million in 1986. It’s good business for the car makers who make $8,300 profit on the average entry level luxury car sale, almost double the industry average of $4,700 on cars and trucks.

Just-Auto.com says that automakers are also targeting more affluent households. Ten years ago, the richest 20 percent of households accounted for 45 percent of spending on new automobiles but today they account for 60 percent of the spending and purchase 40 percent of all new cars and trucks, according to General Motors.

Such numbers and profits are an incentive for manufacturers to bombard the entry level luxury market with new models, many designed to take on the acknowledged performance king in the class, the BMW 3-Series, Just-Auto.com says.

The all-new C-Class sedan, starting at “an un-Mercedes-Benz-like base price of $29,950,” will be followed next fall by Jaguar’s Mondeo-based X-Type at around $30,000.

Just-Auto.com says Jaguar has ambitious plans for the X-Type, expecting the model to double its US sales to nearly 95,000 cars in 2001 and, worldwide, to quadruple production from roughly 50,000 in 1998 to 200,000 in 2002.

Such recent entries as Honda’s Acura 3.2 TL, Lincoln LS, Volvo S60, Lexus IS 300 and a redesigned Oldsmobile Aurora will compete for their own share of the market, the site says, noting that industry sources suggest Cadillac will launch a redesigned rear-wheel-drive Catera (currently built by Opel as an Omega derivative) in 2002.

Luxury makers with heritage and reputation have a built-in advantage, according to analysts. Consumers might be more attuned to a “designer label” on automobiles than ever before.

“Mystique is a critical component in this,” says Art Spinella, vice president of CNW Marketing Research. “One of the things we find is that attitudes towards these brands are already set before people even see or drive the vehicle.” Once consumers buy that first Lexus or other luxury model, they often become loyal customers, unwilling to switch to another brand, he said.

Chris Seidel, spokesman for Ford’s Premier Automotive Group, which includes Jaguar, Volvo, Lincoln and Aston Martin, said that image can play as big a role as quality or performance. “These cars are all excellent in quality, so you differ by having a strong brand and an emotional attachment with buyers,” he said. “More and more people are buying a brand and expressing their lifestyle through them.”

Lincoln has scored a sales success with its LS, which mimicked the European sport sedan formula of rear-wheel drive and confident handling. Yet a relative lack of image and performance has made it difficult for U.S. automakers to be taken seriously for entry level luxury cars, especially by younger buyers, the site says.

While Cadillac and Lincoln once had luxury reputations that were the envy of any automaker, both managed to fritter them away by sticking for too long with huge, pillow-soft sedans that increasingly appealed only to older drivers, the site says.

Last year, Mercedes stole the U.S. luxury sales crown from Lincoln, a historic first for an import automaker. And Lincoln’s single year at the top in 1998 ended Cadillac’s 61-year run as the best-selling luxury brand in America. Mercedes has tripled its U.S. sales in six years and, with Lexus, is again battling Lincoln and Cadillac for the 2000 sales crown.

The site says one paradox for automakers is that luxury cars depend on exclusivity for part of their appeal. Once a Jaguar or Mercedes is parked in every other driveway, some analysts feel their air of exclusivity could begin to get thin. In addition, budget luxury cars that skimp on quality or features could cheapen the hard-earned reputation of a luxury nameplate.