||$30,000 is the New Luxury-Car Hot Spot
There's a new price battleground -- $30,000 -- for luxury-car makers as they chase younger buyers with small front-wheel-drive vehicles that are sliding down into mass-market territory.
Mercedes-Benz, BMW, Audi and others are going after the 75 million 30- to 40-year-olds who are forcing "the biggest changes the automotive industry will face," said Bernie Glaser, head of marketing for Mercedes-Benz USA. "They have big expectations for products and brands."
Those buyers cannot and will not pay the $40,000-plus sticker prices some of their status-conscious baby boomer parents can afford, industry researchers say. Yet they demand "attractive highly styled cars and the right technology," Glaser said.
Nonluxury brands are likely to feel the heat from new models such as the Mercedes-Benz CLA, which was shown to journalists just before the recent Detroit auto show.
"They could eat into the mass market," said IHS Automotive analyst Rebecca Lindland. "A $30,000 Mercedes -- and they will cap the car at $35,000 -- is an incredibly competitive price point, even against the higher-end Honda Accord."
The young shoppers targeted by Mercedes, BMW and Audi want fuel-efficient four-cylinder engines -- the engines most luxury brands shunned for the United States until two years ago -- without compromised performance.
Many of the cars will be front-wheel drive, although they'll perform like luxury vehicles, Mercedes-Benz and BMW executives say. All-wheel drive will be optional on many models.
"Our small cars will drive and feel like BMWs," said Paul Ferraiolo, manager of product planning and strategy for BMW of North America.
Mercedes-Benz is leading the charge with the fwd CLA, a sleek sedan with coupe styling that will debut this fall. It's the first of three new compacts priced at about $30,000 that Mercedes will bring to market by early 2015.
BMW has announced it will offer a 320i sedan starting this spring for $33,445, including shipping -- $4,300 lower than today's entry-level 328i sedan.
"It is a full-blown 3 series," said Ludwig Willisch, CEO of BMW of North America. "We wanted a clear offer to attract younger people who enter the brand."
While BMW says the average 3-series buyer is 46, the 320i will appeal to 30- to 40-year-olds, said Victor Leleu, 3-series product manager.
"They want the 3 series, and it is a hard car for people who are in their first job to attain," he said.
In August, BMW introduced the X1, a compact crossover with rear-wheel drive or optional awd that starts at $31,695, including shipping. It's small -- 175.5 inches long -- but not as small as BMW's new fwd family of cars that starts to arrive in 2014.
The first of those models will be a wagon based on the Active Tourer concept that debuted at the Paris auto show in September. BMW won't specify what other fwd models are in the pipeline but says the platform will be used for at least 12 new or replacement vehicles for BMW and Mini.
Early next year, Audi plans to introduce the new A3, a fwd four-door sedan smaller than the A4 that is meant to compete with the BMW 3 series. Audi's Q3 crossover also is coming next year.
The A3 will be priced under $30,000; and if Audi continues its aggressive pricing strategy, it will position the Q3 below BMW's X1 and bring it in at $30,000, or just over.
Cadillac has entered the fray with the ATS compact sedan that went on sale in September with a base price of $33,990 with shipping.
This summer Infiniti's volume-leading G37, which starts at $38,255, including shipping, will be reborn as the Q50, using the G's existing 3.7-liter V-6. But Infiniti later plans to introduce a smaller-displacement turbocharged four-cylinder optional engine derived from the Mercedes Benz C-class four-cylinder.
Infiniti's more ambitious move will come in the next two years with the introduction of a smaller, lower-priced vehicle that will become the brand's entry point.
Mercedes-Benz will follow up with the GLA compact crossover in mid-2014 and the B-class electric sedan in early 2015. The CLA has collision prevention, attention assist and stop-start as well as the mbrace2 cloud-based entertainment and communications system that offers concierge services and links applications with smartphones as standard equipment.
Lindland of IHS says the $30,000-or-so Mercedes-Benz offerings could lure mass-market brand customers.
"You could argue that people will say, 'For just a little more money I can buy a Mercedes rather than the touring version of the Accord that goes for $35,000,' " she said. "It presents a threat to the mainstream marketplace. And it is becoming more socially acceptable to be in a luxury vehicle."
Still, outsiders wonder whether a $30,000 Mercedes-Benz will damage the brand's image. Mercedes-Benz USA CEO Steve Cannon answers: "The only way to dilute the brand -- just ask Jaguar about the X-Type -- is to do it wrong. That is why we held Stuttgart off for many years and said we will not bring the (first-generation) A and B class because those vehicles did not fit the Mercedes-Benz brand. They were small, boxy and utilitarian."
He says a bigger danger than brand dilution is not bringing new buyers into the brand.
Going more mainstream could be a challenge for some luxury brands, said John Mendel, executive vice president of American Honda Motor Co.
"You can de-content too much," he said. "I don't know if people buy a brand because it's de-contented -- if it's Cartier but it's not real silver," he said. "There's a lack of genuineness if you err on the side of being the Ferrari of Costco."
(Source: Automotive News, 01/21/13)
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