Luxury Brands And Market Realities In The United States

"PS9" (PS9)
11/04/2015 at 21:04 • Filed to: None

‘Beat the Germans’. If you ask an enthusiast what it would take for a luxury brand to gain credibility here, this would be their answer. RWD. V8s, V10s and V12s. World Class racecar handling. Sick ‘ring times. You cannot compete with the Germans without those things, and your results in the market will surely reflect that if you try...right? Not so fast.

This is a picture of the entire vehicle market in the United States, in order of October 2015 Year To Date Volume. !!!error: Indecipherable SUB-paragraph formatting!!! . I’ve taken the liberty of extracting the luxury brand-related data. What follows is a picture of luxury brand performance in the United states.

These are my takeaways from this.

The third best selling Luxury Marquee in the United States is...Buick. RWD, V8 power, excellent Handling, bespoke engines and chassis’; these are the things you cannot get from this marquee, yet they they are ahead of Lexus and handily beating Audi. If you look at their lineup, you can see it’s full of Also-rans. Every car they sell is represented somewhere else in GMs portfolio. That should be poisonous to a Luxury brand, but Buick is unlikely to face punishment for this. Between 2012 and 2014, !!!error: Indecipherable SUB-paragraph formatting!!! They are accelerating. We can also see why there is not and likely will not be a RWD performance Buick in the line up; their position in the market is strong enough for such a product to threaten BMW, Mercedes, Audi...and Cadillac.

Acura is another poster child for the ‘See what happens when you don’t do as the Germans?’ argument. They may have failed to make a RWD V8 M5 supersedan competitor, but being right on Audi’s heels shows why they have not produced such a vehicle; no one who buys Acuras wants that from them.

Almost no one here would throw the ‘failed luxury marquee’ label at Jaguar, but we can see here they are at the bottom of the market in the US. They’re doing everything enthusiasts say are right; RWD only line up, V8 supercharged performance, excellent interior appointments, !!!error: Indecipherable SUB-paragraph formatting!!! , competing with in-house tuner brands like M and AMG; all of this is aimed at giving Jaguar the credibility enthusiasts say a luxury brand needs here, !!!error: Indecipherable SUB-paragraph formatting!!! Their volume has been ticking up slightly though, and will probably continue after the F-Pace launch, but given that !!!error: Indecipherable SUB-paragraph formatting!!! has almost 7x their volume, they still have a long way to go.

Volvo has Comparable Volume to Range Rover and Porsche, but the sub-six figure price tag of their line up means they can’t play the low volume-high margin game like those brands can. They’re more like Jaguar with almost 5x the volume. Given that they had 86% (!) growth in volume relative to last October and the excellent XC90 launched to a great reception of buyers and reviewers alike, they probably won’t stay down here much longer. Jag needs something similar to happen with the F-Pace if they want Volvo’s volume and growth here.

You can almost cleanly see the division in business models between Luxury brands. Ones that rely on Volume (Everyone with more than 100k car volume YTD) and ones that rely on cultivating an image of exclusivity (read: Low volume and high margin). Porsche, Land Rover, Bentley, etc., make up the difference in volume by charging exorbitant prices for features. Did you know you can option out a Boxster to almost $200k? The number of folks actually shelling out that much for it are really low, but probably not zero, and each sale here is probably worth 3-4 Boxsters by itself.

We’re told over and over again that building a luxury brand means one thing and one thing only; go after the Germans. It’s a great formula for building awesome cars enthusiasts care about, but as we can see here, many in the market for a luxury car don’t really care for precise Nurburgring carving handling, RWD, and fire-breathing twin turbo V8s. Worse still; playing to the enthusiast card almost exclusively as Jaguar has done is a recipe for tiny volume and fluctuating growth, none of which you want from a luxury brand. We can see this even more clearly when we zoom in and !!!error: Indecipherable SUB-paragraph formatting!!! ;

In first place, we have an illegitimate badge-swapped FWD imposter. In 4th? Lincoln MKZ. That’s curious and critical grab in the market for a ‘failed luxury brand’ to get.

DISCUSSION (5)

Jayhawk Jake > PS9
11/04/2015 at 21:08

I don’t know why we are speculating. Surely surveys of the luxury car buyer have been done. That will tell you what people look for when they pick a marquee.

I'm going to guess that car configuration is not high on the list

bob and john > PS9
11/04/2015 at 21:10

The biggest (ironicly) problem with jag was that they didnt have a 3//C/A4 competitor or a SUV.

now that they do, i forsee them going on a massive uprise.

TheHondaBro > PS9
11/04/2015 at 21:17

I always facepalm when I read comment on Jalopnik saying all luxury car buyers only care about power and performance. That’s like saying all sports car buyers only care about comfort.

BMW and Mercedes-Benz are two of the biggest names in luxury. The fact that most of their cars are RWD and have big engines has nothing to do with their success.

And then there’s Audi, a luxury marque as popular as the aforementioned. Their cars are mostly FWD-based, and you don’t see them selling poorly.

ranwhenparked > PS9
11/04/2015 at 21:38

The luxury market seems to be breaking into two camps, or maybe it really always has been in these two camps - RWD based, sports-oriented sedans; and FWD cars that focus more on comfort and plushness. Cadillac is taking the former route, while Lincoln has been taking the latter in fits and starts.

The American luxury brands traditionally did prioritize ride quality and general comfort over everything else, but they let their designs stagnate and I think people confused that with buyers no longer wanting cushy cars when all it really meant was that buyers no longer wanted cushy cars with button tufted upholstery, opera windows, and padded vinyl roofs.

wiffleballtony > PS9
11/05/2015 at 11:00

Trying to out German the Germans ins pointless because I seriously doubt most people who want a MB or a BMW actually care about Nring times or the drive wheels. They are interested in the badge and how it makes them look successful.