Status among cars used to be symbolized solely by vehicles such as the Lexus and Mercedes-Benz.
But in this era of trucks, quality midpriced cars and value-conscious buyers, luxury cars no longer pack the prestige they once did. Some are struggling to attract buyers. Others are selling but aren’t substantially increasing their share of the new-car market.
Though Japanese luxury-car makers were spared tough trade sanctions last month, the outlook for the segment is discouraging, say analysts.
“It’s simply more in vogue now to be frugal,” said Dennis Virag, managing director of Automotive Consulting Group Inc. of Ann Arbor, Mich.
“The guy who was 50, making $100,000 a year, he was going to buy a luxury car,” said Eric Hood, a representative of the Dohring Co., a California-based market research consultant. “You could count on it. Today, he may drive a Suburban; he may drive a Pontiac Bonneville like (General Motors Chief Executive) Jack Smith.”
Analysts said the luxury-car segment has been flat for about 18 months. In 1994, one of the industry’s best recent sales years, luxury cars barely held their own.
Lexus, which along with Infiniti redefined the segment in the 1980s, was the only one of the eight makes in the class to suffer a decline in sales last year. But though the others had increases in sales from about 3 percent to about 19 percent, three of the eight lost market share and three others merely maintained their share. Jaguar and Mercedes-Benz were the only two to increase their market share and both are basically reclaiming lost ground.
Though a few, such as Mercedes and BMW, are in better health now than they were five years ago, the numbers suggest that the segment as a whole may face some difficult years, analysts said.
“The luxury and near-luxury market has gone from 3 percent to 6 percent of the car market in the last 15 years,” said analyst Ray Windecker of American Autodatum in Livonia, Mich. “That has absolutely plateaued . . . and I would assume it will continue that way.”
Unlike 15 years ago, Cadillac’s main competition is not just the Lincoln, nor does Lexus vie only with Infiniti and Mercedes-Benz. All must contend with sport-utility vehicles, which can offer about as much luxury as a high- dollar car and far more practicality.
There’s research that “we’ve done that sport-utility vehicles are eating heavily into the luxo market,” said Hood of Dohring. “Most people moving from a luxury car into a sport-utility vehicle probably are getting more for their money.”
A loaded Chevrolet Suburban, one of the biggest and most costly sport-utility vehicles, has a price of less than $40,000. A BMW 525i costs about the same but is generally viewed by critics as an underpowered, average luxury sedan.
And, as Hood and other analysts pointed out, the BMW can’t tow or carry anywhere near the load that the Suburban can.
“Some people are going to look at a $40,000 Lexus or Cadillac and decide that they can get more vehicle in a $30,000 Blazer or Explorer,” he said.
Many luxury carmakers including Lexus, Infiniti and Mercedes are planning sport-utility vehicles or considering them.
But that will solve only one problem, the analysts said. The bigger and more persistent challenge will be convincing consumers that luxury cars represent good value.
With so many well-built cars for around $20,000 that offer handling, good ride, decent performance and a degree of luxury more buyers are questioning whether they are getting their money’s worth in a $40,000 or $50,000 car. A $16,000 Neon, for example, offers spirited performance, a roomy interior and lots of amenities.
Even those who seek status in their cars “have to wonder whether they are getting two or three times as much car when they buy a Lexus or BMW,” Hood said.
Virag of Automotive Consulting Group agrees that luxury cars have been hurt by the value issue and sport-utility vehicles. But he also thinks that luxury consumers have changed.
Ten years ago, when the luxury-car market was surging, much of the growth was fueled by young professionals who had prospered in the early 1980s. Not only is that group older today, Virag said, many have less expendable income.
“In all honesty, a lot of people are seeking value for the dollar with kids in school, with a questionable Social Security system, with people having parents who are old and may need medical care,” Virag said. “The consumer has just turned against them.”
Some analysts say they won’t be back. As midlevel cars such as the new Ford Taurus, the Chevrolet Lumina and the Nissan Maxima continue to get better, there isn’t much reason to pay twice as much money for a luxury car that offers only marginally more features, the analysts said.
Windecker, however, said that the sport-utility vehicle market is peaking and that within another four or five years, some high-end sport-utility buyers will return to luxury cars.
“No one segment can continue upward forever, like sport- utility vehicles, and that may help rejuvenate the luxury segment,” he said. “And besides, (sport-utility vehicles) still don’t have as much status as a luxury car.”
