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NEW YORK — The shifting postrecession definition of luxury, Generation Y’s increasing influence and the counterintuitive success of the Tesla Model S are compelling auto makers to rethink how they define the segment, executives from Mercedes-Benz, Audi, Cadillac, Infiniti and Hyundai said Monday.
Appearing on a panel at the 2014 Automotive Forum addressing the trend toward smaller, less-expensive luxury cars such as Audi’s 2015 A3 and the 2014 Mercedes CLA, the executives differed on cause and effect but agreed that car buyers’ expectations of what a luxury car represents are fundamentally changing.
The recession was cited as the biggest factor in making cars like the CLA — which sells for around $30,000 and is a runaway success — plausible entrants into the category, which traditionally started at a price point $20,000 or more higher. The downturn, the panelists said, has (for now) made conspicuous consumption unpalatable even to Americans of means.
“All research shows a different mindset since the recession,” said Michael Bartsch, vice president of Infiniti Americas. “It’s shifted to self-reward — what’s on the inside, not the outside.” Bartsch drew the comparison of a coat lined with fur but trimmed with something less luxurious. “Right now, self-reward is completely socially acceptable,” he said. “Bling is not.”
Uwe Ellinghaus, Cadillac’s chief marketing officer, said that high price no longer automatically confers status. “More and more, people no longer care about whether you can or can’t afford a car,” he said, a price-status continuum that Cadillac helped perpetuate until the bottom fell out of its business model when Baby Boomers abandoned the brand for sportier, better-handling cars from Mercedes and BMW.
The millennials, whose indifference to traditional automotive marketing continues to bewitch auto executives from Dearborn to Stuttgart, are also less concerned with status than whether or not a car will mesh seamlessly with their iPhones. “The first thing my kids look at in a car is the infotainment system,” said Bartsch. Added Scott Keogh, Audi of America’s president, “Millennials are about design. Price becomes less of an issue. It’s the car as the extension of me, of my life.”
Lowering the entry point for the luxury car market with the CLA has been a boon for Mercedes in attracting a younger demographic, said Steve Cannon, president and CEO of Mercedes-Benz USA. “In one fell swoop the CLA brought us an audience 10 years younger, opening our brand to folks we’ve never seen before,” Cannon explained. Younger buyers, especially, he said, want to associate themselves “with brands that stand for something. If the price starts at $60,000, that’s a price point they can’t reach. It’s time for folks to get off the pedestal. Mercedes-Benz needed to be approachable.”
The success of Telsa’s Model S — especially the warm embrace that Hollywood tastemakers have given the car — has not gone unnoticed; Tesla gave Cadillac a comfort zone in which to launch its new ELR plug-in hybrid earlier this year with a heavy push inside Hollywood.
But the panelists felt it was less Tesla’s green cred than its clean-sheet technology and lines derived from classic luxury sports coupes like Aston Martin’s DB9 that won over luxury buyers formerly enthralled with the once-bulletproof status of the BMW and Mercedes brands.
“The success of Tesla is reassuring,” said Cadillac’s Ellinghaus. “Luxury still works, even with an electric drive train. People do not want to give up a good-looking and good-driving car. Tesla wouldn’t have been a success if they had given up on those qualities.”
Cannon said that the CLA’s surging sales were indicative that a luxury brand like Mercedes could now loiter at the lower reaches of the segment without tarnishing the image of more expensive Mercedes models like its flagship S-Class, which sells for $70,000 more.
“At the end of the day, people surround themselves with things they love, whether it’s a Mercedes-Benz or a $5 latte,” Cannon said. “As long as the underlying value is there, those indulgences will always be there if your brand stands for substantive things.”
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