How Much Is a Car’s Luxury Nameplate Worth?

How Much Is a Car’s Luxury Nameplate Worth?


2012 Ford Fusion Titanium sedan

The day could be fast-arriving when a new breed of car buyer considers a new generation of cars, and wrestles with a choice something like: “Hmmm, $ 30,000. Should I get that loaded Ford Focus, or this new mini-size entry BMW?”

Absurd? Not necessarily.

Luxury auto brands already are making a living in the United States on their smaller models — BMW’s 3-series is the best example. Now, they’re easing more into the compact- and even subcompact-size market segments and have begun to show teaser versions of remarkably small cars on the auto show circuit.

At the same time, mainstream automakers — Ford Motor [F  Loading…      ()   ] premier among them — are adding equipment to their smaller cars and trying to boost the prices. Detroit makers, especially, hope to increase small-car profits enough to make up for losing some of the huge earnings they’ve gained through the years from big trucks and SUVs, which are less popular now.

Thus, the luxury brands’ move down in size and price is a direct threat.

Buyers more and more will decide whether they value a premium brand name enough to sacrifice size and possibly features they could get for the same price on a larger, well-equipped, non-luxury-nameplate car.

“It’s a weird area. Absolutely it puts a ceiling on what mainstream brands can charge,” says industry expert Jim Hall at 2953 Analytics. At the same time, it’s treacherous ground for pure luxury brands. A very small car that’s relatively inexpensive “may not work, and taint, or depreciate, the value of the luxury brand by making it less exclusive.”

The Los Angeles Auto Show, which begins with press previews on Wednesday, will host debuts of several high-end and mainstream small cars, illustrating the industry’s battle for dominance in the fuel-efficient segment.

Ford thinks that design and execution, rather than the status of a high-end badge on the hood, can carry the day.

The automaker says its redesigned, 2013 Fusion midsize sedan, for example, has been luring a notable number of trade-ins from Acura, BMW [BMW-DE  Loading…      ()   ] and Audi     ()   ] owners. Half of Fusion’s early sales are to non-Ford owners, and most of those are former luxury brand customers, the automaker says.

Referring to the top version of the Fusion, the Titanium model, Frank Davis, executive director of Ford’s North American product programs, says, “Our Titanium buyer is the luxury buyer — the Acura, the Audi, the BMW buyer.”

The Fusion Titanium midsize starts at about $ 31,000 and can tickle $ 40,000 loaded with options and fitted with optional all-wheel drive. A size down, Ford’s Focus compact has a Titanium model, too, for nearly $ 30,000 with all options.

BMW’s 128 small coupe starts at about $ 32,000 by comparison. And a new line of smaller BMWs is in the wings, based on a front-drive chassis shared with the brand’s Mini models. Those might be designated 1-series models, making the current 1, in effect, a 2-series.

Name aside, a front-drive BMW would be radical for the brand with rear-drive religion.

A bit embarrassing, too, as BMW a few years back made fun of front drive in ads. BMW, in fact, acquired the British-based Mini brand precisely to give the German maker entree into the front-drive subcompact segment without resorting to a front-drive BMW-branded car.

Such a switch would be a dramatic demonstration of how desperate the high-end makers are to play in the lower end. They’ll need to in order to meet U.S. mileage rules that require a company’s vehicles to average 54.5 mpg in 2025, about twice the current level. And it’s a way — risky for the image, perhaps — to boost sales.

Mercedes-Benz’ latest-generation A-class subcompacts rolling out in Europe are U.S.-bound and likely to spawn a variety of spinoffs as even the brand known for its big, stolid sedans shoulders into the mpg-oriented small-car segment.

Audi has a line of A1s, about Mini Cooper size, that it has said will include a U.S. version in the future, but timing’s murky.

“The luxury market has become a blur,” says Art Wheaton, auto expert and industry education specialist at Cornell University. Already, in his view, “There’s small difference between Honda and Acura. Maybe nicer leather seats.”

Honda bristles at such characterization, but it’s undeniable at its Acura brand’s lower reaches, where the ILX entry sedan is a jazzed-up Honda Civic. That’s well known, and effectively ensures that Honda couldn’t successfully field a high-end Civic. Links List Headlines

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