The price point battleground is key real estate in the battle for vehicle sales. If the price is too high, sales will suffer as fewer consumers will buy, while if it’s too low, the profit may be too small. According to the most up-to-date market research, $30,000 may be the new price point for luxury vehicles, as desired younger buyers are buying front-wheel drive luxury brands around that price point, making them more mass market.
Thirty- and forty-somethings force market change
Luxury automakers ranging from Mercedes-Benz to BMW and Audi have their sales sights set on the 75 million 30- to 40-year-olds that are appearing in the U.S. vehicle consumer market. Mercedes-Benz head of marketing Bernie Glaser sees the shift as being among the “biggest changes the automotive industry will face.”
Consumers take the Goldilocks stance that $40,000-plus (common among luxury vehicles) price point is too much, but still demand looks, style and the latest technology, according to Glaser. As luxury models drop in price – such as the Mercedes-Benz CLA that was recently shown at the Detroit auto show – non-luxury brands will feel the sting of lost market share.
“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.”
Making luxury a good four-cylinder word
Mercedes-Benz is leading the charge of new, smaller luxury vehicles with four-cylinder engines. The CLA is a sleek sedan with coupe styling, and it will be available at U.S. dealerships by fall 2013. BMW’s 320i sedan will hit dealers this spring with a new luxury vehicle price of $33,445. That’s $4,300 lower than this year’s entry-level 328i sedan. In early 2014, Audi plans to introduce a new A3 FWD four-door sedan that’s smaller than the A4. At under $30,000 and packed with features, the new A3 is sure to provide major competition for the BMW 3 series.
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Even Cadillac is on board for lower prices on luxury vehicles. Its ATS compact sedan went on sale in September 2012 with a base price of $33,990.
The dangers of brand dilution
While automakers are looking to bring new buyers to luxury brands via lower price points, some critics note that automakers should be worried about watering down their most exclusive brands. John Mendel of American Honda Motor Co. sees the mainstream shift as a significant challenge for luxury vehicle brands.
“You can de-content too much,” Mendel 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. There’s a lack of genuineness if you err on the side of being the Ferrari of Costco.”
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