| 11:38 AM EST

What’s Luxury?

One of the concerns that some people have in the industry is whether “luxury” brands are becoming too common.
#RollsRoyce #Cadillac #BMW


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If we look at a definition for the word luxury, we find other words like sumptuousness, lavishness and splendor.

Which pretty much sounds like one of those scenes in a movie about some royal palace where there are billowing drapes and a lot of grape-peeling going on.

I think that in the automotive space there is a slightly different notion of what constitutes luxury.

To be sure, a Rolls-Royce Phantom is a luxury car.  But one could readily make the argument that cars that carry badges from Mercedes and BMW are also luxury cars.

That, of course, is if we think of “luxury” as being something above “mainstream.”

Chevrolet is mainstream.  Cadillac is luxury.  This is the case even if we are talking about a $60,000 Chevrolet Corvette and a $35,000 Cadillac ATS.

One of the concerns that some people have in the industry is whether “luxury” brands are becoming too common.

Realize that the term common relates to a great number of things, as in there were more commoners back in the day than there were royals.

Once there are lots of whatever, then it’s no longer as special as it was when it was rare.

This issue was raised by some people when, earlier this year, Mercedes launched the CLA in the U.S.A.  Somehow a sub-$30,000 Mercedes just didn’t sit well with those who think of Mercedes as being something more aspirational, with aspirations being measured by the size of the digits on the window sticker.

BMW and Audi have also gone down the road of the low(er)-price-point vehicle, which begins to cause concern among customers who thought that when they bought those brands, they weren’t just getting good cars, but something somewhat special.  If the kid down the street rolls up in a BMW 2 Series or an Audi A3 and you’re in a 7 of either brand, that number might not seem as significant as it once did.

One brand that has always seemed to be aspirational is Porsche.  So it came as quite a surprise to me to see that Porsche is boasting that it has increased its global sales from January to October 2014 by 14% compared to the same period in 2013.

Through October it has sold 151,500 vehicles.

As you might imagine, the sports car manufacturer’s sales in China helped account for much of the rise.  China sales were up 18.5%, to 36,021 units.

But in the U.S., even though sales were up by merely 11.2%, that translates into 39,033 911s and Boxsters and Cayennes and Panameras.

In the case of Porsche, the question of luxury doesn’t come down to a low price point per se, but the issue of exclusivity, of uncommonness, versus availability.

Would you feel as special in your Porsche if you saw them going and coming on your commute?  Not likely.

Every vehicle manufacturer wants to make more.  And to make more—as in money—it seems as though it comes down to making more—as in number of units.

But at some point, when luxury gives way to commonality, when exclusivity is no longer a key characteristic, then OEMs may all make more units but less in the way of margins.