OUR GREAT MINDS

    by Liane Angerman, Associate Editor

    Essential Luxury – When Leather and Innovation Collide

    Considering the global increase in luxury car sales, critical analysis of  the term “luxury” bears new scrutiny.

    There’s a blurry stratum lying delicately between the binaries of luxury and life’s essentials. Ponder momentarily the inhabitants of northerly climates, who endure the blinding cold winters; does  their choice of seal- or bear-skin coats launch them to the top of Greenpeace’s remonstration list? Or the billionaire tycoon who buys a fleet of corporate jets to secure his tax leverage? While wearing furs and owning planes defines ultimate luxury, a veritable rethink of luxury in our society is befitting in the competitive arena of luxury car sales.

    According to a March 2013 survey by McKinsey that took into consideration the growing demand for luxury cars in China and looked at those buying them, more than “60 percent of survey respondents regarded ‘buying a car’ as much a priority as ‘buying an apartment’ and ‘paying for children’s education.’” The survey population included a broad range of global auto manufacturers, executives, and assorted consumer focus groups that attempted to decipher China’s anticipated ability to grow its premium car market by 12 percent annually into 2020 and globally by 16 percent.

    According to the survey, these “entry-level” groups (or the “new mainstream”) of car consumers have growing annual incomes and a matching confidence that their incomes will continue to increase (McKinsey, p.7). The notable difference, between these up-and-coming groups versus the regular variety of affluent consumers (the Baby Boomers), is their notice of body style, branding, and image. Whereas the Baby Boomers placed dominance of powertrain technology and vehicle performance as priority features.

    Multinationals are the mainstay of China’s economic drivers. Eighty percent of China’s luxury car quota is German-made, along with other Euro, Japanese, and U.S. makers topping up the count. In North America, there’s a mirror of this trend occurring. With changes in technology, increases in higher education achievers, and the injection of both women and successful junior executives participating in the consumerism of autos, the image of what our forefathers once called “luxury cars” is now exhausted.

    Mercedes-Benz managed to score a strong overall in Forbes’ Luxury Car Buzz Index, savoring a 17.5 percent increase in sales in the U.S. alone in 2011. They dropped jaws that same year when they launched six new models. Their aim is becoming very obvious—with the gradual waning of luxury car sales to the Baby Boomers comes the new insurgent tide of the Y generation. The “carpe diem” optimism of the newer generation overshadows the practical approach of their parents and their grandparents.

    Each brand is competing for the same market space while striving to be unique. For example, BMW’s focus is on the driving experience, while Lexus wants its owner to appreciate the status of brand, and Jaguar seems all about the pleasure trip.

    Jaguar Land Rover Automotive, out of Britain, has recently introduced some of the most incredible technology to the global automotive market. Their unique drive selector safely ensures the car cannot accidentally drop out of gear and automatically places the vehicle in park should the driver incur a thoughtless moment. Features such as these are being termed “value added” and easily slide from what once was the luxury category to what technology so happily lends to the market now as safety and, therefore, an essential.

    The Jaguar XJ AWD features the Meridian 825 watt surround sound system with 17 speakers and a benchmark concert audio to elevate its riders to experiential decadence. The practicality of the all-wheel-drive and various other added value features, like durable leather and 3.0L V6 diesel engine option, marry well with its price point. Jag has also introduced the XF series that shares the same AWD system with the XJ and maintains its well-known consumer stature, unlike Mercedes when they decided to go Smart.

    Forbes’ survey ranked10 leading luxury car brands: Acura, Audi, BMW, Cadillac, Infiniti, Jaguar, Lexus, Lincoln, Mercedes-Benz, and Volvo. Comprised of five factors—Brand Satisfaction, Brand Momentum, Personal Promotion, Digital Media, and Traditional Media—they demonstrated how Generation Y has promulgated a new species of practicality where auto sales exist. Making more money means being able to spend more money on items with higher value (and a matching price tag). Additionally, they view their purchases as an investment in their quality of life.

    Accordingly, the McKinsley survey attested that motivated Chinese middle class first-time buyers are seeking status by upgrading to premium cars: 30 percent cited “reflection of social status” and 27 percent “self-indulgence” as valid reasons. Additional justifications at the rate of 25 percent each included: “car as a source of fun,” “car as my ‘business card’ for credibility,” “attracted by sophisticated functions and innovative designs,” and “demanding excellent service” (McKinsey, p.6).

    As technology enhances our choices and quality of life, the natural tendency is to indulge, provided the affordability factor is in place. Despite an unstable global economy, the confident societal attitudes of emerging professionals worldwide are carving out new strategies. There appears to be an ongoing race of luxury carmakers jockeying to earn top spot on the sales podium.

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