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Walking the Fine Line

As several manufacturers (we will not mention names) explore "premium economy" of the luxury segment, they are walking a fine line.

All the buzz is on the freshly launched or soon to be launched "premium economy" products, the advantageous pricing, how affordable this new product is, the DNA of the manufacturer, the size of the wheels, and so on. We can keep on going, but you get the picture.

In the meantime these manufacturers have a ton and we mean a ton of lease returns (most of the product is leased) that is on a direct collision course with the new "premium economy" product.

From an idealistic perspective one could days that they have "big ones" to disrupt their own very successful business model, and its a case of constructive destruction, creativity, and innovation. Lets not forget seeking a new and refreshed customer base. 

From another perspective, one could say that they are embarking on a perilous course, augmenting their risk factor, and at some point "residual values" and "premium economy" will intersect with a degree of collateral damage.

In the meantime lets enjoy all the new product buzz, the increased sales, "premium economy" morphing into luxury, and luxury morphing into "premium economy". While residual values morph to a higher risk level.

CPO sales (the canary in the coal mine) are already signaling caution.

It will be interesting to see how it all develops when several air bags deploy, and the talcum powder from the air bags settles. 


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