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Thursday
Jul242014

Downsizing of Luxury

Agreed during these Dog Days of Summer we are being eclectic, and spending some time with The Colonel (yes...who is this individual).

Lets get The Colonel's thoughts on the downsizing trend in the luxury segment.

Q: Colonel, good morning you look refreshed, and ready for action.

A: Thank You and the "smoke" is not a requirement.

Q: Is there a downsizing trend in the luxury segment,

A: The thought vector is that Millennials have less financial resources than their predecessors, and if vehicles are down sized they will increase their appeal to Millennials (Gen Y).

Q: Is there an element of ambition on the part of manufacturers.

A: Sure there is, on the premise of covering every niche and sub niche of the luxury market.

Q: You mentioned "premium economy" a few months ago when referring to the downsized vehicles in the luxury segment.

A: Yes...I did, at some point they are no longer luxury vehicles, its a luxury brand extending their brand in non luxury sub niches.

Q: This can easily become complicated, and fraught with varying opinions from a variety of pundits.

A: It sure can, any luxury vehicle be it a sedan or utility version needs a serious "f#$k you" factor to command a luxury price. Usually it was bigger engine, bigger size, more technology, and so on.

Q: When you down size you dilute the "F#$k you" factor, dilute the price, and extend the brand into uncharted territory.

A: Precisely, although everyone seems to have all the answers.

Q: Some of these new down sized luxury vehicles are selling very well, which reinforces the folks that have all the answers.

A: Yes, they are, there is always an initial pent up demand, and we are in the initlal phase.

Q: There are some manufacturers exploring the middle of the luxury segment.

A: Yes, there are the Koreans are a good example.

Q: Is it possible that a Millennial will lease a down sized luxury vehicle from an established brand, and subsequently progress to a Korean brand.

A: Who knows, when dealing with "premium economy" there is an element of uncharted landscape for all the stakeholders.

Q: The idea is to start them in "premium economy" and move them upwards with time.

A: That process was initiated by Alfred Sloan 100 years ago, lets start them with a Chevrolet, move them to a Pontiac, then to Oldsmobile, then Buick, and then Cadillac. Or lets start with a Ford, then Mercury, then Lincoln. Or lets start with a Plymouth, then Dodge, then Chrysler, then Imperial.

Q: Fascinating, that thought vector has been around for generations, and we all know that certain makes are no longer part of the automotive landscape.

A: Precisely, there are risks in filling every niche and sub niche. To alleviate some of the risks the premium economy models are assembled in lower wage areas of the planet.

Q: An established luxury brand that has the top of the market covered, and is now delving in "premium economy" has the entire luxury segment, niche, and sub niches covered. 

A: Absolutely, on a spread sheet, power point, presented by MBA's it all looks good, and better yet invincible, its a win, win, win.

Q: We sense some skepticism on your part?

A: The premium economy, entry luxury, and mid luxury will become increasingly competitive, with diluting brand loyalty.

 

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