McNaughton Automotive Perspectives

Last year when I was considering what new luxury segment vehicle to purchase I had an experience that I think bodes well for Cadillac.

Keep in mind that my family has a long history with European imports.  In fact the last domestic product we bought was a 1986 Jeep Cherokee, just before the SUV craze really took hold.

Since that time we have had Volvos, a SAAB, a Mercedes Benz, half a dozen Audis and a couple of VWs.  For the last fifteen years my family has been happily ensconced in a series of Audis. As great as our experience has been with our Audis (we still have 2 in our household fleet) I thought it might be time for something new.

Growing up in my household, my sons could not help but pay attention to the automotive industry and both of them love cars.  So as I went through my deliberations concerning a new car, two conversations with my sons illustrated the change that is about to take place in the luxury segment.  The first with my then 22 year old, who when told I was thinking about a Mercedes-Benz, dismissively said “don’t buy a Mercedes-Benz, that’s an old man’s car.”

The second conversation, this one with my 25 year old, didn’t demean the possibility of a Mercedes-Benz, but concluded with “Dad, you should take a look at the Cadillac CTS, I think they’re cool.”

Now it was my turn to be surprised.  I admit that I have impressed by the design direction of Cadillac and I certainly recognize that the product is greatly improved but  “cool” from a twenty five year old’s point of view?

For 30+ years we have watched the Europeans and Japanese recreate the luxury segment as the domestics lost favor.  Very few baby boomers thought of Cadillac or Lincoln as marques they wanted in their garage.  Mercedes-Benz, BMW and Lexus have been their first tier luxury brands of choice.   However, the preeminence of these brands is being challenged.

There are three reasons why the “Tier 1” luxury brands are under fire:

1. The run up of luxury segment volumes over the last 10-15 years has been extraordinary making Mercedes-Benz, BMW and Lexus commonplace. In the early nineties these brands fought to break through the 100M unit level, in 2008 each sold over a quarter of a million vehicles.  It’s hard to feel that your car is special when you see it coming and going at every intersection.
2. The recession has altered Americans’ sensibilities regarding luxury. The Wall Street Journal reporter Matthew Dolan was interviewed and commented that Americans have moved from “conspicuous to careful consumption.”  He went on to say that “the luxury of the past is not the luxury of the future.”
3. We have a new generation of luxury segment purchasers entering their high earning years and they have different perceptions of BMW, Mercedes-Benz and Lexus than their parents do.  This generation dismisses Mercedes-Benz as another generation’s car in the same way we dismissed Lincoln and Cadillac thirty years ago.  They now look at Cadillac and think it’s pretty cool.

These three factors sound to me like the recipe for a sea change.  The “prestige” marques have become too common, Americans don’t want to show their wealth in an ostentatious fashion and new buyers are open to the possibility of “new” brands.  Audi is taking advantage of this shift.  I think VW, in a slightly different way, is well positioned.

Perhaps most interesting is the possibility of a resurgent Cadillac, could it become a new generation’s marque of choice?

Tags: Audi, Cadillac, GM, luxury cars, marketing, Strategy, Volkswagen, VW

This entry was posted on Sunday, November 8th, 2009 at 5:32 pm and is filed under Strategy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.