straight cash homie
Memory snapshots from Detroit auto shows of my youth: Datsuns parked on candy-red carpet, begging my dad to buy a Renault Alliance (wisely, he bought another Oldsmobile), a Bitter SC, panhandlers in the stairways at Cobo Hall, steam pluming from the manhole covers in a dark, frigid city that the sun seemed to have forgotten. The cymbal crash accompanying the transformation of Detroit’s little January dealer show into the North American International Auto Show in 1989 was the debut of the Lexus and Infiniti luxury divisions of Toyota and Nissan, then doing a good job of plowing Detroit under. Along with Acura, Honda’s upscale division that launched in 1986, this trio of hot rookie brands intended to turn the lights off in Germany next. That was 25 years ago, in case you need another reason to feel old. And it didn’t quite work out as planned, as the sales figures for calendar-year 2013 prove. The bestselling luxury brand in the U.S. last year was Mercedes-Benz, which finished just ahead of BMW by selling about 334,000 vehicles. Mighty Toyota’s luxury division, which once rocked the Germans on their heels with that first sublime LS400, finished only third, with around 274,000 sales. Acura did almost the same business as Audi, or about 165,000 sales, while Infiniti sucked wind at 116,455, joining Lincoln and Volvo as the only luxury brands to actually drop in volume from 2012 despite a resurgent economy and rising car sales overall.
Each of Japan’s luxury makes has its problems. Big L’s trouble is that its sales are heavi*ly concentrated on only two key moneymakers, the ES sedan and RX crossover. The two have been the left and right legs of Lexus for years, and they contributed 64 percent of its 2013 volume. Though dependable showroom performers, the ES and RX are conservative products tied to one generally older buyer demographic. And they only come in one flavor. Unlike, say, Mercedes, which reaches different buyers with the same cars by offering versions ranging from budget taxis to muscled-up AMGs, Lexus churns out the same basic ES and RX for the same aging baby-boom buyer year after year. The recent push for new buyers with the rear-drive IS and its F Sport trim are laudable efforts, if halting and late. Last year, the BMW 3-series outsold both the Lexus IS and ES combined.
Infiniti will long suffer the stigma of having been a dumping ground for rebadged home-market Nissans with aging hardware. The excellent G35/G37 notwithstanding, it has been in semi-crisis mode for two decades as various vehicles have fallen flat. The latest play by Infiniti prez Johan de Nysschen, who was stolen from Audi in 2012, is to replicate VW-Audi’s relational structure by making Infiniti more independent. The first initiatives: Move Infiniti’s headquarters out of Japan to Hong Kong; rebadge all the vehicles with Q, the alphabet’s least-sexy letter (Quack? Quirky?); and replace Infiniti’s one product that seriously competed with German rivals, the G37, with the Q50, an overly electrified mediocrity. But it’s still early days for Infiniti Rescue Plan No. 347.
Acura has been its own worst enemy. Its star car, the TL, once stole customers from up and down dealer row. Then Acura’s designers discovered psychotropic drugs, causing them to confuse modern vogue with gangster gruesome. However, Acura’s biggest blunder was killing off its Integra/RSX, the car that gave the brand both performance credibility and a ladder up for younger buyers. Today, the MDX and RDX crossovers basically carry the franchise while what survives of Acura’s car line is a trio of so-so sedans.
Meanwhile, the Germans have thrived. Certainly, no opponent is more dangerous than one who is cornered. Unlike the Japanese luxury brands—or even quasi-independent Audi—BMW and Mercedes are not just marketing divisions of larger carmakers. If they fail, there’s no mother ship to shovel in money. If C-classes and 3-series don’t sell, the people in those plants and design studios and boardrooms can’t just swap hats and continue on with their day. In Munich and Stuttgart, this is a fight not just for incremental volume or extra profit, it’s a fight for survival.
The Germans have one big advantage: heritage. Which means they already hold the high ground in the market. However, defending it has been costly. BMW has grown by expanding to 11 model lines, not counting Mini, and more are on the way. Mercedes sells more than a dozen lines in the U.S., from the CLA to the S-class to the Sprinter. Meanwhile, Lexus has 11, Infiniti, 8, and Acura just 7. The Germans have run their engineering departments ragged trying to plug holes and tap new veins.
Through it all, Germany GmbH has stayed relevant by being German, which means sophistication and performance not achievable by relying on the parts bins of mass-market cars. There will always be buyers who don’t think that’s worth the price premium. But, as the last 25 years have shown, there are many who will pay it in times when authenticity is rapidly becoming the rarest luxury.