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What becomes a luxury car the least?

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Alex Law
In a musty corner of England a few years back, I took a tour of the factory where Volkswagen's Bentley division builds its ultra-luxury cars.

The Brits had spent a large number of Deutschemarks to revitalize the ancient facility, bringing it into the 20th Century just before it ended.

Anyway, as the tour of the woodworking facility was coming to a close, one of the supervisors was telling me his private vision for the new plant. Owners often visited the plant to see their vehicles being crafted into life by guys called Roger and Nigel, it seemed, and after their visit to the wood shop the owners always had to have the sawdust brushed off their Savile Row suits.

For this particular supervisor, this was a sign that Bentley had no control of its quality control, if you will. For him, there could be no better use of all that German money than putting in an air-cleaning system that did away with the sawdust and need for that valet service.

I felt then and I feel now that doing away with the post-tour brushing was a mistake. My thought is that it's one of those small grace notes that leaves a big impression, particularly on guys who probably wished that having a "gentleman's gentleman" to prepare one's clothes was still acceptable behavior.

Having a guy with a brush and a subservient attitude look after you like that is precisely the kind of thing that helps justify spending an extra $150,000 for your car, since it gives you another story to tell your friends at the club.

As eccentric as this story may seem, it helps clarify some of the key questions of the luxury vehicle business today -- what represents added value, what's a "premium" car, when does a brand stop being "exclusive," and how do we justify charging more for a vehicle?

This is not an academic exercise. The companies that sell cars with house-size MSRPs are facing more competition than ever, and the companies that have leaned heavily on the "exclusive" excuse for over-priced vehicles are now going downscale with new models.

For the time being, let's forget about the big-ticket, small-volume firms like Bentley and focus on the firms that want to sell more cars in Canada than Suzuki and still be called "exclusive".

That would be Audi, BMW and Mercedes-Benz, which are all bringing in new entry-level models. The A3 from Audi and the B-Class from Mercedes are already here, and the 1-Series from BMW is due sometime in 2006.

While these small cars will certainly not be cheap or inexpensive, they will be less substantial than their older siblings and they will bring the qualifying financial level down to an a new low.

The former point will make a difference in the overall perception of the brands, since the impression of gravitas that all Mercedes models previously made will be missing in the B-Class, for example. This will not be such a problem with the A-3, since Audi's reputation is more flexible than Mercedes-Benz's, and BMW might be able to put out a car that delivers that sports-performance feel.

In any case, tinkering with your brand's essence is a very risky thing to do, as countless companies have learned to their regret. Anyone want a New Coke?

On top of that, relentless competition has created an entire universe of cars that are of excellent quality with better-than-ever performance levels and ever-growing lists of standard equipment. In other words, the overall package that could once only be had in a big-ticket vehicle is now available right across the price structure.

Beyond the technical difficulties inherent with bringing out cheaper and less expensive models and having them live up to their familial status is the issue of "exclusivity."

A large part of the appeal of big-ticket brands is that they absolutely show you to be in a higher income bracket than most people, and limit ownership to people of similar economic status. By offering cut-rate new models bearing those upscale badges, the companies risk lowering the value of every model in the family.

For sure this won't matter at first, as people who could no longer afford to buy Audis, Bimmers and Mercs rush out to buy the new models. Sales will undoubtedly go up, and the marketing executives will gloat.

But one day, inevitably, the folks at the other end of the price scale -- the ones paying two, three, four or even five times as much for their German vehicles -- will notice that the new hire for the IT department has a new model bearing the same brand, that their secretary is in line in front of them at the dealership service department, that vehicles with the same badge are more common than econoboxes. That's when they'll start to reconsider the "exclusive" nature of the brand and maybe consider something else.

When this will happen and where those consumers will turn as a result is not known, but there's little doubt that it will happen.
Alex Law
Alex Law
Automotive expert