Ever since the first steam-engine automobile (capable of carrying people) was developed in 1769, manufacturers have constantly sought to improve their vehicles; not only in terms of technology, performance and safety, but also with regards to their luxury offerings. An exemplary brand is Bugatti—founded in France in 1909 by Italian-born Ettore Bugatti. Raised in a family consisting of artists (his father Carlo was an importer of art nouveau furniture, as well as a jewelry designer); Bugatti emphasized design when he strove for success in competitive motor racing.
Ettore’s attention to detail was such that Bugatti engines were hand scraped to ensure gaskets weren’t required for sealing. Rather than bolting springs to their axles, Bugatti’s springs were passed through a perfectly measured opening, which proved a far more elegant solution. Ettore famously described Bentleys—whose name has become synonymous with luxury—as “the world’s fastest lorries”, which highlights just how prestigious he believed his rare cars to be.
Other notable brands that offered unsurpassed creature comforts (along with their extravagant price tags) were Delage, Delahaye, Rolls Royce, Jaguar, Cadillac, Lincoln, Buick, Packard, Peerless, Pierce-Arrow, Marmon, Mercedes-Benz, BMW and Audi, along with newcomer, Lexus. In modern times, the three German marquee carmakers have dominated the luxury (or premium) market, but French and Korean companies are now challenging their global dominance.
China, South Korea’s closest car-manufacturing neighbor, has one of the largest and hungriest luxury car markets in the world; this segment grew more than 30% last year. Audi has been the dominant supplier for this insatiable demand with some 313,000 units making their way into Chinese hands last year. In 2008 and 2009 respectively, Hyundai began tapping this lucrative market with its Equus and Rohens offerings and more recently with the Genesis. Termed ‘Intelligent Luxury’, Hyundai, in taking on the Teutonic powerhouses, has delivered competitive quality, power, performance and customer service without a hefty price tag.
The global luxury segment has room for expansion, especially in China says Audi’s sales chief, Peter Schwarzenbauer.
“We expect the premium segment to grow much more strongly than the overall market. China has 304 cities with at least a billion people and, so far, we have dealers in only 187 of them. The premium market still has extremely good growth prospects. We’re scratching the surface in China,” he says. China is expected to overtake the United States as the world’s largest luxury car market by 2015.
As a sign of things to come, Hyundai’s Genesis was named ‘Near Luxury Car’ segment leader in 2010 according to Strategic Vision’s Total Quality Index (TQI) ousting rivals BMW (3-series), Mercedes-Benz (C-Class) and Audi (A4). TQI measures are taken according to the complete experience the cars have to offer, from purchasing to owning, driving and performing. The Genesis scored well thanks to its competitive price, warranty, many standard features and reliability. Hyundai also provides its Equus owners with a service called ‘Your Place, Your Time’. Owners simply schedule their service appointments on a mobile application and a customer care representative collects the car and leaves a loan vehicle (another Equus) in its place. Such endeavors have seen Hyundai rated among the Top 5 Brands, on the basis of brand value, according to a recent Consumer Perception Survey.
Sister company, Kia, is mirroring this bid to take over the premium segment. Sketches of its upcoming Cadenza–to be released in the Korean market in the first half of this year–which is code-named KH, have garnered much interest in the press. Kia will make use of Hyundai’s existing platform and thus shorten its learning curve. “Our new flagship sedan integrates all of our key capabilities such as design, performance, high-tech features and infotainment,” claims the director of overseas marketing for the group, Soon-Nam Lee. Kia and Hyundai plan to appeal to first-time luxury car buyers who can’t afford the traditional German juggernauts.
Naturally, the greatest stumbling block to dethroning the competition has been the fact that Hyundai, Kia, Citroën, Peugeot and Volkswagen’s brands were built on the concept of producing economical transport. Ominously, Nissan Motors CEO, Carlos Ghosn, believes the strategy of mass-market car companies branching out into the higher echelons could backfire.
“The definition of a luxury brand is a brand for which you’re ready to pay a higher price tag for what it represents. If you start to be a bargain, yes, you’re going to have a boost in sales in the short-term, but you’re going to lose the luxury halo after a while,” he says.
His view isn’t a commonly held one as other manufacturers feel that by providing premium products, they can compete in the same space.
“Volkswagen is positioned as ‘Das Auto’ or ‘The Car’ and we are the volume premium brand in SA. This is manifested in both the type of vehicles we produce and sell and in the quality, finish and materials found in our vehicles. In addition to this, while we are the market leader in South Africa, we offer a premium range of vehicles which includes the Passat, CC and Touareg,” says Matt Gennrich, general manager of Communications for VW South Africa. “The big three—BMW, Mercedes and Audi, account for the majority of sales while other players such as Jaguar, Land Rover, Lexus and, of course, Volkswagen, are all competing for a share in the premium segment which accounts for about 19% of the total passenger market. It takes time to build a brand, and we have invested substantially in the last few years in television, print, and outdoor advertising. The Touareg established its credentials right from the launch of the first generation with the V10 diesel and the class-leading technology offered in the car in the luxury SUV market,” he says
French manufacturer PSA Peugeot Citroën is also not sitting on the sidelines. The long-awaited Citroën DS5 is on the brink of being unveiled, and this will be the flagship model in its premium DS range of cars. Based on the C-Sport Lounge concept unveiled at the 2005 Frankfurt Motor Show, the DS5 combines a coupe with some grand touring features. This car emphasizes technology and luxury embodied in clever elements such as a color heads-up display, individually-selected lighting for the cockpit roof, seats employing the ‘watch bracelet’ design and significant soundproofing. The DS5 even sports a refrigerated storage compartment under the armrest and has Citroën Wi-Fi On-Board so passengers can surf the internet while they’re being driven.
While the mass-market manufacturers are striving to get a slice of the premium pie by offering more for your money, it remains to be seen whether consumers will be swayed by the affordability of the competitor brands, or whether they’ll subscribe to Ghosn’s ideology of paying for the privilege of luxury and exclusivity.