Ad agencies and automotive marketers may wax lyrical about the future prospects of millennials, but for sheer purchasing power, nothing beats the spendthrift Baby Boomer looking to salve his, or her, need for self-indulgence with a luxury car. Indeed, in just the 13 short years since the dawn of the new millennium, Canada’s luxury car segment has more than doubled, stoked in part by the ever-increasing concentration of wealth amongst Boomers and the fact that most of those born between 1946 and 1964 are now empty-nesters, able to freely indulge their desire for four-wheeled hedonism.
It helps, of course, that the very definition of what constitutes a luxury vehicle has broadened considerably in the last decade and a half. Where the previous lowest echelon of what auto makers dared badge pretentious bottomed out somewhere around the Mercedes C-Class and BMW 3 Series level, there are now smaller, and less expensive, “premium” offerings that blur the line between mainstream and luxury cars. Indeed, pretty much every luxury automaker has moved downscale in recent years as they endeavour to lower the cost of entry into the luxury ranks.
A 2015 Mercedes-Benz GLA on display the Montreal Internatinal Auto Show at Palais de Congrées in Montreal, Thursday January 16, 2014.
Phil Carpenter, Montreal Gazette
So, where the C-Class was previously Mercedes-Benz Canada’s lowest price offering, the company now offers a B-Class hatchback, a CLA budget-minded sedan and the about-to-be-released GLA micro SUV. All are built on a smaller platform than the C and are powered only by four-cylinder engines, both major contributors to their relatively budget pricing. Meanwhile, Audi Canada does offers a smaller car, the A3, though to date it has only been available as a hatchback (the much awaited A3 sedan should enhance its relatively paltry sales). Acura has all but abandoned the upper echelon of the luxury segment, concentrating its efforts on the mid-priced TL and the compact-sized ILX. Likewise, BMW has tried its hand at a smaller 1-Series, though its downsizing has been less successful than Mercedes’. That said, splitting the 3 Series lineup has proved genius, with the 3-Series sedan remaining the No. 1 selling model in Canada and, between the two former like-badged models, the 3 and 4 Series accounting for 41% of BMW’s 2013 sales.
The ever-expanding luxury segment also benefited from the continued popularity of the SUV. The MDX and RDX, for instance, remain Acura’s stalwarts. BMW Canada’s line of Sport Activity Vehicles — X1, X3, X5 and X6 — are big players in the company’s growth past the 30,000 unit mark. And the mid-sized RX accounted for almost half of Lexus Canada’s 15,949 sales in 2013.
The current BMW X1 (pictured) can be had with a turbocharged, 3.0-litre inline-six engine, but a new report suggests it might be dropped in favour of a high-output turbo-four when the next-gen model bows in 2016.
Handout, BMW
But no manufacturer displays the power of the luxury SUV more than Jaguar Land Rover Canada. Where Land Rover was once a niche brand, outsold by sister brand Jaguar, those roles have been reversed with the off-road maker dramatically outselling the sport sedan maker. Indeed, so lucrative is that sport cute-ute market that Jaguar will launch its own SUV, the C-X17, hoping to emulate the success of last year’s sport cute sensation, the Range Rover Evoque.
Sales of large luxury sedans, meanwhile, continue to decline. Mercedes-Benz (S- and CL-Class) and BMW (6 and 7 Series) continue to be the heavy hitters but both were down dramatically, the 7 Series’ 2013 sales half of 2012′s and the S-Class down by more than a third. Audi is finally making inroads with its A8, up 17%, and Jaguar — offering all-wheel-drive for the first time on its large luxury sedans — is on a roll. XF sales are up some 75% while the perennially underselling XJ, also benefiting from the addition of AWD, now outsells Audi’s A8, Porsche’s Panamera and the Lexus LS with an overall gain of 89% in 2013. It’s a measure of the flattening of the large car segment that, while the 7 Series outsold the XJ by a whopping 577 units in 2012, its advantage dropped to a barely significant 37 units in 2013. Meanwhile, though Lexus’s LS and Acura’s RLX both increased volume for 2013, the once-popular models are largely an afterthought compared with both brands’ SUVs and smaller offerings.
So, what does the future hold? To be sure, as automakers continue to challenge what defines a luxury car (the concept of a sub-$30,000, four-cylinder-powered Mercedes B-Class being classed as a luxury entrant while the superbly-equipped, V8-powered Genesis not making the grade must surely rankle Hyundai), the market should continue to grow as the cost of entry into badge-dependent automobiles is reduced.
Hyundai introduces 2015 Genesis at the North American International Auto Show (NAIAS) on January 13, 2014 in Detroit, Michigan.
Scott Olson, Getty Images
Of course, exactly how small and how cheap these product offerings can become before losing the brand’s glitz is a question that continues to pester marketers and analysts alike. So far, that floor has not been reached (though Jaguar made a hash of it when launching its little-loved X-Type in 2002), but it is worth noting that when Mercedes-Benz Canada brought in the fortwo microcar, it was badged as a Smart.
Perhaps a better indicator of whether further expansion will be successful will be BMW’s relaunch of its bargain-basement 1 Series, long-rumoured to be built on the first front-wheel-drive platform to be badged BMW. The Bavarian automaker based part of its decision on switching its low cost model to the more efficient FWD format on a study that showed its entry-level customers couldn’t tell the difference between a pedestrian front-driver and the company’s classic rear-wheel-drive layout. While that revelation may indeed give permission for the switch, such ambivalence can’t be good for long-term brand loyalty. Whatever the marque, it seems all automakers are challenging the definition of what constitutes a luxury car. And boosting sales as a result.
