Simply Irresistible

Luxury-car dealers shift strategies with 'bargain basement' prices.

June, 2001

Sure, the Lamborghini stopped traffic. But it was BMW, Lexus and their classy competitors that won raves at the 2001 First Hawaiian International Auto Show, held April 5-8 at the Hawaii Convention Center. These luxury cars, which traditionally tout pricetags above $50,000, over the past few years have appealed to non-executive types—thanks to affordable models priced between $28,000 and $40,000.

Affordable luxury? It’s a paradox, but true. As these entry-level vehicles comprise 70 percent of the U.S. luxury car industry, auto dealers race to grab their market share. “The name of the game is, is the name more important, or is the service more important?” says Leighton S. Migita, general manager for Lexus, a Servco Pacific company.

Those are not easy choices, because the vehicles share similar prices. Last year, the average cost of an entry-level luxury model nationwide was $34,104, according to CNW Marketing reports. “For a long time, there was a vacuum in that area, yet a lot of people wanted luxury vehicles,” says David Rolf, executive director for the Hawaii Automobile Dealers Association. “There was a gap between the higher-end vehicle and vehicles in the $20,000-range, like the Hondas and the Toyotas.”

“People have this thing where if it’s below $30,000, they’ll buy the car, but if it’s above $30,000, they start to hesitate,” Migita says. Lexus’ answer to that is the IS300, a sedan that competes bumper-to-bumper with the BMW 3 Series, Audi’s A4, G20 Infiniti and the Acura TL. Curvy, yet sharp in the right places, the IS300 features standard High Intensity Discharge headlights and 17-inch alloy wheels. Lexus this year announced a new hue: Solar Yellow.Mercedes-Benz bridged that gap in 1994 with its least expensive car, the “baby Benz” C Class. The C240 and the C320 models this year house new six-cylinder engines in place of their original four-cylinder engines. Their new little brother, the C Class two-door sports coupe, boasts the same 2.3-liter supercharged engine as the Mercedes-Benz SLK roadster and is scheduled to hit the U.S. market this fall with a starting price of under $30,000.

Since Lexus’ entrance into the U.S. market in 1989, the Japanese brand has had unstoppable success, due to the introduction of new designs almost every year. Examples: the SC coupe, the GS sedan and the Toyota Camry-esque ES250. Lexus in 1996 even joined the SUV parade with the LX450, which set the prototype for the aerodynamic RX300. “It’s been one product after another,” Migita says.

Probably the most talked-about entry-level luxury car is the Jaguar X-Type, a $29,950 sedan scheduled to launch July 29. Jaguar this year hopes to sell about 95,000 nationwide. The vehicle’s sporty sleek exterior, combined with a new communications system (similar to GM’s OnStar network), claw old notions that the English brand is a rich-old-man’s plaything. Television ads for the X-Type even feature tunes by Sting. “One of the problems Jag has is it’s been selling to the older person, 60 and above,” says Garry D. Brechin, general sales manager for Jaguar of Honolulu. “That’s fine, except that these people die off. You have to get to a younger population.”

Although there already were 15 pre-orders in the first three months of this year, the Honolulu representative plans to showcase two X-Type demos two months prior to the launch. That ought to pacify iffy customers, who may have heard that the X-Type shares engineering and design elements with the mid-size Ford Mondeo sedan.

Luxury-car dealers that don’t play the entry-level game say that although their customers loyally return to the same brand year after year, they would like to offer lower-priced models, as well. Says James Berger, sales professional for Saab Hawaii, which has stood on Waialae Avenue since 1979, “I wish Saab had a car that was worth $20,000. Then I think it would generate more business.”

 

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