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High End Luxury Cars

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  • "And as great as Lexus cars are, I know I'll probably never buy one, because I simply don't find them quirky and entertaining enough"

    And you have no idea what you are missing !! Lexus may not be for you, but you are doing yourself a world of dis-service if you are in the market for a luxury car and do not even consider a Lexus, if only for a test drive. That would only cost you time.

    Regardless, you are entitled to your opinion. Other savvy buyers are placing Lexus at the top of their lux car/truck buying needs, hence its #1 position in the NA market. Quirky and all !!
  • pablo_lpablo_l Posts: 491
    I know they are great cars, but I have no doubt about the fact they have little appeal to me, so I am not missing on anything that would be right for *me*. There truly aren't many cars out there these days that make me curious - I think manufacturers have dialed out character to much, and even the '01 XJR I owned was a major letdown, because I found it utterly boring. It was a great car, I just didn't feel it. Imagine how I'd do with an even more "sensible" car. To this day, my biggest car regret is that I got rid of my '96 XJS convertible to buy the XJR. The XJS was the perfect car for me, with all of its many rational deficiencies. Or because of them. :-)
  • oac3oac3 Posts: 373
    Now I get it. It is YOU who is quirky and not Lexus cars !!! You will prefer a '96 XJS conv to an '01 XJR ? That puts you on the other side of many Jag buyers. A good friend of mine just picked up a used (2002) X-type 3.0 and loves it. Of course, being a Brit that he is, he has been fantasizing on owning a Jag, and now finally pulled the trigger. He told me the new Jags are more matured, refined and better all around. I won't know any better since I am not a Jag fan.

    On a different note, my COO drives a 2003 XJR, so that makes two Jag owners in my company. BUT, there are lots and lots of Bimmers on our parking lot. More so than any other car brand/model. Only a pittance few are Lexuses.....with me being the only LS owner. The guy next door to my office drives an A6 4.2, his previous car was an A8.
  • pablo_lpablo_l Posts: 491
    I do stand by my individuality, indeed. :-) Note I never claimed the XJS was a better car, nor do I remotely imply anyone that prefers cars with less, uhm, character is crazy. For some reason, many of the more desirable things in life come packaged with big flaws, in my opinion (I say somewhat achingly after paying a $4k bill for what seemed routine maintenance for my collectionist car, I certainly hope that is not the running rate going forward!).
  • merc1merc1 Posts: 6,081
    In your first paragraph you're still doing what you've done from the start. Ignoring price. This what if scenario you've come up with isn't based in reality because in reality Mercedes and Lexus aren't the same price, except for in two instances, nor are they held in the same reguard.

    "There has to be an agreement on basic principles for rational discourse to take place"

    This is true. So lets loose the what if scenario because it's not based anywhere near reality.

    "You keep wanting to look at Lexus vs MB as on a model by model basis, saying that on a overall (all SUVs + all cars) basis, MB’s unit sales performance is explained by higher model-by-model prices, and that the higher prices aren’t simply compensation for higher prestige/heritage. Well, if that were true, wouldn’t we find that the model matchups where MB is most expensive (relative to Lexus) are the ones where MB sells poorly, and that the matchups where MB is priced similarly to or less than Lexus are the ones where MB sells well? "

    You're confusing two issues here. This conversation was never about why a Mercedes costs more, only that they do. Who cares why, for the sake of this discussion. We're talking about sales vs price and vice versa. They "why" question is for another topic, and there have been some incorrect theories cast about that in here already anyway.

    "In fact the exact opposite is true. It is the matchups where MB is priced similarly to or less than Lexus where MB has its greatest sales weakness. The C-class compared to the ES and IS. And the M-class, compared to the RX and GX. In the other lines, where MB is priced higher than Lexus, MB generally sells the same or higher numbers than Lexus…quite the opposite of what your theory implies. (The only exception is the G vs LX, where MB is priced higher and does sell less; but since the LX isn’t a big volume seller itself, the unit [as opposed to percentage] difference isn’t large, so this doesn’t go very far in explaining why Lexus outsells MB)."

    Again, the IS300 and ES330 are not even close to being the same car, so why are you constantly trying to lump them together? The C-Class outsells the IS300 by about 3 to 1 on a yearly basis. The ES330 outsells the C-Class, again I've stated this a many times.

    The ML doesn't sell better because, again like I've admitted before, its clearly not up the Lexus SUVs, and it's in its 7th model year, and the Lexi are brand new. You're right here, price has little to do with it due to fact the ML is priced similarly to the GX and RX. That is but one exception.

    If these are the only two product lines between Mercedes and Lexus in which Mercedes is price competitive, how in the world can that offset the often medium to very large price differences between the GS and the E-Class, S vs LS, SC vs SL, LX vs G, SC vs certain CLK models, and to mention the CL of which there is no Lexus competitor. You're only looking at the lower half of the Mercedes lineup.

    "Here’s my theory. I think that prestige/heritage has a value, and that people will pay extra for it. But people who are concerned about prestige will, if they can afford it, buy towards the high end…if they buy a C the neighbors will know that they’ve got the cheapest MB. So MB is able to extract a bigger “prestige premium” (pricewise) on the E and S than on the C or ML350, for example, and still sell well. And since people at the low end are not as concerned about prestige as those at the mid-high end, other factors become more important…like reliability, roominess, etc. So in my view it isn’t price that explains MB’s sales vs Lexus…it is PRODUCT (or product, reliability, service, etc). For the C, where MB sells fewer units than Lexus despite lower starting prices, maybe those factors are roominess, reliability, service. As for the ML…well, you’ve said yourself that MB has a product problem there, that the vehicle isn’t that desirable."

    There are lots of places where this theory doesn't jive with reality. People will pay for prestige yes, but that is only half of the situation.......the other half of that is they'll pay for it WHEN THEY CAN. Prestige means nothing when you want a SL500, but can only afford a SC430. The 30K price difference will, more often than not, make the decision in favor of the SC430. There is no way possible that this kind of price difference doesn't account for some lost sales for Mercedes-Benz.

    Ferrari and Porsche are held by many to be the best sports car builders on earth. It depends on who you ask as to which is best. Generally Ferrari gets the nod, but it's a fierce debate. There is no debating however when it comes to sales of the two brands. Price is what keeps a Ferrari out of garages of tens of thousands of buyers, many of whom a Porsche is no-sweat to acquire.

    Yes, other factors play a role in cars sales, again, I've mentioned this many times before. Reliability, comfort etc, etc, the list is endless, but to say that price has nothing to do with a brand like Mercedes' who's lineup is skewed upwards of 50K is cleary incorrect.

    Look at this:

    http://www.mbusa.com/brand/index.jsp

    Select the "Model Selector" on the left side.

    Without even looking to see how many, do you see where most of those cars land on the price chart? The high side. The numbers: There are 14 models below 50K, with the E320 being right on the border at 48K, which you probably can't find at that price on a dealers lot. There are 23(!) models priced above 50K, of these there are 15 priced at 70K or above, right where Lexus tops out at. Of that 15, 8 of them are priced at 90K or above!!!! There is no way this type of pricing doesn't have an effect on overall Mercedes sales.

    The bottom line is that Mercedes is only price competitive with 2 lines of cars, the rest are prices higher than the competiting Lexi, and thus really shouldn't be able to sell in the numbers they do. Yet you initially tried to state that the "market" didn't think much of Mercedes' cars, yet when you look at the numbers the only thing they are missing is the SUV component. Lexus better hope the next ML, and the new GST (R-Class) and the new G-Class don't catch on.

    The correct thing to say would be that the market doesn't think much of Mercedes' ML (and neither do I), but they obviously think a great deal of their *cars* because despite their higher prices they buy more of them overall and model line vs model line, except in the case of the ES vs the C-Class.

    M
  • merc1merc1 Posts: 6,081
    "Of course the enthusiast counts but the pure bred enthusiast is a miniscule percentage of car
    buyers. Otherwise why would anyone buy an Accord or Camry when a 3series or C-class is also within reach."

    We're not talking about a "pure bred enthusiast" here. That type would only buy a M Series or to a lesser degree an AMG car. I'm talking about people who look for more than leather, stereos and nav systems as the key ingredients in their cars. People that actually mention driving the car as opposed to "how soft it rides". Other things like styling, handling, performance, design. I hardly think the average Camry or Accord buyer can afford anything other than a base 3-Series or C-Class. Most Camrys and Accords sold are stil mid-grade models, most with 4-cylinder engines, not the top line XLE and EX-V6 models.

    "My point is that good business plays to where the money is not where the enthusiast is. MB and BMW missed the whole change to the SUV market badly. Maybe they cared too much about the enthusiast."

    Not hardly, they did just that, play where the money is, just not where all of it is. You seem to imply that Mercedes and BMW haven't been a success at what they do, building cars. They are the two leading luxury car sellers in the world. The SUV game is new to them, just as building anything with a performance bias is new to Lexus. If BMW and Mercedes missed the boat in SUV game, Lexus surely missed a different boat with their cars. The SUV is but one component of the market. BMW and MB have to cater to much wider audience than Lexus does all around the world and on that scale Lexus doesn't even begin to compare. Like I said before you view on the market can go either way.

    M
  • I agree with most of what you said with regard to pricing vs. sales volume of "cars", except the fact that MB's disadvantage in higher prices should be more than offsetted by their much wider model line-up with more engine/model variations. You should be able to sell more if you have more choices to offer. I suspect that too is going to change as Lexus will gradually offer a wider variation of choices in the future. Lexus hadn't been in business for 15 years & they have already done more than anyone expected. I also agree with ljflx that the Lexus RX is car-based and is really a raised ES station wagon(that's why they call it cross over), & trying to seperate RX's sales from the cars' sales in an effort to imply that Lexus can only sell SUV's may not make much sense, although they often lump the RX together with the true truck-based SUV's with real off-road capabilities like the GX & LX.
  • merc1merc1 Posts: 6,081
    Thats true, more variants should help, problem is Mercedes' base is already higher in most cases and those variants are only priced higher. The only model that truly gets a boost by having so many variants is the C-Class. Even some of those, 4Matics, wagons etc get very pricey once you add options.

    M
  • footiefootie Posts: 636
    Do either you or Pablo have any specifics that can be referred to regarding "acquisitions", "writeoffs", etc. at Toyota that impacted their finances?

    I sure can't find them. So I am assuming that all of the posts that have occurred here about such are just hypothetical.

    Toyota's reported net income under the Japanese GAAP is about half of their net income under US GAAP. But going forward from 2003 they will use U.S. GAAP for public reporting.

    There hasn't been an operating loss at Toyota in the last decade. These guys are funding their entire automotive operation out of free cash flow.

    On the conservative angle, one of the advantages of the way TPS works is that it is an 'inventory-less' manufacturing system. They build to order for their distributors. Their suppliers ship to the build plan. They modulate their build rate to market conditions, which for the last 10 - 12 years has been nothing but increasing unit sales.

    You never see these guys with 18 warehouses full of routers in San Jose like Cisco.
  • ljflxljflx Posts: 4,687
    I'll look and see where I read that and post a link if/when I find it. It may have been on Hoovers. The item was non-operating and it may well be that the charge they took didn't even put them in a loss position or maybe such loss was only for a quarter and the year was still profitable. It didn't affect my stock decision so it was a non-event as far as I was concerned.
  • I think Lexus is currently missing out on the coupe versions of their cars as compared to MB & BMW. I would like to see coupe versions of the IS,GS & LS, although it may be difficult to do a coupe version of the ES, as they already have the Toyota Camry Solara, which at high trim level, is every bit a luxury sports coupe as the low trim MB c-class coupe & BMW 320/325ci.

    Lexus sales figure as compared to MB/BMW will always be hampered to a certain degree in this regard, as a high trim Toyota Avalon/Solara/camry with the ingredient/options to be classified as a luxury car will be counted towards Toyota sales, and a low trim C class/3 series, which in reality does not have higher luxury/content, still counts as MB/BMW sales.This is even more true if you look at world wide sales figures, as many low power/diesel,low trim MB/BMW (which includes cloth seat C class, E class, even S)which are not even offered here in N.America, are sold, many as taxi's, whereas in Japan & Asia, it's mostly the Toyota's(which have no Lexus equivalent)that are used as taxi's.

    My point is that you can never fairly compared sales figure of Lexus versus the traditional luxury brands, & I agree with what some has mentioned here before that higher sales does not mean better in this discussion.
  • ljflxljflx Posts: 4,687
    Great points and if MB and BMW were in business for only 15 years they would have - at most - the amount of models Lexus has and most likely would have fewer.

    Pablo - I understand your point well. The Jaguar XJ is a great car but it has no appeal whatsoever to me. But I wouldn't say never abiut Lexus. If they build a car that excites you I'm sure you would put it on your short list.
  • pablo_lpablo_l Posts: 491
    Certainly if Lexus were to design a car that excites me I'd look at it - I actually have little brand religion. I actually have learned that fierce brand loyalty never pays off, for you'll eventually always wind up disappointed.

    There's one car Lexus has in its offering that made it close to my radar screen, though: the SC430. But I decided I wanted a 4 seater convertible, otherwise I might have picked it, the interior is fantastically executed, and the car is very competent all around. I find the SL overpriced and unnecessarily busy design-wise, way too many character-lines thrown in. But I like 2 door designs because of optics, then I typically don't like ultra-sharp sportiness, because I seldom see the point: there's strict speed limits in CA, the highways are of terrible quality, plus I do own a motorcycle that'll make any sportscar feel uninvolving. Thus, the SC fit the bill reasonably well, perhaps next time out.
  • bwiabwia Boston Posts: 1,268
    Footie, apparently the loss refers to Toyota's "Other business", which is not delineated.

    Here is the relevant reference and link.


    Other Business

    In fiscal 2002, revenues from other operations fell 31.8%, to ¥728.8 billion, and operating loss contracted from ¥4.6 billion in the previous fiscal year to ¥3.0 billion. The primary cause of this substantial drop in revenues was the elimination of IDO Corporation (now KDDI Corporation) from consolidation in the second half of the previous fiscal year and the transference of Toyota’s industrial equipment and logistics systems operations to Toyota Industries Corporation from fiscal 2002.

    Operating loss declined mainly due to the decrease in expenses associated with the development of intelligent transport systems.
    In 2001 and 2002 operating losses were ¥4.6 Billion and ¥2.96 Billion yen respectively.


    http://www.toyota.co.jp/IRweb/invest_rel/annualreport/annual_repo- rt02/business/other_business.html
  • footiefootie Posts: 636
    Thanks.

    However, at $30million it's small change to a company coming up on $10 billion in profits on $160billion in revenue this year. They took bigger losses from securities investments in 2000 by 10x that and didn't even blink.

    Earlier references to Toyota's "loss" were making it look like they were in trouble or recovering from it.
  • pablo_lpablo_l Posts: 491
    Nope, I never claimed Toyota was in trouble. No one did. Merely that car industry fortunes seem to be cyclical in nature. We'll see.

    But I'll never buy cars based on what Wall Street says on the company's operations performance, it means nothing to me when making a car choice. And I doubt the majority of car buyers overly cares about the financial performance of the company that built their car.
  • sysweisyswei Posts: 1,804
    Let me try to clear something up. I never suggested that Lexus is a “better” “vehicle” for Merc1 or anyone else simply because Lexus sells more “vehicles”; nor is MB a “better” “car” for myself or anyone else simply because MB sells more “cars”. As I tried to express in my post to Pablo, an individual can have his own ideas as to what vehicle is best for him, based on his own needs, desires, and preferences…what I’ll call an “individual’s best vehicle”. What I find valuable in looking at aggregate sales data is that, as I posted before, I think such data “shows which company is doing a better job of meeting real market needs.” Market or aggregate needs, not individual needs.

    gscoupe and ljflx,

    Your suggestion that we consider the RX to be a car is interesting, but we’re just not going to find any data on how many RX owners considered a wagon vs how many considered a competing SUV. If we knew that we could apportion a certain fraction of RX sales to the SUV side and the rest to the car side…who knows, maybe Lexus would then beat MB in both cars and SUVs. (Just a possibility, as I said we have no data.)

    Merc1,

    You wrote, “People will pay for prestige yes…they'll pay for it WHEN THEY CAN. Prestige means nothing when you want a SL500, but can only afford a SC430.” My response is that one of MB’s strengths is its broad product line. You know as well as I do that buyers who can’t afford the SL can and sometimes do buy the CLK. Some of your beloved carmags even put the SC and CLK in the same comparo. And as for the LS and S, you well know, and I have even seen some examples on Edmunds boards, that sometimes LS prospective buyers cross-shop vs the E, not the S. So whether it is the SC430 vs CLK500 cabrio, or LS430 vs E500, there are choices out there for the prestige-loving MB fan that doesn’t have the cash for more car. He isn’t in a situation where he “can only afford a SC430” or LS430.

    Your analogy of Porsche/Ferrari vs Lexus/MB is a flawed one because in the Lexus/MB case, MB’s price range fully encompasses Lexus’…MB’s low end starts 13% LOWER than Lexus’. Whereas in the Porsche/Ferrari case, Ferrari’s low end price starts 238% HIGHER than Porsche’s.
  • footiefootie Posts: 636
    Message #3717  by pablo_l   Dec 13, 2003 (10:07 pm)
     Only a short time ago, Toyota had a huge loss, which makes me take their one year profit streak with a grain of sand. Business Week and ...

    >>> I believe that both of these were incorrect.

    It might be easy for casual readers here to get the wrong message.

    There was no 'huge' loss at Toyota and their profit streak is about 15 years old ...

    They fund their auto operations out of free cash flow, while the DCX's of the industry are up to their eyeballs in debt.
  • ljflxljflx Posts: 4,687
    Toyota had net income of $4.5bln, $5.5bln, $4.2bln and $6.3bln in the past 4 years ending April 30 2000-2003 respectively. The projections for the current fiscal are around $9bln. I believe there was an extraordinary expense booked in 2002 (year ended 4/30/2002)which may have put them in the red for a quarter in that year but obviously they still made a lot of money on an annual basis. The company will have doubled its earnings in 5 years if this years numbers hold-up. Personally I think they will surpass the projections. The stock is at or near a 52 week high right now.
  • pablo_lpablo_l Posts: 491
    We've clearly established Toyota's financial performance is strong. On the other hand, there do remains some weak areas and exposures that were clearly laid out in the BW article. Again, the car market has always been very cyclical - we'll see if Toyota defies history. Finally, sure, Toyota is a financial success, but their average product is relaively insipid and I do hope the car landscape 10 years down the line doesn't consist only of Toyota look-alikes, really. Their technology - top notch. Those hybrid vehicles they will bring to market are seriously smart. I find something like that far more innovative engeineering than cranking out yet another I6, V8 or V12 engine or some silly extra smart brake and steer assist technology.
  • merc1merc1 Posts: 6,081
    Amazing, you completely ignored everything that was previously posted. Did you even look at the model/price chart? Obviously not. A CLK is not a SL, and everyone that wants a SL does not buy or even want a CLK. Unlike the SC430 which tries unsuccessfully to be a 4-seat (who can sit back there) and a compete with 2-seaters, Mercedes has true 2-seat and true 4-seat convertibles.

    You could buy a C320 instead of a S500 too, that isn't the point. The point is where the cars line up, you know the ones that are supposed to be compared. The E-Class and the CLK do compete with the LS and SC, to a degree, especially with the E vs the LS, the LS is clearly "more" car for the money. If were to even mention sales of the E-Class compared to the LS430 you bring up price and class in a heartbeat. The cars are in small, medium, and large. C/ES/IS, GS/E, LS/S, the prices are higher for the MB in every case except the base C230 vs the IS300 and ES330. The CLK/SC/SL could all compete, sure.

    You're just reaching for things now, but in the end Mercedes' cars still cost a lot more. Buying a different Mercedes still doesn't take away the fact that MB has those higher priced cars. If everyone thought like that nothing above 70K would sell at Mercedes-Benz. They sell EVEN LESS cars overall, which illustrates my point. Price hinders sales.

    "MB’s low end starts 13% LOWER than Lexus’."

    When are you going to look at the entire range from Mercedes and Lexus side by side, instead of just the bottom end? Mercedes has at least 8 cars that start above any Lexus, that more than cancels out the 3 models that start below Lexus'. You are flat out ignoring where the bulk of Merceds' cars are priced. The C class is only ONE MODEL RANGE. Look at where the other start/end at. You're pretending those upper end MBs don't exists.

    The only market needs Lexus is serving better than Mercedes is the SUV market's needs. In cars they don't offer nearly the choices.

    M
  • pablo_lpablo_l Posts: 491
    If you're going to talk low end, go to the German Merc site and check out the A class, or engine variants of the C class such as the C180. But the key is that Merc charges more for a given car than its direct competitors can. The competition is hardly even on technology and options parity -say C320 vs IS300 or 330i- but rather because many people think "Uhm, for this price I could also get an OK loaded C230" and are willing to do that in order to get the star. Mercedes does have a certain cache with many buyers. I am not saying it's justified, I just observe it very often.
  • ljflxljflx Posts: 4,687
    I'm afraid to say it because it may upset some merc supporters but I also know a few too many people who buy MB because of status rather than the car.
  • I agree, i know a woman who wouldnt give a fair look at anything but Mercedes if i paid her... She is 45 and grew up in an era when Mercedes was on top of the world in the luxury market and is still too ignorant to see that all she sees in the company is its "prestige or brand recognition" and not the actual car... She is also that type of person that wouldnt wear a watch untill she could afford a Rolex, and certainly she wouldnt wear any other brand...
  • the Gen Ys are much less ignorant from what i can tell, and since there are so many great cars out there i doubt they will ever look at one company as the end all be all of success in life... if you own one at least...
  • ljflxljflx Posts: 4,687
    I have a cousin who will walk in to Saks 5Th Ave. and spend $500 on an item that can be obtained for $400 somewhere else. I can easily understand those that will do it for convenience and don't care about paying 25% more for that convenience. But she doesn't have money to burn. She'll even drive out of her way to go to the Saks. She then lets everyone within earshot know she went to Saks. I am amazed at behavior like that. She is always asking me why I don't buy MB and my answer is always the same. I buy what I think is the best quality car and the one that satisfies my needs. I'm not interested in impressing anyone but myself. She just doesn't get it.
  • sysweisyswei Posts: 1,804
    I am going to take one last stab at trying to get you to agree on something that flows from elementary economics, and if you don’t get it this time, I will indeed give up. You have said that “People will pay for prestige yes …they'll pay for it WHEN THEY CAN”…which means that prestige is valuable, and that, other things equal, if one product has more prestige it can command a higher price. PRESTIGE IS JUST LIKE ANY OTHER “FEATURE” OF A PRODUCT, such as larger size, larger engine, better styling, etc…insomuch as people are willing to pay extra for it (which you have admitted).

    Suppose there is a housing developer who is building new homes on a large tract of land. Suppose that he offers only two models, “m4” which has 4000 sq ft on 1 acre, and “m5” which has 5000 sf on 1.25 acres. You question customers’ ability to pay for the higher-content product, saying that it is impossible to sell in the same quantities if one is priced higher. I submit that if m5 is priced only slightly higher than m4, say 5%, then it will not only sell more units (directly opposite what your theory implies), but it will probably sell MULTIPLE TIMES as many units as m4. Similarly if the developer tries to price too much for the extra content, say 45%, then m4 will outsell m5 by multiple times. If follows that there is a some price premium between 5% and 45% where the two will sell in EQUAL numbers, DESPITE m5 being priced higher. I don’t know if that premium will be 20% or some other number, but the important point is that if a product has higher content, be it size or prestige, it CAN command a significantly higher price and still sell in equal units. Get it?

    We can see this principle in operation in the real world. I recall you posting that in some years the S500 outsells the S430. How can this be if your theory is correct, namely that higher priced products have to undersell lower priced ones, even if they offer “more” of something. My answer: that when there is more content, which in this case means larger engine, better standard equipment, more prestige associated with the S500 badging, then as long as that content is priced appropriately the S500 can sell in similar units to the S430. Get it?

    Or take another example from the MB world. In some years at least, CLK coupes outsell the C coupes (per autosite.com). And in some years, E sedans outsell C sedans. Not consistent with your theory that higher-content, higher-price products can’t possibly outsell lower-priced products. But consistent with my theory that higher-featured products, if priced appropriately, can sell in the same or even higher quantities. Again, prestige is just like a feature in that people will pay extra for it.

    Soooo….your claim that MB’s higher pricing is a unit sales handicap isn’t necessarily so. We all know that MB, across the board, offers more prestige and heritage than Lexus. That is like a feature or content that people will pay extra for. And as long as a product has more content, it can command higher prices and still sell the same number of units…or higher units…than the lower priced competition. So long as the extra content isn’t OVERpriced (like a 25% larger house at a 45% higher price), which you haven’t demonstrated.

    You wrote “Price hinders sales” but it should really be “price hinders sales if not accompanied by appropriately higher content.” MB’s higher prestige/heritage constitutes higher content.
  • pablo_lpablo_l Posts: 491
    It's basic economics that the price of something is determined by "perceived value" to the buyer. End of story.

    Prestige adds perceived value to some buyers - we can argue about what percentage of buyers this is, but fact it is the essence of luxury brands to carry price tags that are in absolutely no way related to cost considerations.

    Now prestige is a feeble thing, on the other hand, and luxury brands can be run into the ground and lose cache if not managed skillfully or if they simply run out of luck (which is a factor in life and business). It is not easy to engineer a brand, they do take a life of their own image wise and it is impossible to control several of the associations people have with a brand. Theories on that abound. It just happens. In Europe, Mercedes does little for brand management these days other than simply demand a premium over what competitors charge. Whether that will have any repercussions remains to be seen. In the USA, Mercedes seemingly tries to engineer the upscale image a tad bit more, which is probably aided by the fact the US market does not reward ultra-compacts and small displacement engines anyhow - even if they offered them they probably wouldn't sell all that well.

    But the Mercedes brand is an interesting study when it comes to mass market psychology.
  • sysweisyswei Posts: 1,804
    Well put and succinct. I know I get too wordy at times.
  • syswei, c'mon when it comes to *wordiness* you are far outclassed by Merc1 :) Now that we are all in agreement, can we move on ? Oooppsss we haven't heard from Merc1 yet, which means this is not put to bed YET ! But we really should move on. MB has a higher prestige, costs more than its peers, and sells about as much as its peers despite its higher prices. No disputes by any of us. Just KISS and make up !
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