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High End Luxury Cars

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  • stevekilburnstevekilburn Posts: 359
    "Value HELM" can appeal to buyers who are socialist in nature.

    Those who love capitalism and its benefits should push for more profit increases. Lexus should gun more for capitalists who love "commanding premium" along with its current customer base.

    However, capitalism can also give sour results if those profits are not wisely invested.

    By raising its prices in line with A8 and 7 Lexus can use that extra cash just as any enlightened capitalist would.

    Did I ruffle a few feathers? ;)
  • tagmantagman Malibu, CaliforniaPosts: 8,441
    Steve,

    With all due respect, just consider all the counterpoints that have been posted in reply to your campaign. Are you posting just to post, or also to read and absorb different viewpoints? Think about it.

    TagMan
  • stevekilburnstevekilburn Posts: 359
    I am reading, absorbing and admiring all the counter-points and in time my view will evolve, you may be right, posting too much can dilute the message, but at the same time I feel compelled to campaign for both Lexus and Porsche.

    I just found a list of HELM suppliers, for example for porsche, and I will post it in relevant forums. I am also thinking about turning the corner and talking a little about HELM suppliers themselves and their future prospects. Check out this link

    link title

    It lists many german, french and american HELM suppliers. Except Delphi, most of them are healthy. Even more interesting is the fact that germans never use any japanese suppliers, very rarely.
    Domestics also dont use many japanese suppliers, but japanese use many german and domestic suppliers.

    When you find supplier list for LS 460 and S550 you can post it here.
  • merc1merc1 Posts: 6,081
    But from what I hear from Ingolstadt, the '09 replacement for the current A8 will correct all of the wrong-doings here in the States. It's said to come to market with a 4.2 FSI V-8 with about 470-hp/8-speed tranny as the "base" engine and a "clean" V-10 TDI within the first year it comes to the States.

    Yikes! If that is the case the class will be once again sent back to the drawing board. It sounds nice, but a base A8 with 470hp sounds like a little bit much to me.

    I did read that for 07' all V8 A8 and A6 models get the 350hp version of the 4.2L FSI V8 - a typical German car company move as far as engines go.

    So it all remains to be seen. I'm not giving up on my favorite German brand!!

    No please don't because I'm not! :D Audi is only second to MB in my eye when it comes to luxury cars, BMW used to be #2 but they just aren't pretty enough across the range for me to feel the same way anymore. That is however just when looking at them however because they still remain arguably the best drive of the 3.

    M
  • merc1merc1 Posts: 6,081
    I agree with you and others are Steve's argument, but there is no S450 yet and it doesn't appear that there will be one for at least another year so the S550 is where its at. If I were MB I wouldn't even bother with a S450 at this point until direct-injection is implememted giving the S450 a better hp rating because 335hp isn't going to come even close to the projected 380hp LS460. I think MB realized this because now it is like the S450 never existed and luckily for them the S550 is doing better than originaly projected. I don't see a S450 before the 2008/09 model year. The June issue of R&T says we aren't getting the S450 at all. :surprise:

    M
  • merc1merc1 Posts: 6,081
    I think Lexus will to a degree match prices or at least be in the same ball park with the 7-Series and A8 this time around, but not the S-Class, at least not with the LS460. To push LS460 prices any higher would only make some traditional Lexus buyers who like that price difference between it and a Mercedes question the value part of the Lexus equation. Lexus doesn't want to risk that. Why should they? The traditional Lexicans are right here Steve. To price a Lexus LS the same as or too close to the Mercedes S-Class could produce a "may as well get the Benz" reaction from people who are open minded about shopping both brands or those who aren't lead back to Lexus based solely on reliability.

    Being a value relative to Mercedes (not necessarily BMW and certainly not Audi) is one of the core Lexus beliefs, it was one of the main reasons "Lexus" was established.

    M
  • stevekilburnstevekilburn Posts: 359
    Your post is pointless because I never said LS should be priced head-to-head with S550. :confuse:

    All along I posted that it should be in line with A8 and 7 prices. I am not sure what you are trying to tell me here. May be that extra coffee is creating problems for you. ;)
  • merc1merc1 Posts: 6,081
    Read it again Steve it says "the same or too close to" the S-Class, not just at the same level. Futhermore I agreed with you that Lexus may price the LS closer to or in line with the 7-Series and A8 give or take a few grand.

    As far as pointless posts go it seems you've been doing that for a while now according to many here.

    M
  • stevekilburnstevekilburn Posts: 359
    I read tagman's and ljflx's spin carefully and have great respect for their poetry and their line. ;)

    I am convinced that Lexus will do better being a "premium HELM" rather than "value HELM". Because the paradigm has changed. Its not about offering more value for money in HELM, but offering a better ownership experience.

    Please read my post link title

    and how I have articulated based on lj's lower build cost and profits argument. In fact I do not disagree with him at all.
    The point I am making is subtle. Its about "commanding the price premium" not "offering a value alternative".

    Thats where the crux of the matter is.
  • lexusguylexusguy Posts: 6,419
    Regardless of what we think on the boards, Lexus has their strategy in place.

    "So, how is Lexus responding? Well, as we see it, the American luxury auto market continues to evolve into two distinct, major segments, mainstream luxury at the foundation, and a growing prestige segment at the high end. As we define it, prestige luxury vehicles range anywhere from $70,000-plus to the $1.2 million Bugatti Veyron."

    "Let's take a closer look at each segment. Prestige luxury buyers typically look for status, craftsmanship, innovation and design in their cars, and they're willing to pay for it. The Mainstream luxury segment originally consisted of "Traditional" buyers, those who were mainly interested in performance, heritage, and status. When we introduced Lexus in the late 1980s, we positioned it as the "smart" choice and a "New Values" buyer began to emerge. These buyers generally are less interested in status and more concerned about quality, dependability, comfort, value and unsurpassed service. Seventeen years later, they've become the main portion of the mainstream luxury market."

    "Today, the "New Values" segment, led by Lexus, makes up about one million of the 1.8 million buyers. The Traditional segment, led by Mercedes and BMW, accounts for another 800-thousand.

    The high-end Prestige luxury segment, piloted by Mercedes, is much smaller at 100,000 vehicles, but sales are highly profitable and have doubled in five years. This breakdown of the luxury industry clearly shows some excellent opportunities for Lexus to grow in the future.

    Our plan is to increase our lead in the mainstream "New Values" segment, to expand further into the traditional mainstream area, AND, to go upscale with some new products that will appeal to prestige customers."

    "We also plan to grow Lexus a third way, by expanding into the fast-growing prestige luxury segment. This move is about much more than just going after higher profit sales. The prestige market is the key to image development and overall luxury success. We learned that from visiting with America's top car collectors like Jay Leno, and by doing extensive interviews with executives from dozens of European prestige brands like, Givenchy, Gucci, and Prada. We discovered that these luxury icons make exceptionally high-end products to build their image, and then rely on mainstream luxury items for the bulk of their business."

    "We firmly believe this new flagship model (the LS600hL) will not only expand the definition of hybrids, but also propel Lexus into the prestige segment. We're also studying the production of more prestige luxury products. Vehicles like the LF-A super car "concept" we unveiled last year in Detroit. Our goal is that these products will not only be styling knockouts, but also employ the latest in technology from our global Formula One racing teams.

    So, in a nutshell, our overall Lexus product strategy is to continually expand the boundaries of Lexus by adding new and unique elements to our core attributes of quality, dependability, comfort, value and an unsurpassed level of luxury. We're doing that by using more emotional styling for our vehicles, adding breath-taking hybrids, and developing prestigious high-touch, high-tech vehicles for the future. All of these elements will greatly broaden our appeal, give Lexus a much stronger point of difference, and lead to higher sales."

    Link: http://www.autospies.com/article/index.asp?articleId=7211&categoryId=1
  • stevekilburnstevekilburn Posts: 359
    Overall I agree with this assessment. But there are some critical flaws.

    First he should have defined the markets in terms of proportions. Using 70K to 1.2 Million figure is bad because prices will increase/decrease over time due to inflation etc.

    Had he defined prestige as top 1% of the market as he did in "autoline detroit" it would have made better sense. Mainstream including "new values" and "traditional" would then be the rest 9% forming the top 10% of the market, what we call as luxury.

    Of course this includes performance HELMS too like porsche and ferrari. But for this thread mainly on HELM, I believe top 1% or what he says "prestige" market is our only concern.

    So what is Lexus strategy in this regard:
    1. LS 600h L
    2. LF-A
    Is that a clear road-map to attack top 1% of the market. And strictly speaking

    While S-class and 7 fall in top 1%, the LS (below 70K) falls outside this category, so now we have a problem. But I still admire Lexus for what they have done. great job, till now
  • sysweisyswei Posts: 1,804
    Those who love capitalism and its benefits should push for more profit increases. Lexus should gun more for capitalists who love "commanding premium" along with its current customer base.

    Let's not confuse unit profits with corporate profits. If Lexus jacked up its LS prices by 50% it might raise per-unit profits, but unit volumes would fall enough that corporate profits would suffer.

    When the LS was introduced in 1989, Lexus had little to offset the established image and prestige of MB. So of course it had to significantly underprice MB if it were to ever sell comparable numbers of units. Something has to offset prestige in the buyer's mind, and presumed reliability isn't enough for some buyers.

    Over the years, Lexus has improved in prestige, and this has enabled them to narrow the price gap with MB. But we all know that MB still enjoys a prestige advantage, so again there must be some offset if Lexus is to sell comparable or higher numbers of units. As long as a prestige gap remains, so to will a price gap, imho. But you will see Lexus continue to narrow that gap as its prestige improves.
  • carnut100carnut100 Posts: 7
    I think there will be an S450. Just like there was a strong niche for the s430, there should also be a niche for the s450. If you remember the s430, also had a number of standard options of the s500 missing ... cheaper leather, cheaper wood, CD player not standard, lighting differences, etc. I think offering an S class at an $8 discount will grab some sales for them. The current S550 with any options at all tops $90k (I have an S550) and some people don't care if it is 0-60 in 6.7 seconds or 5.7 seconds. Both performance levels allow the average driver to do what needs to be done.
  • merc1merc1 Posts: 6,081
    I too think there will be a S450, just not right now. I really don't think adding a 335hp S450 will actually help sales in the short term. The S450 is going to have to get more competitive under the hood or come in under or at best at the same price as the A8L and 750Li, it can't cost 77K like the old S430 for it to be competitive with those cars now and Mercedes really can't sell a V8 S-Class for much less I don't think.

    Long before the W221 was ever shown the rumor mill always forecasted a direct-injection V8 for the S but then it changed to those engines weren't ready at the time of launch. I just think that MB has had to rethink the S450 because of cars like the LS460 and 750Li. If they bring in a S450 at even 75K it just won't do much again, IMO. My theory is that the new V8s will get direct injection for 2008 or 2009 and then we'll get a S450 with around 365hp and the S550 will be taken over 400hp. Mercedes it appears has opted not to put the new V8s in the ML or R-Classes either for MY2007 so something is up there, I think.

    Either that or they're waiting to see where the LS460 lands in price and go from there. That could be what they're waiting to see also.

    You are right about some not caring for the amount of hp or the 0-60 times, but I think now the ante has been upped and these cars are more competitive now than ever before. I mean the S550 comes withing 7 hp of the 1993 V12 600SEL!

    I think that right now a 335hp S450 would actually cost MB some sales as crazy as that sounds. A S450 will likely be still priced above the LS460 (maybe about the same as a LS460L would would make it even worse for the S450 hp wise) and that just doesn't add up and some buyers will likely walk away from the "S-Class" period without feeling they shouldn't have to pay 86K (to start) for a more "competitive" S-Class. As it stands right now there is no waffling, you either ante up 86-106K or not and be done with it. I think I like it that way until MB can make the S450 more competitive. I bet BMW won't import the 300hp 740i here for similar reasons.

    This situation with the S450 is kinda like the W140 S320. Now that car made up 40 percent of S-Class sales during some of those years according to an article I read some years ago, but it was dropped when the W220 was introduced. Why they brought over the W220 S320 7 years later for just 1 year is beyond me, but still I think MBUSA just didn't see the point of trying to pedal a car that was so lacking under the hood. If there has to be a cheaper S-Class I'd rather it be a 50-state certified S320 Bluetec, now that would be nice.

    Lastly, how is your S550???

    M
  • designmandesignman Posts: 2,129
    I really don't think adding a 335hp S450 will actually help sales in the short term.

    I don’t know. I have to believe there are still plenty of people who want to get their foot in the door of a Mercedes and could care less about engine power.
  • designmandesignman Posts: 2,129
    You can’t help but be impressed with what Toyota has accomplished. It’s ironic and interesting how Lexus uses the term “new values” and Steve calls it “cut-rate”. There is a huge swing in image perception there. Either way it’s what they are all about.

    Can the zebra change its stripes?

    I’ve always said that Lexus will not measure up in the status category until they can charge as much as the German competitors. However, it could be that the nature of status is changing too. Cigarette smokers used to look cool, now they look pathetic. Is it becoming cool beyond necessity to be frugal? Could it be that an MB buyer will start to resemble a fool and his money thanks to a loftier perception of “new values”? No doubt this is somewhere near the core of the Lexican mantra.

    As such, Toyota has moved to the beat of its own drum, it’s their DNA and if the perception of status in the auto world is to change, Toyota cannot change. Their plan has already worked and it seems there is no reason to think it will not continue this way.

    Lexusguy... good post, timely reference.
  • ljflxljflx Posts: 4,675
    "The point I am making is subtle. Its about "commanding the price premium" not "offering a value alternative"."

    Steve, if that's the case then why hasn't BMW or even Audi increased their prices $10K+. Why do both, and not MB, even offer a SWB car?

    "Because the paradigm has changed. Its not about offering more value for money in HELM"

    The paradigm will never change. It is, has been amd always will be about making money selling these cars.
  • garyh1garyh1 Posts: 386
    Let's not confuse unit profits with corporate profits. If Lexus jacked up its LS prices by 50% it might raise per-unit profits, but unit volumes would fall enough that corporate profits would suffer.

    Exactly correct, syswei, and the final nail in the coffin for Steve's rant on pricing. I had been waiting for a while for ljflx to make that obvious business point so succinctly (he usually does that so well), but you did it first.

    Any marketer as smart as Toyota/Lexus would be aware of the issue, and would have studied demand curves to determine not "how to get the most prestige", but "how to maximize corporate earnings". Once a brand is fully developed, if they believed they could sell enough cars at
    a higher price to more than make up for the expected lower volume, they would do it. They obviously believe that is not the case now, and Steve I don't think your postings are going to convince them you are right and their marketing studies are wrong!
  • blkhemiblkhemi Posts: 1,717
    "Yikes! If that is the case the class will be once again sent back to the drawing board. It sounds nice, but a base A8 with 470hp sounds like a little bit much to me."

    You thinks thats crazy, try a 550-hp W-12 for '09 and a 630-hp S8 for '10/'11. Audi is getting very serious at taking MB/AMG head on in terms of powerplants. They are even developing new Quattro systems and pneumatic suspensions to handle all the twist that these engines will produce.

    Audi is on a war-path here in the States. I guess they finally got V-Dub to loosen up a bit and give them more directional stability here.

    They're developing new and improved ways of producing the legendary aluminum bodies so it'll be less costly on both the company and the customer(insurance).

    But there is one constraint that I have to pick at: PRICE! I wonder where will this send their pricing strategy. If they're going after MB, then for sure they don't think that they can command MB's primo prices? Not yet at least.

    BTW, BMW is awfully quiet with the 7-Series. I haven't heard anything on the new replacement, but hear that the new car will too send the carmakers back to the planning board.

    BTW, remember when the A8 came out in '04. It's 335-hp engine was more powerful than the S500(302hp), the 740il(325hp),the LS430(at the time-290hp), and XJ8(294hp). So this Audi's plan of attack again to out-power all of the other car's for at least a year or two.
  • merc1merc1 Posts: 6,081
    If not, why does the 6 cyl E350 sell so well vs. the 8 cyl E500? When I bought my E320 in 1998, I was fully satisfied with its 6.9 sec 0-60 vs. 6.4 for the E430. I would imagine a lot of people are making the same valuation now, with an $8350 MSRP price differential between the starting prices of the current models (yes, some of which is due to other options included on the E500).

    Well thats a different class and the E350 is more competitive with other cars in that class compared to what a 335hp S450 would be compared to the 750iL, 07' LS460 and A8L. Plus the E's market segment is dominated by six cylinder engines which typcially aren't known for big hp numbers anyway. I just think they'd be better off at least making the S450 look more competitive on paper with more hp for it.

    MB will bring in the S450 as soon as it has excess production capacity over the demand for the more-profitable S550. When that will be is beyond my ken. They're just not going to say when too early for fear of slowing down S550 sales.

    I'll buy that. I think they may be trying to see where the LS460 will price in addition to what you've stated.

    M
  • garyh1garyh1 Posts: 386
    I have to believe there are still plenty of people who want to get their foot in the door of a Mercedes and could care less about engine power.

    I'm with you on this one, designman. If not, why does the 6 cyl E350 sell so well vs. the 8 cyl E500? When I bought my E320 in 1998, I was fully satisfied with its 6.9 sec 0-60 vs. 6.4 for the E430. I would imagine a lot of people are making the same valuation now, with an $8350 MSRP price differential between the starting prices of the current models (yes, some of which is due to other options included on the E500).

    MB will bring in the S450 as soon as it has excess production capacity over the demand for the more-profitable S550. When that will be is beyond my ken. They're just not going to say when too early for fear of slowing down S550 sales.

    Heck, before they were ready to produce the S550, they even tried to stretch their sales down-market by bringing out an S350 - what does that tell you?
  • merc1merc1 Posts: 6,081
    I don’t know. I have to believe there are still plenty of people who want to get their foot in the door of a Mercedes and could care less about engine power.

    You could be right, but I don't know either. Guess we'll have to see what they do.

    M
  • garyh1garyh1 Posts: 386
    I just think they'd be better off at least making the S450 look more competitive on paper with more hp for it.

    Can't disagree with that thought. Timing of ramp-up vs. demand for the S550 may give them time to improve the engine in the S450, but if not then they can always bring it in with a next-year upgrade.

    I think they may be trying to see where the LS460 will price in addition to what you've stated.

    Just think what you are saying. MB the leader, the innovator, the true HELM is holding back trying to see what Lexus the copycat, the pretender, the updated Buick-maker, is going to do? Wow, merc, you really have come a long way in the last year towards looking at things from a wider perspective. I salute you! :shades:
  • merc1merc1 Posts: 6,081
    Just think what you are saying. MB the leader, the innovator, the true HELM is holding back trying to see what Lexus the copycat, the pretender, the updated Buick-maker, is going to do? Wow, merc, you really have come a long way in the last year towards looking at things from a wider perspective. I salute you!

    LOL....picture me grudingly typing this like a stubborn little kid, saying "thank you".

    Seriously though MB isn't above having to re-think things from time to time especially with pricing in this segment. I don't think anyone MB/BMW/Audi/Jaguar etc. thought Lexus would add nearly 100hp to the LS this time around.

    M
  • tagmantagman Malibu, CaliforniaPosts: 8,441
    Please allow me to throw a potential wrench in the gear regarding the S450.

    I think the S450, in the format we are all expecting it to be, would not necessarily offer MB a clear advantage over the LS460 and it also would not necessarily have enough unique characteristics compared to the S550 . . . and it, therefore, could potentially cannabalize some S550 sales, as well as lose some others to the LS460.

    I suspect that the execs at MB are aware of this. So while the rest of you were posting about the timing and merits of the S450, I started to wonder how the S450 could offer something more unique and special and innovative. I then thought about the new 350 CGI engine. Given the increasing focus on fuel efficiency and power, this might be a viable alternative and a good marketing strategy.

    MB might be planning to use this 350 CGI engine instead of the one we have all been expecting, or perhaps there are alternative BluTech diesel plans, or even something else that we know nothing about yet.

    Anyway, my point is that I am strongly suggesting the possibility that there might be an alternative to the powerplant and model designation that is being considered.

    The advantage could be less cannabalization of the S550, and further distinguishing and distancing itself from the LS460.

    Anyone else want to agree with me on this possibility, or have I gone too far out on a limb here?

    TagMan
  • ljflxljflx Posts: 4,675
    That's a sick strategy in this green and increasing oil cost enviroment (nearly as sick as bringing out the phaeton) and will be a bomb IMO. Sounds to me like Pietsch is still calling the shots, is as obsessed as ever with MB and is as nuts as ever on business decisions. Lexus bringing out a powerhouse car above the LS and competing in a different segment is the smart way to go. If you are going to brag about low volume high HP cars then move to another car level rather than put an existing HELM on steroids. This is reminding me of a pennant race where a few teams are playing each other in games at the end of the season and killing each other off while other teams feast on losing record teams. Audi, if that strategy is correct, may win a battle but you can bet your life they will lose the bigger war.
  • ljflxljflx Posts: 4,675
    You could be dead right here. It does seem - on paper - that they made the S550 a little too perfect leaving no room for anything underneath it. But an alternative diesel powerplant would circumvent that. They have to have something under the S550 because I'd think that their sales would drop to low volumes after about 18 months if they don't. Lastly I must have read three different stories saying that the American market is the penultimate market for the S class, so to be one dimensional at the affordable level cannot be MB's plan.
  • tagmantagman Malibu, CaliforniaPosts: 8,441
    You could be dead right here. It does seem - on paper - that they made the S550 a little too perfect leaving no room for anything underneath it. But an alternative diesel powerplant would circumvent that.

    Man, if we are right about this . . . it's going to feel real good when we see it. What do you think about the other possibility of MB using the upcoming 350 CGI (Stratified-Charged Gasoline Injection) engine? Just as legitimate, don't you think?

    TagMan
  • ljflxljflx Posts: 4,675
    Or a hybrid of some type.
  • lexusguylexusguy Posts: 6,419
    Audi's super cars have already commanded very primo prices though. The RS6 was more expensive than the last M5, wasnt it? The new RS4 is also BIG bucks.

    Audi's cars have to outpower their competition if they want to be competitive in terms of actual on road performance. The A8 when it came out in 2004 may have had the horsepower advantage, but its still slower than just about every other car on the list.
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