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High End Luxury Cars

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Comments

  • bluestar1bluestar1 Member Posts: 112
    "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 Member 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 Member 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 Member 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 Member 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 Member 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
  • gscoupegscoupe Member Posts: 30
    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 Member 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 Member 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 Member Posts: 4,690
    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.
  • gscoupegscoupe Member Posts: 30
    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 Member Posts: 4,690
    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 Member 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 Member Posts: 2,913
    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 Member 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 Member 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 Member 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 Member 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 Member Posts: 4,690
    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 Member 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 Member 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 Member 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 Member Posts: 4,690
    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.
  • biggie2biggie2 Member Posts: 45
    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...
  • biggie2biggie2 Member Posts: 45
    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 Member Posts: 4,690
    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 Member 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 Member 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 Member Posts: 1,804
    Well put and succinct. I know I get too wordy at times.
  • bluestar1bluestar1 Member Posts: 112
    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 !
  • merc1merc1 Member Posts: 6,081
    I'm done with the what if scenarios. Lets stick to the cars, where actual, real life data can be used.

    "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?"

    Got it. This was clearly shown just recently in the C&D comparo, for 87K (S430), the overwhelming majority of MB buyers would pick a S500, which would give you more for that 87K. Thats the first reason for the S500 outselling the S430, the next would be that once you've reach the point of looking at a 73K car, a 80K one isn't nearly the stretch between a LS430 and a S500, as you try to imply, the cars have a huge base price difference. Only a LS430 Ultra(?) buyer at 71K could think about looking at a 73K S430 or a 80K S500, the buyer looking at the base LS430 at 55K, isn't going to just say, oh the S500 is more prestigous, let me shell out another 25K. To assume everyone can make this kind of leap is pure fantasy. I'm sure there are some LS430 buyers that can afford a Maybach and everything else in between, but the average one can't. Not all S-Class buyers could either. Note: Not saying this the same kind of price leap, just using this for emphasis.

    Question: what does any of this have to with Mercedes' sales vs Lexus'? Not much. This has nothing to do with, again what you've ignoring here, that most of Mercedes' cars are still priced higher than Lexus'. What Mercedes models outsells another is completely irrelevant in this conversation.

    "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."

    Lots of things wrong with this. First of all the CLK has 6 models, the C Coupe has only 2, and
    try as they might, MBUSA, will never tell you that all C Coupe sells are of the C230 Coupe, I have never, ever seen a C320 Coupe in a lot or on the street. Secondly we're talking about a completely different price range and buyers here. The C Coupe is bought by first-timers to the MB brand, the CLK isn't.

    " 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."

    You're talking about within the MERCEDES-BENZ lineup, not MERCEDES vs LEXUS. Again, you're reaching for another point that has nothing to do with what you and I have been talking about here. I could have told you the very same things you've posted, within the Mercedes lineup. No news there.

    We all know that people are willing to pay for a car for whatever reasons, prestige, performance, whatever, but you've continually missed is they only do this if the CAN DO IT. Your theory misses this by a country mile, you're assuming that everyone can afford to buy whatever they want.....this is so not true. A S500 could be the most critically acclaimed, prestigious car ever made, but unless you have 80K it doesn't matter. A LS430 is much cheaper, by about 25K, and you think that doesn't prevent a car like the S500 from selling more units you're sorely mistaken and clearly not dealing in real world.

    "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 I take this as you saying that say a SL500 and a S500 offer more content than a SC430 or a LS430, I could have sworn you were the same person that said these cars didn't even come close to justifying their price premiums over their Lexus competition. You can't have it both ways, they either do or they don't. Since you've admitted that Mercedes either sells as many or outsells Lexus' cars then I guess this statement was wrong from the start:

    "And I'm saying that the buying public, on balance, doesn't feel the high prices are worth it...which is why MB isn't number 1 in unit sales."

    Corrected: The only Mercedes that the market doesn't think much of is the ML. They think quite highly of their cars, in fact going by sales numbers, they think of MB's cars higher than Lexus' due to in many cases a whopping price difference not being a factor in MB selling more actual "cars" than Lexus does. This is most clearly demostrated by you. You've tried to state that prestige is the big equalling factor here, which it isn't (see above), but lets go along with that for a minute. If thats the case, then all Mercedes is missing is the SUV factor then right? Since their cars outsell Lexus' quite easily in most cases. I've said just that all along, but you in your statement above you said "MB isn't #1 in unit sales" implying that entire brand's cars weren't worth the price. You, yourself have proven this not to be true, after I already proved it by pointing MB vs Lexus sales, model line vs model line.

    Your initial theory is hugely flawed also because you're not taking into consideration all those models MB has above 70K? Are they not trying to sell those too? Does Lexus even compete past 70K? How could a company that has so many higher priced cars than a competitor, outsell that competitor when that competitor specializes in 30-50K automobiles, when the majority of the more expensive brand's cars are priced over 50K, with some of them over 90K? Look at the price chart given earlier. Again, where do most of MB's models land? How is Mercedes supposed to outsell Lexus when Lexus' biggest sales numbers are produced by their SUV, of which they have three volume SUVs compared to Mercedes' one? Please don't tell me the G-Class is a volume SUV when its projected volume is 1K units yearly, and the "variant" of the G is a 95K AMG model.

    Nobody is contesting or disputing anything about what people are or are not willing to pay for. I never contested this, you brought this up in an attempt to steer away from your initial theory being wrong. Your whole basis was that Mercedes should have no trouble outselling Lexus, and yet you've yet to even address certain points, only to come up with more "what if" questions. Look at the two brands price and model layout on their websites, anyone can see Mercedes in reality has no business even being in a sales race with so many cars priced more than any of their competitors.

    M
  • merc1merc1 Member Posts: 6,081
    The CL, SL, and S-Class in particular make even their German competition from BMW and Audi look like bargains, on paper. A loaded A8 or 745Li, and I mean loaded each costs about 80K, right where the S500 starts, yet Mercedes isn't at a sales disadvantage compared to a 55-71K Lexus model? Come on now. Mercedes would sell a ton more cars if they were cheaper. Think about Lexus dropping the price of the SC430 to about 40K, the car would sell a whole lot more than it already does. You can want and lust after the most prestigous cars on the planet, but if you don't have the money you can't get it. You are not taking this into consideration. Your theory is based on price not being a factor between a Mercedes and Lexus, and for the majority of buyers that is simply not the case. Price is one of the biggest things Lexus trades on, when comparing themselves to Mercedes, here you're saying that it doesn't make a difference because a Mercedes is more prestigous. So not true for the bulk of consumers. The LS430 can be had with almost everything the S500 has for 71K compared to about 90K+ for a truly "loaded" S500, or as you saw in C&D over 85K for a loaded S430, call it MB being overpriced or whatever, but Mercedes is at a fundamental sales disadvantage here.

    ljflx,

    As long as you are not trying to imply that Mercedes is the only brand that is bought for prestige sometimes, then there is no issue with that statement from me. I agree that everyone should buy they car they want, otherwise for the money I have to spend I'd get a C230 Sedan and call it a day, but I don't want one.

    I know what you're going to say, but I'll ask anyway. I know back in 2001 you looked at the LS430 vs the S430/500 and you bought the LS430. My question is, if the S500 would have been priced closer or nearly the same as the S500 would you have bought the S500 or at least considered it more heavily. I think I know what you're answer will be because of the conversation I'm having with syswei, but I figured its worth a shot. My point is that I know you can afford either, but wasn't the MB knocked for price, in addition to the nav/ride/reliability concerns? Or better yet did the price make the things I remembered you listing as negatives that much harder to overlook????

    M
  • gscoupegscoupe Member Posts: 30
    I still say MB's disadvantage in prices should be more than offsetted by their much wider model range they offer. There are some models in the MB line up that doesn't even have competitors available not only from Lexus, but other luxury brands as well.Other than the fact that Lexus has yet to introduce coupe versions of their sedans, if one is looking for a V8 powered 4 passenger luxury sports coupe/convertible, where can you go besides Mercedes(Cl & CLK), at least in the past few years? The BMW 6 series coupe/convertible is coming out though, as well as the M version of the new 4 series BMW which I've heard will be a V8 ,and I suspect there will be more competition coming from other brands as well in the coming years.

    BTW, I think the BMW 6 series is the best looking Bangle design yet. I don't know if it'll appeal to everyone, but at least not nearly as hideous as the Z4.
  • footiefootie Member Posts: 636
    With 75% of these high end cars being 'leased', isn't the lease price the issue for most shoppers?

    I know quite a few folks that have acquired a BMW, Lex or MB in the last few years. Most of them call their accountant or financial advisor and say "Hey, I am going car shopping for new Merc or whatever, should I lease or buy? Next questions has to do with source of funds..."

    If so, then another big factor here besides prestige and heritage and 0-60 times, is the resale value and the amount of manufacturer's support.

    Cars like MB's and Lex carry pretty good residuals, while BMW tends to be less and Audi/Jag are in the tank. Also, Lex has good money factors from TFS and MB is getting more agressive from MBCC since their inventories have risen here.

    Take an 80K car with a 60% residual - you pay for 32K worth of depreciation 56K average loan with nothing down.

    Take a 70K car with 50% residual - you pay for 35K depreciation and 51K average loan.

    Depending money factors the difference can be very small.

    So I don't get the Encyclopedia class discussions on this issue. It ain't about price. It's about deal and cash flow.
  • gscoupegscoupe Member Posts: 30
    You are correct. For those who lease their cars, Mercedes' higher prices may not be a significant disadvantage at all.
  • ljflxljflx Member Posts: 4,690
    It's still a money factor. In 2001 the S500 would have cost me $375+/- per month more than the LS430. That still works out to be about $13,500 pre-tax and 8,500 post tax differential on a three year lease. If you continue to lease for 6 years or so that's equal to or greater than the price difference in the first place. If you want to spend that money you save on the cost differential you can buy a houseful of electronics or a few nice plasma TV's. I just added a Samsung DLP TV which was about equal to the third year of lease savings I had.

    I always tend to lease because I like a new car and the latest stuff every three years. But as well I find it very difficult to justify a purchase financially - on the cars in this arena. Lower end cars are a different story. I just worked a GX deal at $745 per month with 0 down. I could have bought it but using a 3.5% return on the money I would have laid out over three years upfront (and same on 3 years of lease payments) the price worked out to be $250 cheaper if I lease and buy at lease end (including the lease fee of $500) rather than buy upfront. In 2001 with interest rates a bit higher it was about $1,000 more to lease my LS430 than buy upfront (half of that was the lease fee). So why buy when you can try out the car for three years and decide later and either save some money or spend a tad more. If you decide to buy at lease end and pay a tad more consider it an insurance policy on getting a quality car that pleases you.

    Merc1 - I think our HR handbook is shorter than your last two posts. As for prestige - people buy certain things to impress others rather then themselves. It happens most often with what is seen as the highest price commodity - MB, Rolex etc. But it spreads out very well to the BMW's, Jags, Lexus etc. of the world as well.
  • bluestar1bluestar1 Member Posts: 112
    In Oct 1998 I bought my '99 LS400 with the premium pkg (HID, heated seats, NAV). OTD price was ~$60K. Could I have bought an S-class ? Didn't think I want to shell out that much extra cash for a 3-star prestige. I got a fully loaded luxury sedan for $15k LESS than the comparable (by my standards) MB. OK I couldn't afford the S-class. Does that make you feel better, Merc1 ?

    What irritates me slightly is having someone who does not have an MB (probably cannot afford 99% of them) talk so authoritatively and berate others who, at least, put their money where their mouth is. Someday, Merc1, you will finally own an MB, and we can all rest in peace ! Sorry to make this personal, but these long-winded diatribes gotta end somehow.
  • footiefootie Member Posts: 636
    With 75% of these high end cars being 'leased', isn't the lease price the issue for most shoppers?

    I know quite a few folks that have acquired a BMW, Lex or MB in the last few years. Most of them call their accountant or financial advisor and say "Hey, I am going car shopping for new Merc or whatever, should I lease or buy? Next questions has to do with source of funds..."

    If so, then another big factor here besides prestige and heritage and 0-60 times, is the resale value and the amount of manufacturer's support.

    Cars like MB's and Lex carry pretty good residuals, while BMW tends to be less and Audi/Jag are in the tank. Also, Lex has good money factors from TFS and MB is getting more agressive from MBCC since their inventories have risen here.

    Take an 80K car with a 60% residual - you pay for 32K worth of depreciation 56K average loan with nothing down.

    Take a 70K car with 50% residual - you pay for 35K depreciation and 51K average loan.

    Depending money factors the difference can be very small.

    So I don't get the Encyclopedia class discussions on this issue. It ain't about price. It's about deal and cash flow.
  • pablo_lpablo_l Member Posts: 491
    It is about price. That is indisputable. Even people will a lot of money to burn try to spend it smartly. Smart shopping does not stop because people have enough money to buy whatever they please. That is a very flawed assumption.

    The leasing difference is not small. Go to the respective websites and give it a try: leasing comparatively equipped S430 or LS430 turns out to be $1458 vs $989. Quite significant. You also have someone who looked into both talking about about $375 a month. So it *is* a very real money issue, and one's got to decide whether the star is worth the costly premium. Some say yes, some say no.

    Mercedes recipe for success going forward is obviously to keep as many people as possible going for the premium, while the competitors will make that as tough as decision as possible.
  • michael_mattoxmichael_mattox Member Posts: 813
    The biggest difference in the S430 and LS430 is how much more that you get for your money with the LS....It is amazing to me that Mercedes ever sells an S430
  • pablo_lpablo_l Member Posts: 491
    It's amazing to you, yes. But then there's the people who'd be amazed at those who settle for lesser heritage and/or prestige... and the thing is none of the 2 camps is "wrong". It's about personal preference - different strokes for different folks.

    Buying any car over $30k is, after all, an irrational act to some degree.
  • michael_mattoxmichael_mattox Member Posts: 813
    Just curious...Which camp would you fall into.
  • pablo_lpablo_l Member Posts: 491
    Depends on the item. With cars, I did go through an escalation exercise until I found out I am not that much into prestige, but rather into what happens to entertain me. I discovered that, somewhat tragically, with my Jag XJR ownership experience. Great car, but bad fit for me for a number of reasons. The fact I opted for a 9-3 convertible for most of my car driving speaks volumes. I do not need for everybody to see what I can and can not afford. But I do have a brand snob in me, and thus I did get a near new car, but I did it i used condition - there's no way on earth I could justify blowing $100k on a car given my current post-bubble income. I do run my budget like a business - I manage it to be profitable at year end. In the meantime, we have added a Mini S to the car stable, and it is a total blast. For all of $25k I am having a great time.

    My wife is different, and a bit like my mother -Freud would be proud- in her car brand preferences. Rationally, she thinks many cars are very neat. But she will go Merc brand every time, even when she shies away from blowing the money on the more expensive offerings (I am happy about that).

    I should also point out that I think the Merc CL is *the* car. I would get it, I could get it, but I prefer to wait until the day where I truly feel I have "arrived" until I celebrate with treating myself to a new CL. Besides, they are damn expensive in maintenance once the warranty runs out, and I do shy away from loading up re-occurring expenses these days...
  • michael_mattoxmichael_mattox Member Posts: 813
    Do yourself a favor and test drive a new ES or an old ES

    If you and your wife doesn't like that car (and the lexus) name....I surrender.

    There is nothing not to like including the price.
  • merc1merc1 Member Posts: 6,081
    Thats too bad you feel that way, because I could say about the same thing for a person who constantly sites articles as the end of the world, and also doesn't own a MB and who constantly goes by JDP and CR as the end-all authority on everything MB and then tries to pass it off like the rest of the world lives by this stuff. A person that just by their postings on MB cars, you can tell they don't know anything about them other than what they've read. Thats what I could say.

    What me and syswei were doing is debating, and we did so with much more civility than many a debate we have ever had in here about MB and Lexus. If you don't like my posts then don't read them, its about as simple as that. Putting me down by saying (assuming) about what I can or can't afford is you trying to berate me now, of which I didn't do to anyone during this debate. If you don't like what I have to say fine, but you made it personal this time, I didn't. Period.

    M
  • gscoupegscoupe Member Posts: 30
    While I agree that to some buyers,they can only buy the car that they can afford. However, when it comes to high end luxury cars, where it's also a status symbol & a means to show off, some buyers will tend to pick the car with the higher price tag regardless of whether he/she think it's worth it. They want their neighbors & relatives to know that they can afford a $80K+ car rather than a $60K car. So at the higher end, higher pricing may actually not be a disadvantage at all to some buyers.In other words, they don't really care what they are getting as long as it's expensive.You can't automatically assume that most car buyers are very knowledgeable about cars & are wise, prudent & rational in their purchase decisions.I've personally known people like that, some among my relatives. There are a good portion of luxury car buyers that are silverspooners that can't fully appreciate the value of money.

    I've also heard that some buyers can justify paying more for a Mercedes or a BMW rather than a comparable Lexus or Infiniti because they can end up losing the same among or even less in depreciation over the period of ownership despite the higher price tag.This is definitely true for some Mercedes & BMW models because of their heritage & name.

    To claim that higher price will hinder sales, while true in some cases, is a way too simplistic way of looking at it, as there are many other factors involved as well.
  • pablo_lpablo_l Member Posts: 491
    Michael M -

    if the XJR wasn't for me, you can rest assured a more vanilla sedan like the ES is not going to set my world on fire, either. The only candidate is the SC430, as I explained earlier. It is not that I have a bias against Lexus as a brand, by the way - I am fully aware and have always stated their cars are phenomenally engineered.

    gscoupe -

    I agree with everything you say, but the key is to not start lumping the majority of buyers of any brands into certain categories, as some have done. Certainly not every Mercedes buyers is irrational, nor is every Lexus buyer rational. And if with luxury cars it was just a matter of raising the price to maximize appeal, you'd have all these cars being sold at over $200k. But oddly enough, the over $100k market seems to stay constant in units, and it seems more offerings -as have become available recently- do not increase sales at all, a sure indication the super-rich as a rule do never spend what they *can*, but rather that they are governed by fiscal self-discipline. Due to my job, I work with many multi-millionaires (tragically, I am not one myself :) and the vast majority of them is rather spartan in their car buying habits.
  • ljflxljflx Member Posts: 4,690
    I also know many multi-millionaires and I have the same experience as you. One or two pursue the image but most buy value and what suits them best. Their homes and persona speak prestige, not their cars. I do see that there is a difference with those who inherit money vs. those who earn it though. Those that inherit are more wreckless whereas those who earned it will value it greatly.
  • gscoupegscoupe Member Posts: 30
    I agree with you that we shouldn't lump buyers into broad categories, like suggesting that Mercedes aren't selling more cars because buyers who don't buy Mercedes can't afford them. Besides,pricing alone don't dictate everything.I bought an Infiniti G35 coupe which is $10K less than a comparable BMW 330ci, but given that BMW is the brand with the highest resale value in Canada, especially the hot selling & highly reputable 3 series, plus the free service, I never believe I'm saving any significant amount of money, if at all, by going with the Infinti. So price isn't an issue at all in my decision. It's the fact that the Infiniti is the fresher hot looking car with comparable fun & performance to the 3 series,and is not as commonly seen on the road as a Honda that made the decision for me.I think nothing less of the 3 series because it's a great car. I picked the G35 coupe because the Infiniti is more desirable for me at this point in time.
  • mfullmermfullmer Member Posts: 773
    ...am I seeing a common thread that the Lexus (lets say the LS430) is much more exclusive the the MB?

    Everywhere I go I see S-Class of some nomenclature. Every type of person driving them. I also know 6 people who have '01-'04 S classes (ok, 3 of those have traded them in on more "exclusive" cars - 2 LSs and one Q45).

    I don't see the LS430 everywhere and the person behind the wheel, when I do see one, is someone with whom I can relate.

    So, I guess for exclusivity, the LS430 wins, hands down.

    Of course MB RAISED their prices for '04, with no real updates. What are they thinking? Oh, yes, I know. Those "look-at-what-I'm-driving" types will pay that price for a sub-standard vehicle without question before they will be buy some piece of "[offensive geographical slur ommitted]-crap".
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