Is the Luxury Car Market Getting Squeezed?

BMW is a brand I have owned and watched over several years, and it’s been interesting to see its perception move around the perceptual map. For several decades, during its ‘Ultimate Driving Machine’ years, it was considered a top luxury brand of car that people who enjoyed driving would aim to own. As a product, it was seen as second-to-none in this field, with Mercedes seen as a car that was nice to be inside, but not necessarily as fun to drive as a BMW, and Jaguar seen as luxury, but a bit stuffy. BMW was perceived as better engineered than American cars, even the higher-end ones such as Cadillac.

Then something started to get muddy.

The first problems may have come when Porsche started offering a broader range of models, thus competing with BMW on its premise of being the most fun luxury car to drive. Suddenly, people who love to hear the rev of a good engine could drive a Porsche SUV, or family Panamera. Other super luxury car brands have followed, and just yesterday, I saw an SUV Maserati on the street. It was gorgeous but definitely a strange concept, and is yet another encroachment on previously dominant luxury car brands.

The next problem started with the 2009 Great Recession. Millennials are now of car-buying age, but don’t always have the budget or values that would make them buy a high-end BMW, so BMW expanded its line of cars to offer lower-end vehicles, such as a 1-series. Unfortunately, this is somewhat alienating for BMW devotees, as the 1-series somewhat dilutes the values that the brand built over its lifetime of being a car that could race along the Autobahn, if called upon. Add on top of that the fact that several car companies have merged over the years and technology has reached a point where many brands of car are actually quite well-engineered. This chips away at BMW’s core claims of differentiation.

I have recently given up my BMW, and taken to ride-sharing companies, like Uber and Grab, which has given me the experience of being in a high-end Toyota Harrier, a lovely Renault Grand with a completely clear moonroof, and others, which have both been wonderful passenger experiences- all without the hassle of actual car ownership.

BMW will need to re-define its brand promise and clarify its messaging if it wants to connect with potential customers in future. It is currently in the unexpected position of being squeezed from both lower-end brands, and higher-end brands, and needs to carve out its brand positioning quickly and definitively, if it wants to be successful with the next generation of car buyers. Its next move on the perceptual map should be a move upward- become the best quality again, so as to capitalise on its current brand equity, and distinguish itself from the mid-level brands that are lifting their own product engineering.