Time of writing: November 2019

What is the future of luxury and mainstream cars? In essence, it becomes the availability of choice and prestige.

A convergence

Today we are at a point where typical indicators of “luxury” cars are now gone. And more nuanced areas separate the two categories.

Commonality

  • Safety systems are widespread across the industry

  • Powerful engines are now available everywhere (i.e. 400hp now can be had for <$40K)

  • Technology and features like Apple CarPlay and ventilated seats are commonplace

  • Luxury materials like wood and leather can be found in Kias and Toyotas

Luxury’s Separation

  • Brand equity

  • Elevated levels of craftsmanship

  • Some high-tech features like Night Vision

  • Exclusive higher output powertrains

  • Elevated sales and service experience

The purpose

Luxury: expression of status and personality

Mainstream: commodity tools to go from point A to point B

The Future

Of course, typical indicators like exotic materials, craftsmanship, and creature comforts will continue to define luxury. Less superficially though, I believe it is the luxury of choice that will set luxury apart.

Just look at today’s automakers’ portfolios. All luxury portfolios include sedans, wagons, SUVs, coupes, and convertibles. Mainstream is shifting towards only SUVs and all but eliminating the less popular bodystyles (mainly as a function of economy since margins are razor thin in mainstream and these automakers are reliant on volume). Case in point, the Dodge Charger will be the only sedan in the Detroit Big Three’s combined portfolios in the near future.

The long term future hinges on the future of autonomy. As we shift into a sharing economy for vehicles, a consolidation (or at least alliances) of the industry is inevitable. Mainstream cars are merely tools and redundant vehicles will be eliminated in such alliances. Already, the mainstream industry is a sea of sameness. Nearly every SUV looks the same. I foresee mainstream brands pooling together to work on the platform delivery of ridesharing rather than focusing on differentiating the brands through nuances in vehicle design.

Luxury is a whole different story. Because of the variety of choice, unique style, and strong brand affinity for a respective brand, luxury brands can remain self-contained. They can vertically integrate the platform delivery and vehicle choice for consumers. Moreover, the lifestyle choices and activities of a luxury buyer demands this variety of choice. Racing, off-roading, and the spirit of driving-for-fun demands unique vehicles for these leisure activities. Today, status is defined by busyness. Tomorrow will return to yesterday: leisure will define status.

No doubt, luxury and mainstream will evolve. But while mainstream will be forced to adapt more radically and lose its personality, luxury can evolve into a more unique ecosystem for its singular brand and customers. A parallel reference: think of the smartphone. All smartphones look the same now and can do everything another can. But, you buy an iPhone for its design, the Apple brand cache, and the Apple ecosystem.

Luxury is not dead.