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Why BMW And Mercedes Made Cheap Cars That Failed

Why BMW And Mercedes Made Cheap Cars That Failed

Luxury cars are typically
meant to symbolize prestige, wealth, and even excess, but
sometimes they can come pretty cheap. Every so
often premium automakers push out cars with starting prices
well below the market average. While many consumers see
a car as a largely rational purchase, a means
of transportation, perhaps a tool for work, and maybe
a way to have some fun, luxury buyers are generally willing
to pay for a few extras a person may
not exactly need. Buttery leather seats, real
wood dash panels, and premium sound systems. However, in their quest for
ever greater volumes, some premium automakers are trying to see
if they can get a few more buyers down at the
lower end of the price range. While there are some
advantages to going down market, there are
also some perils. Sometimes it doesn’t
work out. The average new car price in
the United States in 2019 was around $33,600 including
incentives and dealer discounts, according
to J.D. Power. That is for all
cars, not just luxury. About 40% of all premium vehicles
sold in the US cost less than $40,000,
according to J.D. Power. BMW, Audi Mercedes,
the three largest luxury brands by volume in the United
States, are some of the biggest sellers of luxury
vehicles at any price, including the lower end. One very notable example of a
luxury car at the lower end of the price range came
from BMW in 1994, the BMW 3 series compact, officially known
as the BMW 318ti. The car was BMW’s mid-1990’s
shot at widening its highly successful 3 Series
range of sports sedans, which the company had
debuted in 1975. But the three door hatchback
sold poorly in the United States and was discontinued
in North America after just four years
on the market. It enjoyed more success elsewhere
in the world though, and stayed in
production through 2004. A few years after the
318ti, Mercedes-Benz also tried its hand at selling a
cheaper model for the masses. The Mercedes C-Class Sport Coupe
or SportCoupé was a three door hatchback or lift back
car sold in the US beginning in 2001. The SportCoupé had a starting
price at the time of $25,575. A pretty low
price for a Mercedes. For a few thousand, more buyers
could opt for a bigger engine and some
other features. However, at least in its
basic form, the car lacked many of the basic elements
buyers would expect in a Mercedes such as leather seats
and a CD player. The SportCoupé failed to
make a sustained impression with customers, and eventually went
the way of the BMW 318ti. The model was
eventually discontinued in the US. However, the Germans aren’t
the only ones who try their hand at selling a cheaper
car that can appeal to a different kind of buyer. Jaguar, while under the ownership
of the Ford Motor Company, also tried reaching
out to less well-heeled customers with the X-Type,
a mid-sized sedan. It started at $30,000. The car sharing underpinnings with
a Ford model sold in Europe called
the Mondeo. It was not considered a
bad car, reviewers simply didn’t feel it was good
enough to be a Jaguar. And again, sales
were lackluster. Ford would eventually sell the
entire Jaguar brand to India’s Tata Motors. The automotive arm of
the Tata conglomerate. Despite failures, luxury automakers
have continued to see the promise in dipping
into the mainstream market. Mercedes Benz released these
CLA in the U.S. for the 2014 model year. It was basically a sporty
compact sedan with a starting price of
just under $30,000. To save money, Mercedes built
the CLA on a chassis shared with another model and
assembled the car in low cost Hungary. But some reviewers at the
time commented that the car lacked the rich feel
of other Mercedes-Benz models. A reviewer at car blog Jalopnik
said the CLA is an economy car dressed in a
fancy suit, but underneath the dapper garb lies
a compromised Benz. This doesn’t mean it
was a bad car. Reviewers still complimented the
CLA’s outer design and interiors and said the
car drove well, but the $29,900 dollars starting price did
not last, the CLA 250 now slots in at a
starting price of around $36,650 as of 2020. Mercedes-Benz cheapest car in the
US is now the A-class sedan, which starts
at around $32,800. That is nearly $10,000 cheaper
than the next larger class of sedans, the C-Class,
which start at around $41,400. Mercedes still considers the
CLA an entry into the brand, it is just that
the newer CLA offers a bit more than the A-class and a
lot more than the original CLA, which was regarded as
pretty barebones for a Mercedes at the sub
$30,000 starting price. Auto industry insiders note
that BMW and Mercedes brands don’t really have mass
market brands like many of their competitors. So if they want to
increase volume, they have little choice other than offering a
wide range of products under the same brand. This does offer customers a
wide array of options, which helps the brands cover
a broader slice of the market. Throughout much of
their history, both German automakers specialized in selling
top shelf versions of traditional passenger cars
that boasted luxury and high performance. But since
the 1990s, U.S. consumers have increasingly
sought out sport utilities, and Mercedes-Benz and
BMW have responded. The largest portion of each
brand’s sales growth in the US in recent years
has come from SUVs. But both companies have sold
cheaper cars in part because they give each brand
a chance to attract new buyers, especially younger ones who
might not yet have the cash for one of the
classic mid or full sized models. If you have as a
what if example, if you have somebody buy one at 25 even
if their next car isn’t necessarily an Audi or Mercedes,
maybe they come back a little bit later on. If
you can catch somebody that young and get them interested
into your brand, it maybe later in their life that
they come back, but you still have a better opportunity
of getting them to come back. It’s easier sometimes
than to get them in fresh. Mercedes told CNBC that
70% of CLA buyers come from other brands and the
majority of those are coming from non-luxury brands. On average, these customers
are eleven years younger than the typical Mercedes Benz
buyer 54% of A-class buyers in 2019 came from
other brands as well. And those customers most
frequently had owned Toyotas, Hondas, and Lexus vehicles
prior to switching over, Mercedes said. Some industry
observers are skeptical that luxury brands are going to
be able to convert a considerable share of the market
by simply offering a lower priced vehicle when so
many of their other models are going to be simply
out of reach for many customers. But Mercedes told CNBC
that two thirds of CLA buyers have gone on
to buy another Mercedes-Benz vehicle. There is another risk
to all this, of course. Industry observers warn that
as with fashion or similar industries, high end
brands risk diluting or losing the exclusivity associated
with their names if they go too far downmarket
or simply become too common. Brand power is always
important and yes, there can be a point where you
saturate your own market and you then start to feel a
little bit run of the mill and that’s a risk. And I think that for the
most part BMW and Mercedes have defended it
pretty well. In the days of the
C230, Mercedes did take some criticism for broader quality
issues that industry watchers said threatened
the brand’s premium reputation. Mercedes told CNBC
that it doesn’t think the mere existence of
more affordable models will devalue the brand and that
customers can see the difference between a $33,000
A-class and a $94,000 S-Class. Mercedes is actually
doubling or even tripling down on its
strategy, you could say. The three pointed star has
an SUV counterpart to the CLA called the GLA. It also released an all new
model, the GLB in 2019. Mercedes hopes these new entry
models will continue to draw new buyers
into the brand. Over the last 20 years,
the range of models available from companies such as BMW,
Mercedes, and others has widened in many ways, not
just in terms of price. In 1999, for example, BMW sold
six lines of models the 3 Series, 5 Series,
and 7 Series sedans. The Z Line of Roadsters. And for the first year
in history, BMW’s new sport utility vehicle, the X5. It also made high-performance versions
of its 3 and 5 series sedans. The M3 and M5. As of March 2020, BMW’s USA
lineup consisted of a 2, 3, 4, 5, 7, and 8 series
of sedans and coupes, a full X Line of sport activity
vehicles ranging from the X1 to the X7, the Z4 Roadster,
the electrified i3 and i8 models and BMW’s high
performance M batched line. It is much the
same for Mercedes. Audi likewise has a
pretty robust selection of vehicles in many different
forms and for many different prices. The luxury
brands were trying to grow their volumes
so aggressively right? They came out with cheaper
vehicles when the times were a bit tighter, smaller
vehicles that cost less. Now they’re coming out with
SUVs, but also swooped backed more SUVs that are
kind of more coupe like. And I think the problem is
that there’s so many now. And whenever there’s too many
of anything, I feel like it devalues the brand. I mean, that’s true with
just about anything in life right? Regardless of the risks,
carmakers do need to sell lots of cars. All of them have to
make massive investments in technologies and businesses that
are unlikely to bring any profit in
the near future. Survival is a numbers game.

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100 thoughts on “Why BMW And Mercedes Made Cheap Cars That Failed

  1. Wow, the average new vehicle price is $33,649. This is why people are so broke. This is higher than the national median income ($31k). People need to stop spending so much money on cars.

  2. Maybe because BMW and Mercedes aren’t as reliable as they used to be? It’s as if they’re built to last only for 100,000 KM.

  3. Typical CNBC video 10 minutes and the title is never explained in the video. Oh, and the low end luxury cars are selling better than ever. The A and CLA classes are selling like cakes in Europe. Stupid vidoe.

  4. I wish the old American luxury cars from the 60's were still being made- they rode better and looked cooler than the plastic painted junk we have now.

  5. This video could have used more research or refinement. There's a lot of holes in information and many of the video clips don't correspond to what's being said.

  6. 3:13 : I just parked my automatic sports car on an inclined surface and I did not used the parking brake, I just shifted into P and got out. (Car woobling). I don't wanna pay the bill when the gearbox is gonna break …

  7. The video is not completely correct.

    It is totally depended on what country made. I have a Japanese and Germany brand made in Mexico in years back. The quality is terrible.
    If you buy vehicle made in Germany or Japan, no matter what price level, they are much better build.

    I brought the entry model from Japanese and Germany brand and both of them are made in Japan and Germany; they are as good as higher price counterparts.

    The key is look for VIN start with J = Japan, and W = Germany

  8. I have a 2014 CLA and thought it made the brand look good. But that could be because mine was fully loaded with a starting price of $40kish. I think the exterior of the CLA looks excelled. Now the GLA is a piece of crap and looks funny.

  9. you can buy a used cheap asian car and replace it's logo with any of these luxury brand's logo and believe yourself to be driving a luxury car

  10. If mercedes makes a pick up that looks like a nissan, and everyone buys a nissan..that is a BIG FAIL. They are allready shuting down the factory lines. I do not think is for lack of money. Smart people spends money in quality rather than a badge. And they allready know where to look. If they (merc´s, and bmw) lower their price tags, and make more reliable cars…i will probably buy one…but for now i prefer a hyundai or a kia rather than a Merc.

  11. The Jaguar X-Type may not have been the international best-seller Jaguar was hoping for, but in the UK you still find countless examples on the road, way more than S-Types and old XJ's. Frankly, I've seen less pigeons in towns than X-Types!

  12. My favorite luxury car was the Chrysler 300 with the Bentley kit.
    I actually saw someone pick up their food stamps with this car.

  13. bmw and mercedes should just have a second brand for cheaper versions of their cars instead of diluting their brand because this hurts the view of their brand for the actual luxury buyers and don't resonate well with the rest of the market that expect a certain level of luxury from this brands and don't get it from their cheaper versions

  14. coupe suv are stupid. They are even more expensive, eliminate practicality (which is one of the biggest reasons for buying an suv), don't actually make you go faster and they are ugly as hell!

  15. I think the analysis is very US centric and thus fails to point out a more holistic approach. For the German luxury brands other markets like Germany or China are just as important. In Germany, for example, their approach of luring in customers to stay with the brand seems to work rather nicely. As Samjai Sam pointed out the mere "starting price" doesn't get you a lot and a specced out version of a CLA runs you over €55k. Greetings from Stuttgart 😉

  16. Those of us auto enthusiasts old enough to remember when premium marques were exactly that remember being shocked as these manufacturers started coming out with not only "down market" cars but SUVs….. a Porsche SUV????? I actually remember going off on a poor, innocent Porsche rep at the autoshow at how anyone at the company who made the decision to make an SUV should be fired….. and I don't even have the cash to afford a Porsche today, almost 20 years later, let alone then.

    Another part of the equation is financing. Leasing. Big promotions. Today BMW and Mercedes push the crap out of their lease incentives just to get people into one of their cars. 20+ years ago, if you even SAW a Mercedes or BMW advertisement, it was strictly about the car. They never once mentioned price or financing, and I don't think you could even lease a Mercedes in the 1980s if you wanted to. Some high end companies like Rolls Royce wouldn't even finance internally….. if you wanted to buy a Rolls, and you could not afford to pay for it in full with a personal check or bring your own cashier check from your own bank, or a suitcase full of $200,000 in cash, you had to secure financing from an outside bank and bring THAT check to the dealer.

    Now everybody will finance you. You can make $50,000/yr and somehow Mercedes will find a way to get you into one of their cars.

    Mind you these are people who financially should be shopping for Hondas and Fords.

  17. Well the Nissan Sentra (Mercedes Benz CLA/A Class), the Seat Ibiza/Volkswagen Polo (Audi A1) or BMW 1 Series (Mini Couper) haven't fail….Yet…

  18. But, all Mercs and BMWs are cheaply made. They start disintegrating once you drive out of the dealership

  19. 1:14 Talking about new luxury car sales in the US … while showing a cira 1994 Audi with glued tail lights from Netherlands

  20. C class or a 3 series or a IS not a luxury car.. in my opinion this where people get all wrong.. think about it every luxury brand has a flagship and there you go that's actually your Luxury car. 7 series- 8 series- S class.. LS. People just see the brand on the grill which it's a benz or bmw or lexus but they dont know they be on basic vehicle..

  21. acura (honda) started with the very popular Integra for the masses, but today is still struggling to be considered a “premium” brand that lexus (which came out after acura) now commands.

    and acura has stopped selling the integra.

  22. They may have failed initially, but the new a class and cla are now great cars. The earlier ones…. not so much.

  23. Never liked BMW's/Mercs. Ugly, tacky, and for the "wannabe-rich" rather than people who are actually rich. So cringe to see some yuppie in a base model BMW they can barely afford.

  24. The catch em young idea actually works. I own a 2004 mercedes clk and I am 19 and I wanna buy a mercedes E63 AMG

  25. I would definitely get another Benz wish they came with a good service plan or something after your warranty expires once that’s gone you’re pretty much screwed

  26. why not create a subsidiary brand in the name of the parent brand as an attraction, like Toyota have Lexus brand as luxury car divison.

  27. Easy, they’re building for the lease market. Rich people lease their cars. They don’t have to build reliable cars because those leasers will be back in 1-2 years. And the poor people who care only about outward appearances don’t care and will happily buy these money pits at the used car lot…only paying for basic maintanence. Ever see a German car in low rider mode? It’s because the owner couldn’t afford to replace the suspension air bladders.

  28. Couldn't watch this to the end as I could stomach hearing the word "luggxury" any more, I'm guessing they were trying to say luxury?
    I don't understand where those extra g's keep appearing from. 🤮🤮🤮

  29. Those current “cheap” cars from the Germans are only cheap before you start adding options. Want Apple CarPlay and Android Auto? Pay extra for it….whereas the economical brands offer that tech as standard equipment

  30. Of course luxury car manufacturers are trying to sell more economical vehicles…. why because the economical brands are becoming luxury brands non luxury vehicles are starting to acquire more luxury components in their vehicles for a cheaper price….. how can they sell them for a cheaper price because they have more volume

  31. I drove a 2018 SUV Mercedes GLC300. I was not impressed with the interior, door handles were plastic, fake leather, just cheap junk, the doors weren't even that heavy, for that 35k price, no thank you.

  32. Oh Boy, after the Corona Virus is controlled and done, how many of these Luxury vehicles is going to flood the used car market.

  33. 1:13 – Wait, Audi is 3rd biggest by volume in USA? when did they beat Lexus? Big three luxury brands by volume in US are Merc, BMW and Lexus and Lexus is sometimes in 1st place.. couple years ago, Audi was even behind Cadillac and Infiniti and btw Lexus sold about 100,000 more units than Audi last year in USA

  34. In my opinion, Mercedes has always been a more luxurious brand than BMW, but there are now SO many people driving around in A Classes that Mercedes really doesn't feel 'special' anymore.

  35. Lexus and Acura are better luxury cars that last forever and have better resale values. BMW and Mercedes-Benz are great, but they have a lot of plastic materials and keeps having common problems such as oil leaks, electronics, etc. I don’t live in the States (I live in Canada), but they are making the BMW X7 SUVs in America rather than Europe since it is cheaper to buy parts in North America than in Europe.

  36. As long as Germany keeps making cars that are literally trash. They are plastic. No young man could buy a used one because they are nothing but trouble and maintenance. If I was rich maybe I’ll lease one And two years later and give them their trash back. The problem is not the engine the problem is all the plastic trash they put in their to save a buck. But you can’t save a buck and no one’s buying your product. If they keep putting trash inside their cars then gradually without them even realizing it they’re going to lose customers because I told this to about 50-200 people already. It’s slow That I used Corolla for $5000 operates better than a Mercedes or BMW and Audi

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