Updated: Sun, 27 Jan 2013 15:06:00 GMT | By Paul A. Eisenstein

Luxury cars buy into the downsizing trend



The new Mercedes-Benz CLA car is shown at the Mercedes Benz special event on Jan. 13, the day before the opening of the North American International Auto Show.

The new Mercedes-Benz CLA car is shown at the Mercedes Benz special event on Jan. 13, the day before the opening of the North American International Auto Show.

For those attending the North American International Auto Show in Detroit this month, Mercedes-Benz has rolled out an all-new version of its big E-Class line-up. But for reporters who came into the Motor City early for the show’s media preview, Mercedes offered a sneak peek at the new CLA model it will formally introduce later this year.

Sharing a similar silhouette with the current CLS coupe-like sedan, the CLA will be the smallest model the German maker has ever sold in the United States, representing a significant shift not only for Mercedes but for the rest of the luxury car market. 

A quick survey of high-line manufacturers including Lincoln, Land Rover, BMW and Audi shows they’re all taking aim at downsized segments. That reflects some significant trends in the luxury market as buyers come to grips not only with rising fuel prices but increasingly crowded urban environments, analysts and industry planners suggest.

“If we want to grow and don’t want to lose our customers, we have to downsize,” contends Dieter Zetsche, Chairman of Daimler AG and chief of its Mercedes-Benz brand.

It’s not the first time the maker has pushed down-market. Mercedes made waves when it introduced its original C-Class “Baby Benz” more than three decades ago. And in the ‘90s, it tried pushing even lower with the stripped down C-Coupe. The C-Class is now one of the maker’s most popular products, though the smaller, lower-priced Coupe proved a flop and was quickly pulled from the lineup. 

Buyers were equally uninspired by the smaller, stripped-down version of the classic BMW 3-Series, the 318 Coupe.

Whether buyers will welcome even smaller models today remains to be seen, especially in the U.S. where “it has always been bigger is better,” and buyers have measured luxury – and the concurrent price tag – by the inch and pound, said George Peterson, of consulting firm AutoPacific, Inc.

The C-Coupe and the BMW 318 were little more than econoboxes bearing luxury badges.  The new Mercedes CLA, however, will offer much more traditional luxury accoutrements, including leather seats, wood trim and the latest high-tech safety and infotainment systems, the maker promises.

That’s already a formula that works in Europe, said Peterson. “The idea that you make a statement by having the biggest car around isn’t quite the case anymore.  Now it’s more about the technology and features of the car.”

European makers have all added new downsized models, such as the BMW 1-Series and the Audi A2. The trend is apparent even in the luxury crossover segment where downsizing might once have seemed an oxymoron. BMW has had a hit with its X3 and now is offering the even smaller X1.

Slideshow: The 2013 Detroit Motor Show

Buick dealers are just taking delivery of the maker’s new Korean-made compact crossover, the Encore, which the General Motors mid-luxury brand hopes will help it attract an entirely new cohort of young, hip and increasingly affluent buyers.

Lincoln has the same idea in mind for the new MKC, one of four new models it is planning to bring out between now and 2014. The broader compact crossover segment has grown 200 percent over the past five years, including a 60 percent spurt in 2012 alone, notes Matt VanDyke, Lincoln’s new global marketing chief. Yet while they account for a solid 11percent of the overall American automotive market, they’ve now jumped to an even more impressive 25 percent of the luxury segment.

While young, first-time buyers make up much of the market for compact CUVs and other downsized luxury products, VanDyke says it is equally significant that customers are also “coming from other premium segment vehicles,” trading in larger, more traditional luxury products.

So, as with the CLA, the new Lincoln MKC will be offered with the sort of up-market features that normally wouldn’t be found on something nearly that small. In fact, the concept vehicle unveiled at the Detroit Auto Show featured a more lavishly appointed interior than Lincoln’s larger MKZ sedan, which made its debut late last year.

While it will help to load up these new products with plenty of luxury accoutrements, industry stylists are also working to give these downsized products more upscale designs.  Murat Gueler, who oversaw the exterior work on the MKC, and Soo Kang, who focused on the interior, put a particular focus on making the compact crossover look a lot larger than it really is. 

Particularly for the next generation of luxury customers, the idea of downsizing is not something they naturally shy away from.  If anything, they’re used to paying more for compact smartphones and tablet computers. 

And the industry is hoping that they’ll feel the same way about the latest generation of small luxury cars. The key, said analyst Peterson, will be to deliver all the features they’d traditionally expect on a bigger vehicle “so they don’t feel like they have to sacrifice.”

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