Luxury cars are usually 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. However, in the question for ever greater volumes, some carmakers 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 $33,649 including incentives and dealer discounts. 

That is for all cars, not just luxury. About 40% of all premium vehicles sold in the US cost less than $40,000. BMW, Audi, and 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 of the first “affordable luxury cars” came from Mercedes-Benz. They released the CLA in the US for the 2014 model year. It was a sporty compact sedan with a starting price of just under $30,000. To save money Mercedes built the car on a chassis shared with another model and assembled the car in Hungary to reduce labor costs. 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. Underneath the dapper garb lies a compromised Benz. But that should be no surprise, as the CLA is Mercedes’s cheapest car, and cost-cutting is almost always accompanied by sacrifices in quality. Where the CLA makes its biggest compromises is in the areas of standard content and ride quality.” 

This doesn’t mean it was a bad car. Reviewers still complemented the CLA’s outer design and interiors and said the car drove well, but the $29,900 starting price did not last. The CLA 250 now slots in at a starting price of around $36,650 as of 2020. Mercedes’s 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 starts at around $41,400.

BMW also started to produce cars at the lower end of the price range. These include the 1 and 2 Series which almost directly compete to Mercedes’s A-class and CLA. The last of the three popular German luxury brands is Audi. Audi’s A3 also has a similar chassis and competes with BMW’s 1 and 2 Series and Mercedes-Benz’s A-class and CLA.

Well, what are the benefits and drawbacks that luxury car companies face when producing cheaper cars?

The obvious benefit is that these companies have the possibility of a financial gain because they are widening their market. More cars allow for more choices for more people which results in more money. Not only that, but these companies have the possibility to reach a younger, less wealthy audience.

But, there is also a huge drawback: brand recognition. 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. These brands risk saturating the market which can result in the products feeling run of the mill.

So, should luxury automakers produce mid-price models?

I believe that the best move to make is to produce a product with enough luxury features to where it still harnesses the brand’s identity but still compromises on unnecessary luxuries to meet the mid-price cost.