If bling started to go out of fashion during the credit crisis cocktail hour, it was certifiably dead when the housing bubble hangover set in. Big and flashy just seemed out of touch, with the Hummer brand becoming the poster child for all things wrong with excess in transportation.
Let the record show that there were other manufacturers selling wares equally as inefficient. And they’re still doing so today (consider the 13 mpg city you get in the 2011 Toyota Land Cruiser on your way to the recycling center), but a new trend might give rise to luxury becoming more palatable: Just put a hybrid in it.
Automakers are increasingly offering hybrids in high-end cars – not just small econoboxes – in an attempt to give luxury buyers what they want.
Changing Perceptions of Luxury
Ford’s Sheryl Connelly points to a recent study by Synovate in which green is becoming more important than pure luxury.
“In [Synovate’s] worldwide study, when people were asked if they could have any vehicle they wanted — with money not being a consideration — six in ten said they wanted a green car over a luxury car. Additionally, one third of respondents said their ‘dream car’ was a green car.”
“We also expect that the purpose of luxury goods will shift in the next few years,” she said. “More recently, the purpose of luxury items has been to impress. That’s passe . Tomorrow’s luxury goods are designed to express one’s character; to say something about what the person believes is important.”
Luxury marketing consultant Pam Danziger agrees.
“There is a definite shift in the world of luxury away from purely conspicuous consumption; the bling for bling’s sake. What’s coming is more of a ‘luxury on the inside’ type as compared to extroverted ‘bling.’ With the economic crash, anti-status luxury is growing in popularity.”
Luxury Hybrid Buyers
However, this doesn’t mean that rich people will stop driving their fancy cars. What it does point to is a long-term increase in sales of fancy cars that are more environmentally responsible. Rich people won’t want to be condemned for being consumptive. According to Ford’s Connelly, purchasing a hybrid luxury vehicle helps shield them from that criticism.
“People who want to drive a Cayenne don’t want to be blamed by their neighbors for killing the world with C02,” he said. “It’s a pure business decision. Customers want it.”
“From the introduction of the Toyota Prius a decade ago, research has shown that hybrid buyers tended to skew much wealthier than the non-hybrid buyers shopping in the same segment,” said Danziger.
She pointed out that these wealthier drivers were not buying a Prius because they could save money at the pump, but because they wanted to make an environmental and personal statement.
But it’s not that those with less financial means did not want to drive a more fuel-efficient vehicle. “When fuel prices were high, moderate-income buyers purchased hybrids because they could rationalize the added cost of the vehicle against the fuel savings. With today’s lower fuel costs, the payoff isn’t there. But wealthier shoppers don’t care about the payoff,” said Danzinger.
“Their motivation has less to do with saving fuel than it does a reflection of a lifestyle,” said BMW’s Dave Buchko. “These are people who want to drive a luxury vehicle, but do so responsibly.”
Kelley Blue Book analyst James Bell said that while the options for hybrids and luxury hybrids is growing, demand isn’t yet keeping up with supply.
Today’s Luxury Hybrid Market
“According to recent KBB shopper data, the market for luxury hybrids as well as standard hybrids is under heavy pressure from relatively stable and low fuel prices. The demand for these vehicles is soft just as new brands are poised to enter the fray,” he said.
The Future of Luxury Hybrids
But Bell points to long term factors that will see hybrids a part of the luxury market for years to come.
“From our perspective, luxury hybrids are here to stay,” he said. “Going into 2016’s 35.5 MPG CAFE regulations, luxury brands are going to be under even higher pressure to meet new averages.”
Hybrids will help luxury makers hit these targets.
Hybrids No Longer A Premium?
Most manufacturers charge a premium for their hybrid models. Higher costs reflect the greater complexity of hybrid powertrains compared to standard gasoline or diesel powered vehicles. Batteries are a big part of that added cost.
But some are bucking that trend, releasing vehicles at the same price as the garden-variety gasoline cars.
While the 2011 Lincoln MKZ Hybrid is not a revolutionary vehicle – it shares its running gear with the popular Ford Fusion Hybrid – Lincoln did shock industry watchers by pricing the MKZ Hybrid at the same base price as the gasoline-powered V-6 model ($35,180).
“Until Lincoln announced the same MSRP for their new MKZ Hybrid as the standard gasoline version, buyers also expected to pay a premium for such technology,” Bell said.
If Lincoln’s new pricing strategy were to catch on, it would remove “price” as an excuse for luxury buyers choosing to drive a more fuel-efficient vehicle. Capable of delivering 41 mpg city and 36 mpg highway, the 2011 MKZ Hybrid certainly gives owners something to brag about at charity cocktail events.
Are Hybrids Making An Impact?
There are nearly 50 hybrid nameplates on the market. Given all the save-the-world attention this class of vehicles receives, it surprisingly accounts for only two percent of current retail automotive sales.
The reality is that the hybrid market is really the Prius market. Thanks to the overwhelming success of the Prius, Toyota captures more than half of all hybrid sales. In 2009, the most recent complete year of sales, Toyota sold more than 144,000 Priuses in North America.
While small now, the percentage of hybrids sold and their numbers will continue to grow. As stricter fuel economy regulations take effect, manufacturers will be forced to sell high-mileage vehicles in every segment (standard and luxury). Look for new hybrids from Audi, Cadillac, Infiniti, and Lexus to arrive in the next 12-24 months.
These cars will help prove that green is the new bling.