The simple tag of a luxury car implies a lot; usually a lot of metal, a lot of leather, a lot of high-tech gadgets and a lot of money.
But that's no longer always the case. As premium car makers continue to follow - or forge - the global trend of downsizing, luxury cars now come in all shapes and sizes from small hatchbacks to sedans, convertibles and even compact SUVs.
That means access to high-end German badges such as Mercedes-Benz, Audi and BMW is now open for about the same entry-price as a traditional Aussie sedan. Even sportscar brands such as Porsche and Mercedes-Benz's AMG division - once the exclusive domain of the wealthy - are cheaper than ever with new models that cost the same, and are about as quick, as top-end variants from local powerhouses HSV and FPV.
Small luxury cars
Drive tested some of the small luxury models on the market, the Audi A3, Mercedes-Benz CLA and Range Rover Evoque. Photo: Mark Bean.
Small cars, in general, are the boom segment of the Australia new-car market these days in the wake of a swing towards more fuel-efficient engines and vehicles more suited to the urbanisation of large cities. Where traditional large sedans like the locally produced Ford Falcon and Holden Commodore have dominated the sales charts in Australia for decades, the rapidly changing landscape, plus a greater proliferation of brands and models available in local showrooms, has seen the Mazda3 and Toyota Corolla slug it out for the best-selling car for the past three years.
In a record 2013 market, small cars posted a record with 266,413 sales, buoyed by a hefty 62 per cent growth in $40,000-plus models, which now account for almost 17,000 sales.
Add another boom segment - small SUVs have also shot to record sales, with 23 per cent growth in 2013 for almost 75,000, many of which were from luxury brands.
While Australian's buying habits can hardly lay claim to dictating decisions in the boardrooms of premium car makers, the resource-driven state of our economy over the past 20 years has created a relatively affluent - and aspirational - society where prestigious brands have flourished. And now, certainly among the leading high-end car makers, there is a broader range of prestige cars than ever before, each with a family of cars designed to appeal to all sectors of society, from first cars to family cars, small, medium and large SUVs, sedans, coupes, convertibles and sports cars.
Dr Paul Harrison, a senior lecturer in consumer behaviour from Deakin University, says our affluent economy has exacerbated the notion that the type of car you drive - no matter what the price - is considered by many as an advertisement of your place in society.
"Cars are probably the best demonstration of social identity," he told Drive.
"In our MBA class when we talk about identity it's cars that are the best examples. Products are really a social mechanism for people to say to others, 'Please like me'. When we go beyond food and shelter, most of our possessions are about wanting to belong and wanting to be liked.
"If you're buying a Toyota Prius or a Volkswagen Golf or an Audi you're demonstrating this is the type of person that you want to be seen as. It's not a value judgment, it comes with belonging and wanting to be part of society.
"We are drawn towards people who are like us. You look at the people around you and try to make a decision about what will make you belong but maybe make you a little bit superior."
Dr Harrison concedes that the greater extent of affordable European cars has made owning a luxury vehicle more socially acceptable in recent years, and adds that the pressure of keeping up with the Joneses plays a major role in car-buying choices.
"It's about trying to buy a car that's at the higher end of your social stature and that's a lot easier now than it was 30 years ago," he said. "It starts with affluence, [and] people can start to make those choices once they have the income to do it. It's about priorities too and how you spend that income.
"There are more European cars available now and it's more acceptable to drive one, [whereas] 20 or 30 years ago those cars were there but it required a higher proportion of income to buy one."
Small prestige cars aren't exactly a new phenomena as the likes of BMW, Mercedes-Benz and Audi all had a crack at cut-price cars in the 1990s with models such as the 3-Series Compact, C-Class SportCoupe as well as the radical Audi A2 that was never sold in Australia because of its expensive aluminium construction. Both the Benz and the BMW were not only hamstrung by the fact they were essentially sedans with the boot lopped off, but the companies took a hatchet to their equipment levels as well, making them look and feel like a poor man’s luxury car.
It’s a different story now though, led by products that feature all the signatures expected from a prestige car maker, such as the latest safety and infotainment features that were a flight of fancy even in top- end limousines a decade ago and the latest generation of fuel- efficient engines. Their shorter life cycles also provide designers with the freedom to appeal to younger demographics with a greater focus on youthful design, and their greater volumes allow product planners to cost-effectively introduce new technologies and connectivity features. There is also a greater acceptance among first-time luxury brand buyers that not everything is gilded in gold, with car makers developing synthetic materials such as fake leather and aluminium-look plastics.
The prestige small car boom really kicked off with the Audi A3, which the German car maker claims was the first premium hatchback when it was launched here in 1997. It has since become a mainstay of Audi’s range, accounting for almost a quarter of its total sales.
While you couldn’t buy a first-generation A3 from the showroom for less than $40,000 more than 15 years ago – and it was initially available only as a three-door hatchback – the new range starts at just $35,600 and now consists of a plethora of variants that starts with a more practical five-door hatch and is supported by the recently released sedan and convertible models. To highlight just how popular small luxury cars have become, Audi sold more A3 models in January this year than it did over the entire 12 months after the first- generation was launched in 1997.
A spokesman for the German brand, Shaun Cleary, says the rise in popularity for small cars in general – which has seen an increase from 28 per cent market share when the A 3 was launched to over 46 per cent of all passenger cars sold in 2014 – has played a significant role in the proliferation of prestige vehicles within the sector. But, more than j ust the fuel economy benefits of a smaller car, customers are also becoming aware of major advances in construction methods and packaging that have resulted in hatchbacks offering as much interior space as large cars did a generation ago.
“It’s easy to say that fuel economy has played a big part in the shift towards small cars, but small cars are safer, more powerful and more practical than ever before,” he said. “The A3, for example, has only marginally grown in its overall dimensions since it was first released but the interior space has been increased by a much greater proportion. These trends have converged to the point where buyers have come to recognise they can have all they wanted in a large car in a small car w ith the benefits of better economy.”
Audi is in a unique position among the German triumvirate in that it is part of the gigantic Volkswagen Group, which has been a leader in small cars for more than 50 years, and has stretched its range one step lower down the ladder with the A1 city car that is based on the VW Polo and starts from just $26,500 (plus on-road and dealer costs).
Both of its German rivals have been reluctant to follow suit and drop below their respective A-Class and 1-Series models for fear of diminishing the lustre of its brands, but both are strategically supported in the city-car sector with the Smart (owned by Mercedes’s parent company, Daimler) and Mini (BMW bought the British icon in the late 1990s) brands. While there has been plenty of furrowed brows from traditional luxury car owners about the perceived watering down of prestige brands that continue to delve into mainstream segments – which therefore reduces their exclusivity – a spokesman for Mercedes-Benz says there is more to gain, and nothing to lose, by expanding its model range.
“What the A-Class also does for us is bring new customers to the brand,” Mercedes-Benz Australia’s product communications manager, Jerry Stamoulis, told Drive.
“They are, generally, customers that have never considered a Mercedes because it was out of their reach. But in some instances, we’ve seen customers which have come in [to a dealership] to look at an A-Class and didn’t realise the C-Class was so affordable. So the benefits of being in the compact segment is more than just building our presence in one sector of the market, but making new customers aware of the breadth of our range.”
Stamoulis also adds that by capturing customers at a younger age (prestige car makers have traditionally appealed to older generations) it offers them a chance to foster a relationship that continues throughout their driving life. “We literally have a car to suit every customer demand, from small cars to family cars, SUVs to limousines and super sportscars ... you name it, there is a Mercedes- Benz for every stage of your life,” he said.
The proliferation of prestige small cars shows no signs of abating either.
Audi has recently confirmed it w ill add a smaller SUV based on the A1 – dubbed the Q1 – as well as a baby S1 sports hatch, while Mercedes-Benz is set to build on its small car family with the GLA – its first compact SUV – due to arrive in showrooms from April, and a small station wagon, dubbed the CLA Shooting Brake, is expected to be revealed at the Paris motor show in September. The German car maker has also expanded a technical agreement with Nissan’s luxury arm, Infiniti, to share the A-Class’s platform to underpin a small hatch and SUV for the Japanese brand.
BMW has this week launched its new 2-Series coupe in Australia – the newly named replacement for the two-door 1-Series models – and is set to welcome the arrival of its third-generation Mini in a few months. It has also just confirmed the small car boom has forced it to break through a previously unthinkable barrier with its new 2-Series Active Tourer becoming the first front-wheel-drive BMW in history. The small MPV shares its underpinnings with the new Mini and will be powered by a range of three-cylinder and four cylinder turbocharged diesel and petrol engines.
The same could be said for Land Rover, the iconic British four-wheel-drive brand that has built its reputation on super-sized, opulent and extremely capable off roaders, which stretched its reach with the fashionable Evoque small SUV a few years ago. The funky, city-sized SUV, which is available as a regular family-biased five-door and a sporty three-door, has been a sales hit and has been updated this month, featuring the world’s first application of a nine-speed automatic transmission to improve fuel consumption. It’s also available as a two-wheel-drive, further evidence that small cars are allowing established brands to break with tradition.
Its sister brand, Jaguar, is also committed to joining the small car party with a range of lightweight aluminium cars, including its first compact SUV that was previewed by the stunning C-X17 concept car at last year’s Frankfurt motor show.
Lexus and Volvo have also made headway in building their presence over the past decade with classy small cars – the hybrid-powered CT200h and V40 respectively – while Alfa Romeo, once a great purveyor of mid-sized luxury and sports cars, has nothing but a pair of small hatchbacks on its showroom floor.
The Italian brand is, however, hoping to rebuild its reputation with the 4C, a mini supercar with the performance and flair of a supercar with a price tag around $80,000, that arrives here in a few months.
Small cars are now big business for almost every car brand but the relentless rise of prestige city cars has forced the competition, whether Japanese, Korean or mainstream European, to lift their game.
- With David McCowen
Coming soon: Little luxury spin-offs bound for Oz
Audi Q1 Audi is preparing to add another diminutive SUV to its expanding stable with the Q1. Sharing the same platform and engines as the A1 city car, the micro SUV is due to be released in 2016.
BMW 2-Series Active Tourer BMW's burgeoning foray into front-wheel drive cars will come to fruition in late 2014 with the Active Tourer MPV. Unveiled at the 2012 Paris motor show, the new model will be offered in both three-cylinder and four-cylinder configurations. Pricing is tipped to start about $40,000.
BMW i3 The i3 is BMW's first dedicated electric car. Developed at a reputed cost of more than $2 billion, the tall five-door hatchback is capable of a zero emission range of between 130 kilometres and 160 kilometres. It goes on sale here this year.
Infiniti Q30 Coming off the back of its highly-touted Q50 sedan, Infiniti is set to launch the Q30 hatchback in Australia in 2015. The Q30 will form the entry offering of the Infiniti range as an alternative to Audi, BMW and Mercedes-Benz rivals.
Jaguar SUV and sedan Jaguar is set to expand its line-up with the release of an SUV and sedan within the next three years. The new models will be based on the C-X17 SUV concept unveiled late last year. A mid-size sedan will debut the new platform in 2015, with an SUV between 2016 and 2017.
Lexus SUV Lexus is expected to offer an aggressive new SUV spin-off with its angular NX concept. Unveiled at the 2013 Frankfurt motor show, the NX is expected to be offered with a 2.0-litre turbocharged engine.
Mercedes-Benz GLA The GLA is Benz's latest tilt at aspiring luxury car owners, building on the success of the new A-Class and CLA models. The compact SUV range arrives in April starting at $47,900 (plus on-road costs).
Mini Mini is set to launch more models in Australia on top of the bewildering selection that is already available. Other than the upcoming Cooper and Cooper S models due in April, expect to see a new five-door variant (among others) coming soon.
Porsche Macan Porsche will roll out its cheapest car in 30 years in June with the release of the Macan SUV. The highly-anticipated new model promises trademark Porsche panache, priced from $84,900.
No U-turn planned for luxury car tax
The federal government says it has no plans to scrap or alter the conditions of the Luxury Car Tax despite mounting pressure from the motoring industry.
The Australian Automobile Association led calls last month for the controversial tax to be wiped - along with remaining import tariffs on vehicles brought into Australia - following Toyota's decision to cease its manufacturing operations in Australia in 2017.
The 33 per cent tax is levied on cars costing more than $60,316 (or $75,375 on vehicles that use less than 7 litres of fuel per 100 kilometres). On a $109,000 BMW X5 X30d, the LCT comprises $6559 of the driveaway price.
With all three Australian car makers confirming their respective closures, critics argue the rationale for tariffs and the LCT has vanished as there will soon be no local industry to protect.
"There is nothing for the government to consider around the Luxury Car Tax," a spokeswoman for Treasurer Joe Hockey said. "Toyota's going to be here until 2017, the car makers are all going to be for another four [sic] years. In terms of the here and now, the government is more focused on how to give assistance to help state economies readjust."
Earlier this year, the Productivity Commission raised the possibility of scrapping the LCT in an interim review of the struggling manufacturing industry.
The commission borrowed from the Henry Tax Review, which in 2010 recommended the abolition of the LCT and a broader tax implemented to account for lost revenue.
"Because it is levied on a narrow base, the LCT is a higher-cost and less efficient method of raising revenue than more broadly based taxes," the Productivity Commission report said.
The PC also highlighted the discriminatory nature of the LCT, which targets cars but ignores other luxury goods, such as boats.
- Sam Hall
Thanks to The Star for providing the location for the photo shoot.