Japanese carmakers go upscale, challenging Cadillac, Mercedes

Honda, Toyota, and Nissan - Japan's Big Three carmakers - are increasingly going head to head against established United States and European luxury car nameplates, such as Cadillac, Lincoln, BMW, and Mercedes-Benz. That means a glut of new Asian luxury cars competing for the attention of upscale American buyers.

Nissan recently announced plans to introduce an entirely new dealer distribution network, dubbed Infiniti, which will market a line of high-priced sports and luxury cars. Infiniti will debut in 1989 with two models: a 4-door sedan powered by a V-8 - one of the first ever used by a Japanese carmaker - and a V-6-powered sports coupe, expected to carry a sticker price in the $30,000 range.

``Extensive market research supports our conviction that the American car buyer is ready to accept our concept of a Japanese luxury car,'' says Kazutoshi Hagiwara, Nissan president. ``The styling and interior space of our cars will be a dramatic departure from the current accepted concept of a Japanese sedan.''

Why is Nissan so interested in attracting the upscale buyer?

Because the luxury segment is the fastest-growing and potentially the most rewarding niche in the American new car market. In 1960, the luxury segment made up only 3 percent of the total new car market. By 1980, that had grown to 5.7 percent. During the first half of 1987, the figure climbed to 8.2 percent (more than 1 million vehicles annually), and according to many analysts, that could grow by 35 percent over the next five years.

Among American households with annual incomes of $50,000 or more - about 15 percent of the nation - car buyers from more than half plan to spend at least $15,000 on their next car, according to a study by Los Angeles-based Knapp Communications Corporations. (And, it should be pointed out, a growing portion of this upscale market consists of the affluent baby-boomers who have grown up with import automobiles.)

As you might guess, Nissan is not alone in its bid to tap the luxury car market. Toyota is expected to introduce independent luxury franchises later this year. Several other Japanese carmakers, meanwhile, have announced they will introduce luxury-class products, though they have no plans now to open independent, upscale dealer networks. Mitsubishi, for example, will introduce its Galant Sigma in mid-1988. The car is expected to carry a $20,000-plus price tag. Mazda is also expected to join the upscale market within the next two years.

The role model for the Japanese is the experiment begun by Honda in the spring of 1986, when it became the first Japanese carmaker to add a second dealer network, the independent Acura division. Acura now markets 2-door and 4-door versions of the Legend Coupe, which carries a price tag of as much as $28,000, as well as a sporty subcompact, the $10,000 Integra. Acura is also expected to introduce a Porsche-class sports car within the next two to three years.

``We're not ignoring [Japanese luxury cars]. They're a significant threat,'' says John O. Grettenberger, general manager of the Cadillac division of General Motors. But Mr. Grettenberger is quick to stress his belief that ``they have a significant hurdle to overcome in that the majority of American drivers associate [Japanese] products with medium price or lower.''

Indeed, that argument is borne out by a new survey conducted jointly by Knapp Communications and J.D. Power & Associates of Westlake Village, Calif.

With a questionnaire sent to more than 1,600 affluent consumers (with household incomes of at least $50,000 annually), they sought buyers' perceptions of domestic and foreign automobile nameplates.

They found that in the prestige and luxury categories, American car buyers rated Japanese cars lowest.

``There are some consumers still unconvinced the Japanese can build luxury products,'' says William Pochiluk, chief auto analyst with Autofacts Inc., a Paoli, Pa., research organization.

That is why, he says, the Big Three of Japan have decided to move into the luxury markets via independent dealer networks, rather than simply adding more products at their existing showrooms: ``The purpose of [a new] franchise is to enhance the image and to focus communications [and advertising] on that image.''

Despite initial skepticism, Honda's Acura division seems to be proving itself a success. It has already hit the 100,000 sales mark and expects to easily top that figure during its second full year in operation. Acura's dealer network has grown from an initial 60 outlets to 160 today.

Ironically, Acura models are not selling well in Japan, and almost 80 percent of Legend sales are in the US. Because of that, Honda is considering the transfer of production from Japan to its US factory in Marysville, Ohio.

Nissan has no plans to build its luxury car models in the US, but with much of its strategy for Infiniti based on Honda's Acura, it would not be a surprise to see luxury cars roll out of the Nissan factory in Smyrna, Tenn.

Toyota could use its Kentucky plant for much the same thing.

You've read  of  free articles. Subscribe to continue.
QR Code to Japanese carmakers go upscale, challenging Cadillac, Mercedes
Read this article in
QR Code to Subscription page
Start your subscription today