American economics
The American car has long been a symbol of American might, and what was waning is on the rebound
By Jeff Rundles
In nearly 30 years of car reviewing, I’ve seen it all from the sublime (Mercedes E320 4Matic) to the ridiculous (Yugo) and even the dangerous (Suzuki X90). But I have been saying for the past few years that the hallmark of car-making these days is that there really aren’t any real bad cars on the market. The luxury cars are exquisite and even the cheap cars are now solidly built, handle well and offer an array of features that once only graced the high end.
What’s changing, apparently, are perceptions. I happened across the 2010 Consumers Report Car Brand Perception Survey, and it has some very interesting data. For instance, while Toyota retained its overall #1 ranking (although that may now be under assault what with the massive recall and sales halt of seven models in late January), you now see Ford in the #2 spot, nudging out Honda (#3), and Chevrolet has gone from #9 in 2009 to #4 in this year’s rankings.
The most surprising finding – okay not-so surprising – is the overall drop in the rankings of luxury brands: Porsche fell 13 points, Lexus tumbled 15 points as did Cadillac, Infiniti dropped 21 points and Lincoln (a Ford division) sunk 25 points.
Some of this, surely, is the economy; people change their brand perceptions, and perhaps their aspirations, when faced with a different personal economic situation. Sure, a Lexus at nearly $50k looked pretty good a few years ago when I could refinance my home sub-prime and buy it with ready, tax-deductible cash, but today a $25k Ford Taurus is looking a lot better for my own balance sheet.
But it’s beyond economics; or rather the economics have shifted behavior.
First, there is simple economics. The 2009 BMW 328xi with all-wheel drive carries a base price of $35,600, and when you add in just a few of the options that people like – navigation, expanded sound systems, heated seats, etc. – you’re looking at a car in the mid$40ks. Make no mistake; the 328xi is a wonderful automobile. However, the new Subaru Legacy similarly equipped as the BMW (the Legacy 3.6R) starts at $24,995 and will end up under $30k with a lot of nice stuff. The new look of the Legacy, finally, brings it into the same style category as the BMW, and it performs nearly as well. It’s not a 328xi, but it is also not $15k less of an automobile. The Subaru is simply a better buy. By the way, Subaru jumped 39 points on the Consumers Report survey, the largest increase of any brand, and it landed in the #9 spot in overall perception – for Subaru this is huge.
I could go on and on with such comparisons. The new Hyundai Genesis luxury car, which is generating quite a buzz throughout the car world, compares very favorably with Lexus models in performance and luxury, and can be had for a lot less. There are several Ford and GM models that are not only generating buzz, but they are, for the first time in years, actually quite nice cars.
I believe, however, that there more than just simple economics going on here. The last 20 years or so (not counting 2009; that’s when the change happened), the car buying public – and we Baby Boomers pretty much defined this trend – were selecting their vehicles of choice for the show-off factor. To drive a Lexus or Mercedes or BMW or Land Rover wasn’t just about the driving experience, it was very much about the social comment that vehicle made about the owner. It was, to a large extent, a conspicuous display of affluence.
I wrote about this before in these pages. People today are deciding to be a little less conspicuous, to stay under the radar.
Also, I think, there is some patriotism involved. In just a short period of time we Americans have gone from thinking about Ford and Chevrolet, for example, as rental cars, and actually buying them. In the case of Ford, I think this is American pride in that Ford was the only American car company that eschewed the federal bailout, and our rising perception of Ford is partially due to our admiration for the company’s decision. In the case of Chevrolet, owned by General Motors, is may be our rising perception is all tied up with the fact that we, the American taxpayer, own a substantial stake in the company. Even Dodge, a Chrysler unit, is generating buzz with its 2010 lineup, mostly based on its trucks and muscle cars; there are very few thing more American than pickup trucks and muscle cars.
And too, some of the economics is about an overall societal concern for American jobs. Buying Fords and Chevys and Dodges, I think many people believe, will preserve American jobs, and they are willing to do their part. I find this trend highly encouraging. Collectively over the last 30 years or so, many, many Americans have been bashing the American auto worker, denigrating the American labor movement (and its poster child, the auto worker), and finding style and grace in foreign-made goods of all stripes. I truly believe what’s happening on the auto scene these days is a recognition – long overdue – that the decline in American manufacturing, and manufacturing jobs, threatens the wealth of all Americans and the economic stability of the country in both the short- and long-term.
Economics is a tricky business. There are perceptions, attitudes, collective angst, and a whole host of psychological factors in play, of course, and economists spend a great deal of time trying to measure that and explain it. But things can shift quickly; a pop of $1 in gasoline prices sends people to the economy car line, and a decrease in gas prices sends them over the more horsepower – and this can happen in a matter of months, and then reverse just as quickly. An actual sea change is much more gradual.
Perhaps, however, there truly is a new value proposition in America. Having your home equity and your retirement savings decimated and worse – even if there is a rebound – is a wake-up call to something approaching economic sobriety.
The good news is, on the automobile front at least, there is excellence in the value areas of the marketplace. The side benefits – American jobs, American pride, a rejuvenation of American competitiveness – cannot be overstated.
