'Tier 2' luxury brands struggle to compete with elite Germans, Lexus

[IS-SV]

Honda managed to do a upmarket division (actually, the first for a Japanese manufacturer), and they are considerably smaller than Toyota. Based on what I've seen recently from Hyundai and Kia, they have some good candidates. But, as you say, perhaps a subject for another thread.

Yes and Honda has about 2x value of Hyundai and therefore significantly more size, money and resources. Also notice even with those resources greatly exceeding Hyundai they have only achieved solid tier 2 status. Yea, probably another thread, but at least now business facts have been set straight.

 

[mmcartalk]

Yes and Honda has about 2x value of Hyundai and therefore significantly more size, money and resources. Also notice even with those resources greatly exceeding Hyundai they have only achieved solid tier 2 status. Yea, probably another thread, but at least now business facts have been set straight.

Hyundai, by the numbers, actually produces more total vehicles, but, as you note, that is not necessarily a measure of financial value.
Wiki Source:


Rank of manufacturers by production in 2013[34]


Rank Group Country Total Cars LCV HCV Heavy Bus
1 Toyota

Japan 10,324,995 8,565,176 1,481,722 272,411 5,686
2 General Motors

United States 9,628,912 6,733,192 2,890,958 4,762
3 Volkswagen

Germany 9,379,229 9,259,506 119,723
4 Hyundai

South Korea 7,233,080 6,909,194 242,021 67,290 14,575
5 Ford

United States 6,077,126 3,317,048 2,667,220 92,858
6 Nissan

Japan 4,950,924 4,090,677 837,331 22,916
7 FCA (Fiat Chrysler Automobiles)

Italy /

United States 4,681,704 2,163,040 2,350,697 124,131 43,836
8 Honda

Japan 4,298,390 4,263,239 35,151
9 Suzuki

Japan 2,842,133 2,452,573 389,560
10 PSA Peugeot Citroën

France 2,833,781 2,445,889 387,892
11 Renault

France 2,704,675 2,347,913 356,762
12 BMW

Germany 2,006,366 2,006,366
13 SAIC

China 1,992,250 1,685,392 231,374 74,431 1,053
14 Daimler

Germany 1,781,507 1,631,502 150,005
15 Mazda

Japan 1,264,173 1,175,443 88,730
16 Dongfeng

China 1,238,948 642,092 226,319 357,414 13,123
17 Mitsubishi

Japan 1,229,441 1,090,571 135,306 3,564
18 Changan

China 1,109,889 873,794 166,056 70,039
19 Tata

India 1,062,654 650,708 279,511 117,425 15,010
20 Geely

China 969,896 969,896
21 BAIC

China 918,879 243,437 285,947 384,425 5,070
22 Fuji

Japan 808,919 808,919
23 Brilliance

China 782,904 479,335 264,210 39,359
24 FAW

China 717,883 448,290 61,822 203,895 3,876
25 Mahindra & Mahindra

India 584,534 407,563 173,398 2,2337 1,236
26 Great Wall

China 557,564 430,423 127,141
27 Isuzu

Japan 532,966 36,094 494,907 1,965
28 JAC

China 517,577 206,132 120,588 174,571 16,286
29 BYD

China 510,950 510,950
30 AvtoVAZ

Russia 507,242 495,013 12,229

 

[IS-SV]

Yes, nice non-monetary vehicle unit stats, seen it before and a chart good for another thread. It is kind of interesting where the top tier brands are scattered and buried in that chart.

Not market cap and other financial metrics associated with size, money and resources.

But it does highlight something, if only bigger was always better in terms of units shipped....

 

[IS-SV]

Since Tier 2 is part of the thread topic, an interesting question, at least IMO, is where does one draw the line between Tier 2 and Tier 1? Sales numbers? Prestige? Public image? Performance and/or design of their vehicles? Market share? Net company (or division) worth or assets? That alone might be a good discussion in determining who is who.

Could be another thread (tier 1 vs tier 2 in U.S. Market) but it's hardly worth beatng to death like what was done with Lincoln naming for example. The reason why I'm saying this is the gap between tier 1 and tier 2 is so huge in terms of sales unit volume and sales revenue alone making BMW, Mercedes and Lexus clearly tier 1 (obvious even to non automotive enthusiasts). Therefore the other attributes differentiating tier 1/tier 2 are more of a nice to know and more subjective in nature.

 

[CIF]

Some good points as always. Hyundai certainly is not even close to rivaling Toyota in size, resources, etc.

Could they make a luxury brand if they wanted to? They probably could. The key question is would it work, and be successful in the market? Making the brand would be just the beginning. In today's competitive market, they would have to offer a top notch, differentiated customer service or dealership experience in order to get the attention of consumers. That is in addition to top notch, differentiated products. As of now, the Genesis, Equus, and K900 for example are not dramatically cheaper than the top Tier 1 luxury competitors (Germans and Lexus, British to a lesser extent). So Hyundai would not be able to attract customers on the value aspect, since they do not hold a big value advantage with their upper end models. With an actual luxury brand the pricing gap would become even smaller, as higher margins would be needed to support a separate luxury brand. It would be a very tall order for Hyundai to be successful with a luxury brand.

As for what can be classed as Tier 1 and Tier 2 in the luxury vehicle market, I view it quite simply. Tier 1 is the best of the best (you can get really technical about it and say super luxury brands like Bentley and Rolls Royce are above "regular" Tier 1 brands), so this includes the German luxury brands, Lexus, and most of the major British luxury brands. Tier 2 and lower is pretty much everyone else. A wide number of factors come into play here. Reputation, public perception, market influence, design, engineering, craftsmanship, lineup competitiveness, diversity of lineup, world-leading innovations, customer service, MSRP and out-the-door pricing, and a few more minor factors.

Edit: Some may argue that Jaguar and Land Rover are more Tier 2 than Tier 1, but it's a fine line we're talking about in this case.

 

[mmcartalk]

Some good points as always. Hyundai certainly is not even close to rivaling Toyota in size, resources, etc.

Could they make a luxury brand if they wanted to? They probably could. The key question is would it work, and be successful in the market? Making the brand would be just the beginning. In today's competitive market, they would have to offer a top notch, differentiated customer service or dealership experience in order to get the attention of consumers. That is in addition to top notch, differentiated products. As of now, the Genesis, Equus, and K900 for example are not dramatically cheaper than the top Tier 1 luxury competitors (Germans and Lexus, British to a lesser extent). So Hyundai would not be able to attract customers on the value aspect, since they do not hold a big value advantage with their upper end models. With an actual luxury brand the pricing gap would become even smaller, as higher margins would be needed to support a separate luxury brand. It would be a very tall order for Hyundai to be successful with a luxury brand.

As for what can be classed as Tier 1 and Tier 2 in the luxury vehicle market, I view it quite simply. Tier 1 is the best of the best (you can get really technical about it and say super luxury brands like Bentley and Rolls Royce are above "regular" Tier 1 brands), so this includes the German luxury brands, Lexus, and most of the major British luxury brands. Tier 2 and lower is pretty much everyone else. A wide number of factors come into play here. Reputation, public perception, market influence, design, engineering, craftsmanship, lineup competitiveness, diversity of lineup, world-leading innovations, customer service, MSRP and out-the-door pricing, and a few more minor factors.

Edit: Some may argue that Jaguar and Land Rover are more Tier 2 than Tier 1, but it's a fine line we're talking about in this case.

Good response. Although Bentley, Rolls, and the former Maybach certainly make ultra-luxury products, the way I see it, they don't produce enough cars to be in the regular Tier 1 category....that's why I didn't mention those brands before. I'd definitely rate the Jaguar XJ and Range Rover as Tier 1 products, but not the other products from those companies.

I also bears note, IMO, that unless one considers Mini a BMW division, Mercedes and BMW, which are generally considered Tier 1 brands, can pretty much exist on their own and not have to share money and resources with downmarket divisions like Lexus/Toyota/Scion, Audi/VW/Skoda, Cadillac/Buick/Chevy, Lincoln/Ford, Acura/Honda, and Infiniti/Nissan/Renault. BMW and Mercedes can (now) devote most or all of their automotive money and resources to their own nameplates.

 

[CIF]

Good response. Although Bentley, Rolls, and the former Maybach certainly make ultra-luxury products, the way I see it, they don't produce enough cars to be in the regular Tier 1 category....that's why I didn't mention those brands before. I'd definitely rate the Jaguar XJ and Range Rover as Tier 1 products, but not the other products from those companies.

I also bears note, IMO, that unless one considers Mini a BMW division, Mercedes and BMW, which are generally considered Tier 1 brands, can pretty much exist on their own and not have to share money and resources with downmarket divisions like Lexus/Toyota/Scion, Audi/VW/Skoda, Cadillac/Buick/Chevy, Lincoln/Ford, Acura/Honda, and Infiniti/Nissan/Renault. BMW and Mercedes can (now) devote most or all of their automotive money and resources to their own nameplates.

Just to add to that, BMW does have Rolls Royce as a division aside from Mini. Also Daimler (parent of Mercedes) does have Daimler trucks, EvoBus, Mitsubishi Fuso trucks, and Mercedes all as subsidiaries. Even under Daimler Trucks itself, there are several brands that fall under that including Freightliner, Thomas Built Buses, and Western Star trucks. So in actuality both BMW and Daimler spend a fair amount of resources outside of their core brands (Daimler more so than BMW).

Edit: Smart is also a Daimler subsidiary, but resource spending on that brand is obviously minimal.

 

[mmcartalk]

Just to add to that, BMW does have Rolls Royce as a division aside from Mini. Also Daimler (parent of Mercedes) does have Daimler trucks, EvoBus, Mitsubishi Fuso trucks, and Mercedes all as subsidiaries. Even under Daimler Trucks itself, there are several brands that fall under that including Freightliner, Thomas Built Buses, and Western Star trucks. So in actuality both BMW and Daimler spend a fair amount of resources outside of their core brands (Daimler more so than BMW).

Rolls, though, has very low numbers....it is a small division at most.

M-B owns Mitsubishi Fuso? Thanks, I didn't know that....interesting fact. I see a few Fuso trucks running around this area, but, like the Isuzu and Volvo trucks, they aren't terribly popular here, especially compared to the large numbers of heavy-duty commercial-grade Ford F-350 series and up.

 

[CIF]

Rolls, though, has very low numbers....it is a small division at most.

M-B owns Mitsubishi Fuso? Thanks, I didn't know that....interesting fact. I see a few Fuso trucks running around this area, but, like the Isuzu and Volvo trucks, they aren't terribly popular here, especially compared to the large numbers of heavy-duty commercial-grade Ford F-350 series and up.

You're welcome . Yes the Fuso division basically became a Daimler division around 2005, when Mitsubishi gave up most of their shares to DaimlerChrysler at the time, mostly related to the earlier disastrous quality issues and cover-ups at Fuso trucks. As of now, Daimler owns about 90% of the Fuso truck company, and Mitsubishi has a 10% share in it. So even though Fuso trucks are still mostly developed and built in Japan, for all intents it is a full Daimler subsidiary, as Mitsubishi's 10% share means little in reality.

 

[IS-SV]

M-B owns Mitsubishi Fuso? Thanks, I didn't know that....interesting fact. I see a few Fuso trucks running around this area, but, like the Isuzu and Volvo trucks, they aren't terribly popular here, especially compared to the large numbers of heavy-duty commercial-grade Ford F-350 series and up.

Yes, I see an increasingly large numbers of these trucks doing city and suburban commercial work around here in CA, quite popular.

 

[mmcartalk]

Yes, I see an increasingly large numbers of these trucks doing city and suburban commercial work around here in CA, quite popular.

I wasn't doubting that Fuso trucks may be popular in California where you live..........just don't see that many in the D.C. area.

 

[IS-SV]

I wasn't doubting that Fuso trucks may be popular in California where you live..........just don't see that many in the D.C. area.

Yes I knew you weren't doubting popularity in CA, I was just mentioning local differences and types of usage. Also CA auto trends do tend to spread nationaly especially into populated coastal regions on both sides of US.