Brand Inflation

In Crowded Auto Business, a Push to Standardize "Premium"

new passat dpa
The new VW Passat is closely scrutinized. The car is trying to attract the "on the way to premium" buyer.
  • Why it matters

    Why it matters

    Audi, BMW and Daimler found financial success in the “premium” label, but it is applied to all conceivable models these days.

  • Facts

    Facts

    • German carmakers are selling more “premium” autos, but the bulk are still everyday cars.
    • Consumers are willing to pay a higher price if the driving experience is good.
    • The car makers’ goal is to retain 10 percent of the sales price as a “premium” profit.
  • Audio

    Audio

  • Pdf

We live in a marvelous era. Part of the world may be sinking into chaos, but Germany’s economy is doing just fine. Even in the E.U. crisis countries, things are getting better here and there. This summer seems sunnier. And we are enjoying an incredibly high standard of living.

Accordingly, our magic word is “premium.” Almost everything that we reach for, all we buy, eat or drink, everything in our careers, even our free time is premium today. Run-of-the-mill was yesterday.

This is true for German automakers too. Audi, BMW and Daimler are basking in their successes. Sales increase quarterly, and revenues and profits are at a record level. The success is the result of demand worldwide. No end seems to be in sight. The three companies are in a class of their own. They define themselves as standing at the forefront of automakers.

What leaves their factories is, according to them, no mass-produced commodity like vehicles from Toyota or General Motors — it is premium.

The reason why the trio doesn’t simply speak of quality cars has to do with the pricing. “Quality surcharge” somehow implies the standard version of a car is rickety. “Premium surcharge” sounds much better. With similar verbal acrobatics, breweries make their beers more expensive and telephone providers raise prices.

Customers apparently have been glad to pay the premium surcharge and there are no signs of that stopping. The Chinese, Americans and Russians prefer to drive vehicles “Made in Germany.” German cars are status symbols. Attracting customers with a premium strategy has worked out well.

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