‘Luxury’ is the gold at the foot of a rainbow. It isn’t a thing; it’s not real — it’s perceptual; it’s relative. Yet there are brands and cars widely recognised as luxury brands and luxury cars. And there are now many car companies and design studios preoccupied with seeking to find new or modern interpretations of luxury — but there are three big things apparently not much thought about that means that they are destined to be always chasing the gold at the end of the rainbow and miss a significant market opportunity.
Everyone knows what luxury means in headline form, even if they all see it differently up-close. It’s something more than it needs to be. It sits above cheap, mass manufactured, low quality, every-day things. In ice-cream or whiskey or watches or clothes or boats or cars there are qualities that luxury versions of these things are widely known to have.
In car design, luxury cars have evolved gently over decades whilst still owing much of their identity and design cues to cars from over fifty years ago. Rolls Royce, Bentley, Aston Martin, Ferrari, Bugatti all offer contemporary designs that in different ways reference their design heritage — a simple design strategy that everyone can see the merit in. But, like other luxury brands, they also seek ‘modern-luxury’ to give them relevance with younger customers and a focus to complement the inherent oldness that their rich heritages bring. Premium brands also spend a lot of energy seeking to find this elusive modern-luxury - they might have some ownership of ‘modern’ but coupling this with ‘luxury’ is perhaps even harder than for luxury brands to legitimately realise ‘modern’.
CDR has also worked on modern-luxury for many automotive and non-automotive brands: from the core values that differentiate a luxury sub-brand, to modern-luxury interior features; from luxury design signatures, to the wider design strategy for a premium-luxury brand. One thing that unites car companies engagement with modern luxury is the way they turn over every stone and explore every avenue — they try hard to find the elusive gold. But often in so doing so they force and cajole it to be more, embellish it, add layers, and imbue more perceived value into it. Sometimes within the design group there are voices that want to pull back from the add-even-more approach, but invariably they are in the minority and lack convincing argument or alternative approach.
So given the effort put into realising new forms of luxury, how can we be sure that there is such an opportunity for modern-luxury than has not yet been realised? The answer is that today’s luxury cars are not meeting what a huge swathe of today’s very wealthy car customers want from their cars, people who choose instead to buy a premium car; and the evidence for this is plain to see.
Over the last two decades the number of High-Net-Worth-individuals (HNWI - people with at least US$1million excluding their primary residence) increased to 18 million according to research by Capgemini, roughly four times what it was two decades ago. Of these nearly two million people have access to over US$5 million (lets call them Very High Net Worth Individuals, “VHNWI” (Ultra High Net Worth Individuals then sit in a category even further up). If we focus only on these VHNWIs and presume that only half of them buy cars and that they do so only every three years, that would equate to a consumption of more than 300,000 cars per year. Given how most VHNWI people own multiple cars, buy them more often than every three years, and that we chose not to include the merely HNWIs, this estimate of a potential 300,000 luxury car sales per year feels conservative. And yet luxury car sales (from Ferrari, Rolls Royce, Bentley, Aston Martin, Lamborghini and Bugatti) total around 60-70,000 per year, less than a quarter of our estimate and meaning than on average only 5% of VHNWI people buy a luxury car every year. So how is it that today’s luxury car brands are failing to capitalise on this huge opportunity? What are they missing here (and don’t they realise that they are missing something here)?
One reason that VHNWI people aren’t buying more luxury cars is that they luxury cars don’t do anything better than the premium cars; they won’t get you anywhere quicker or more safely or more comfortably — so there is no rational reason to buy one over a premium car. The second reason, arguably the most significant, is that luxury cars are more ostentatious than premium cars and the majority of people (even very wealthy people) do not want to be ostentatious. The third big thing that luxury car brands seem to have not much thought about, and the reason that perhaps they don’t realise that they are missing something here, is that these modest VHNWIs are almost by definition impossible to put into a focus group or undertake ethnographic research with. They are very hard to find, and both not interested in spending time being the subject of research, nor able to be incentivised to do so — unlike some existing luxury car customers.
To make this white-space of modern-luxury happen is not easy. Designing a luxury car to be better than a premium car is a major challenge given how good premium cars are and how much of their competency is based on economies of scale that luxury cars cannot usurp, but there are ways we can see that this might be accomplished that would provide more rational reasons for VHNWI to buy one - arguably some of today’s emergent technologies centred on the connected car and AI could be central to this.
Designing a luxury car to be less ostentatious whilst preserving a true luxury, not-just-premium, identity is also not easy to do — just look at the failure that Maybach made by being just ‘more Mercedes’. But this also is achievable — it is only in the last couple of decades that luxury cars have come to be so expressive and compete on visual excess. Luxury didn’t used to be so look-at-me, it used to be a little more gentle in announcing itself and was often quite unassuming in its comportment — the Rolls Royce Silver Shadow from fifty years ago, and arguably other period luxury cars from Facel Vega, Bristol, and even some from Lancia and Lincoln, were just that: luxury cars that spoke quietly, their conventional three-box silhouette and subtle detailing was the pure reserved good taste of luxury.
So the white space that no one has made happen are modern-luxury cars for the hundreds of thousands of Very High Net Worth Individuals who might likely buy a luxury car if it could genuinely do things better that a premium car and was less ostentatious. Modern-luxury might be less rather than more. Modest luxury might be the gold at the foot of the rainbow.