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The New Face of Luxury

High-end auto makers are reaching beyond rich leather and burlwood interiors to distinguish themselves. As posh down-market competitors press from below, choices like green engines, smaller vehicles and wifi are driving the luxury category
Paul A. Eisenstein
From the Print Edition:
Sylvester Stallone, July/August 2010

(continued from page 1)

Audi introduced a commuter car of its own in Geneva, the new A1, a two-door hatchback that measures barely 13 feet, nose-to-tail. Company officials expect it to do particularly well in the cramped confines of urban Europe, as well as in some of the emerging markets in Asia, but hasn't yet planned to bring it to the United States. A wise decision, contends Jim Hall, of 2953 Analytics. Luxury buyers, he believes, may be as interested in fuel economy as anyone else, but size is still a measure of status and that won't easily go away. 

That, however, poses a new puzzle for makers, especially those who are appealing to the most affluent of the world's automotive buyers: how to deliver products that meet customer expectations but still comply with increasingly tough government mandates-including America's tightened fuel efficiency rules and Europe's new limits on CO2 emissions? 

Bentley's approach is to focus on alternative fuels. Starting with the 2011 model-year, all of its products, including the all-new Mulsanne sedan, will be capable of running on E85 ethanol. BMW, meanwhile, is expanding its fleet of hydrogen-powered 7-Series sedans. The self-styled producer of the "ultimate driving machines" insists that the lightweight gas is the ultimate clean fuel, since a hydrogen car's exhaust consists of nothing but water vapor. 
Plug In, Turn On 
But getting the world ready for hydrogen power is no easy task, and few expect the alternative fuel to make a serious dent in the market until well into the middle of the new century. In the nearer term, the emphasis is shifting to electrification, and electric vehicles of one form or another could be found everywhere you looked at the Geneva show. "The battery cars of the past weren't very sexy. Nobody cared," said Peter Schwarzenbauer, the Volkswagen AG subsidiary's global marketing director. "Now it's sexy, and the prime topic" among consumers and automakers alike.  

Yet Thomas Weber, the Daimler AG board member in charge of technology asked "Does sustainability mean we have to build small cars?" He answered he own question: "Not necessarily," and pointed out the example of the S500 Blue Efficiency sedan, which Mercedes unveiled last September at the Frankfurt Motor Show. With its advanced hybrid power train, the battery version of the maker's flagship S-Class sedan gets more than 60 miles to the gallon. 

One advantage luxury makers have, according to Weber, is that "our customers are more able to afford" these new technologies and, in many cases, are more interested in being on the cutting edge. 

Tomorrow's luxury cars will feature a broad spectrum of technologies designed to improve the efficiency of the conventional internal combustion engine or replace it all together. BMW, for example, has introduced a "smart" alternator that operates only when electric demand is high, otherwise reducing mileage-robbing frictional engine losses. The new Porsche Panamera's engine automatically shuts down when you stop for a light then instantly restarts as you lift your foot off the brake. Meanwhile, the maker will offer a hybrid system for the second-generation Cayenne that can run the SUV on battery power for short distances, at speeds up to 98 mph.  

The next step is the plug-in hybrid. The svelte Fisker Karma, another example in the same the niche that Porche plans to fill with its Spyder Concept, is expected to reach market in less than a year. The California-based start-up Fisker Automotive is the brainchild of Henrik Fisker, best known for his work as a designer for Aston Martin, where he penned the striking DB9. The company is nothing if not ambitious. The low-volume Karma will be produced in Finland, but Fisker recently used a federal loan to purchase an old GM assembly plant in Delaware, and plans to produce a second model, codenamed Project Nina, by mid-decade. 

Another California pioneer is Tesla Motors, whose chief executive officer, Elon Musk, was a founder of PayPal and SpaceX, a private space transport company. "The reason I put so much money into the creation of Tesla was to be a catalyst in the electric car revolution," says Musk, adding that, "it's been a passion of mine for 20 years." The company's first product, the Roadster, is a $109,000 sports car that can match the performance of a Porsche 911. Several additional models are planned. 

But the Roadster is a pure battery-electric vehicle, or BEV. Luxury makers seem to be particularly interested in using this technology for sports cars and other performance models.  Mercedes-Benz, for one, is developing a BEV version of its new, gull-winged SLS, while Audi may bring to market a version of its all-electric concept, the e-tron, which bears a striking resemblance to the gasoline-powered R8 supercar. 
Shortly after World War II, ship builder Henry Kaiser decided to enter the auto industry, bragging that he was ready to invest $1 billion in his new venture. Apocryphal, perhaps, but a Detroit competitor reportedly responded, "Congratulations. Give that man one chip." The price of entry is enormous, which is why so many new nameplates, including Kaiser, have failed over the decades.  

Tesla and Fisker are betting that the current focus on the environment will open an opportunity for them. While the recently retired GM vice chairman Bob Lutz credits Musk and Tesla, "for getting people to focus on battery power," the two new California makers are anything but certain to survive. However, if they do, they could dramatically shift the luxury landscape. 

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