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Cars: Affordable Luxury

Paul A. Eisenstein
From the Print Edition:
Rudy Giuliani, Nov/Dec 01

A steady drizzle falls from leaden skies. For someone trying to traverse the narrow roads that snake through the rolling farm country of Dijon, France, this might be a good reason to park the car, stretch out and enjoy a bottle of Bordeaux. But not on this particular afternoon. Not with this particular car. We tear through the quiet countryside, clouds of water spraying from our rear tires. On open stretches, we press the pedal to the floor, holding until the last moment to apply the brakes. As our confidence builds, we enter each corner just a little bit faster, looking for the limits of our new Jaguar X-Type.

"Do you realize how fast you were going?" my navigator asks. Her tone is one of pleasant surprise, rather than panic, as I look down and see the needle pushing 180 kilometers, a bit over 110 mph. I hadn't noticed. "This car," she adds, a grin spreading across her face, "eliminates the wet."

Long known by its code name, the X400, as well as by the nickname "Baby Jag," the new X-Type is the fourth and latest model in the fast-growing Jaguar lineup. The sedan has generated a fair bit of controversy, in part because it shares about 20 percent of its components with the Mondeo, a decidedly downmarket four-door sold in Europe by Jaguar's corporate parent, Ford Motor Co. Mondeo has received some solid reviews for what might be called a commodity car, but if the X-Type simply added Jaguar's trademark bird's-eye maple and leather, it probably wouldn't have amounted to much. Not to worry. The X-Type is likely to surprise and delight; several unexpected steps could make this the most popular product in the British marque's history.

For one thing, Jaguar has launched X-Type in all-wheel-drive configuration. That's become commonplace on today's sport-utility vehicles, but AWD is still a rarity on passenger cars. When you drive the new sedan, you have to wonder why. The bottom line is this: you would have to go to extraordinary lengths to lose traction, even on the wettest of pavement.

The X-Type's popularity, though, is likely to hinge on something even more basic. Equipped with the 194-horsepower, 2.5-liter AJ V-6, the sedan starts at $29,950. (For $39,950, you get the high- performance, 231-hp, 3.0-liter AJ V-6.) That's less than half the price of Jaguar's flagship XJ sedan, and it means "a lot of people who never thought they could afford a Jaguar will suddenly find it within their reach," suggests Michael O'Driscoll, president of the automaker's North American sales subsidiary.

Jaguar is but the latest automaker to discover this fast-building phenomenon of the U.S. auto market. Demand for top-line vehicles, such as the Jaguar XJ-Series, the BMW 7 Series and the Mercedes-Benz S-Class, has been stable in recent years. Yet motorists with Champagne tastes and beer budgets are finding that by stretching only a little, they can enjoy some of the most desirable brands on the road. The X-Type is entering a segment that goes by several names, but perhaps the most appropriate is "affordable luxury" -- vehicles generally priced between $27,000 and $35,000. Cars in this class collectively constitute the fastest-growing niche in the premium market, indeed, in the entire American auto industry. Affordable luxury sales have doubled in the last three years, and, despite the current economic uncertainties, there are no signs that the trend is cooling. By mid-decade, many observers believe, such vehicles will account for as much as half of the overall U.S. luxury sales.

Why has the segment grown so much? Ask a dozen analysts and you're likely to get an equal number of answers, but some seem obvious. An Audi A6 offers a lot more standard equipment than a comparably sized Volkswagen Passat. And perceptions are a key contributor to this booming market's makeup. We've become a nation of brand addicts, and the more exclusive the better. Juergen Hubbert, who oversees Mercedes-Benz's luxury cars for DaimlerChrysler AG, believes that for many motorists, just having the vaunted tri-star logo on the hood "is worth an extra $5,000" in perceived value. O'Driscoll puts a similar price on Jaguar's "leaper" hood ornament. There's a more practical side, as well. High-end brands tend to have higher residual values -- what you'll get when you trade in, or what the vehicle is worth at the end of a lease -- which often offset the initial, higher purchase prices. So, over the entire ownership cycle, your monthly costs may be no more than those for a mundane Mitsubishi, Ford or Nissan.

There's another motivating factor: a rapid expansion in the number of models available. Manufacturers "are attempting to cast their nets wider," says luxury-car market analyst Susan Jacobs, of Jacobs & Associates, and new products, she adds, always spur demand.

The heart and soul of the affordable luxury segment is the original "Yuppiemobile," the BMW 3 Series. This car virtually defined the coming of age and growing affluence of the American baby boomer. "We are the benchmark," is how Michael Ganal, the BMW board member in charge of sales and marketing, describes the compact Bimmer. Now entering its fifth generation, global sales of the 3 Series grew 13 percent last year, to 511,052. A disproportionate share of that number came in the United States, where prices start at $27,500.

BMW has carefully nurtured the model line that accounts for more than half of its sales. The basic look of the 3 Series, down to the trademark kidney grille, is unmistakable, having followed an evolutionary, rather than revolutionary, approach. And this "ultimate driving machine" has maintained its performance-oriented feel. "People build trust," explains Chris Bangle, the automaker's global chief of design in Munich, "because they know where you come from."

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