The 1998 luxury cars

Nation's Business, Nov, 1997 by Julie Candler

Like a stately yacht that was caught on a sandbar, the luxury-car market is rising slowly with the tide -- a tide created by appealing and aggressively priced new vehicles and the emergence of affluent new customers.

For 1997, luxury-car sales are expected to show an increase of about 4 percent, says Susan Jacobs, president of Jacobs & Associates, an auto-marketing consulting firm in Rutherford, N.J. She forecasts that sales will increase by about 1 percent in 1998.

According to Wards's Automotive Reports, however, 1997 sales of luxury cars had increased by 7.5 percent through August compared with the same period in 1996.

U.S. sales of domestic and foreign luxury cars had declines slightly in recent years. After reaching more than 1.2 million in 1994, they dropped by 3.5 percent in 1995 and by an additional 2 percent in 1996.

Jacobs attributes the healthier 1997 market partly to a stock market that has posted strong gains for the past three years. "There is a wealth effect," she says. "Not that [investors] are cashing out, but they feel they have the wherewithal to splurge a little."

Also, many small-business owners are treating themselves to luxury cars as a strong economy has helped to boost their companies' profits.

Jim Press, senior vice president and general manager of the Lexus Division of Toyota Motor Sales, U.S.A., based in Torrance, Calif., cites another source of new customers: "The number of affluent households in growing faster today, and [baby] boomers are entering the luxury market."

Another factor is a switch back to luxury cars by people who had owned sport-utility vehicles, says Art Spinella, director of automotive research at CNW Marketing/Research in Bandon, Ore.

Spinella cites a study of 1996 purchases indicating that 19 percent of those who switched back from a sport-utility to a car purchased a luxury vehicle (priced above $35,000) or what the industry calls a near-luxury vehicle (priced at $25,000 to $35,000). Of those buyers who formerly owned the biggest sport-utilities,37 percent switched to a luxury or near-luxury car.

The market is also being helped by the steadiness of prices -- and even some price cuts -- for luxury cars, says Jacobs. In recent years, consumers resisted luxury-car prices, which were rising faster than their incomes and the rate of inflation. "People were finding that their present cars were more durable than previous models," she says. "That gave them a greater ability to wait for better deals if they thought current prices were to high."

Above all, it's that cars themselves that are spurring the growth of the luxury market, says Jacobs. "The market is being supported by a lot of new product coming in." she says, referring to all-new cars with new designs. "They started in 1997 and will keep flowing in 1998."

Innovative technological features on many of the new luxury coupes and sedans also are increasing their appeal to consumers. Among those features are:

* Variable steering, which makes parking easy and provides stability at highway speeds.

* Lighter engines and transmissions that operate quietly and smoothly while providing more-responsive performance.

* Traction control, which detects when a wheel is about to lose traction and, through electronic controls, prevents the wheel from spinning.

* Heated and ventilated seats, and steering wheels that automatically tilt upward for easy entry and exit.

Among the innovations for 1998 is the Cadillac Seville STS's optional adaptive seating, an industry first. It adjusts the front seats' support to custom-fit every individual.

The system uses a network of 10 air cells placed between the leather upholstery and foam in the seat cushion and back. Electronic sensors attached to the air cells measure and adjust internal pressure levels every four minutes as the occupant moves in the seat.

A Mercedes-Benz system, Parktronic -- introduced last year on the top-of-the-line S-Class vehicles and offered as an option this year on the upper-luxury E-Class models -- sounds a warning and lights a bar-graph display if drivers get too close to other vehicles or object when the car is moving at 10 mph or less or is backing up. The system uses high-frequency sound waves to sense objects near front or rear bumpers.

On 1998 models, most luxury-car makers are continuing their leadership in safety features by providing an extra air bag on each side of the front of the passenger compartment, for protection in side impacts. Among the automakers now offering the side air bags on some of all of their vehicles are Audi, BMW, Cadillac, Infiniti, Jaguar, Lexus, Nissan (on the Maxima), Saab, Volvo, and Toyota (on the Avalon).

Jaguar is among the luxury-car makers that have added safety-belt pretensioners for 1998. These take up the slack of the belts within milliseconds of a frontal collision reducing the distance that a driver or passenger moves forward.

While most luxury cars are four-door sedans, there is a trend back to coupes. Mercedes, Lexus, and Volvo are releasing innovative, handsome, new or redesigned two--doors for 1998.