wealth, and even excess, but sometimes they can come

pretty cheap. Every so often premium automakers push

out cars with starting prices well below the market

average. While many consumers see a car as a largely

rational purchase, a means of transportation, perhaps

a tool for work, and maybe a way to have some fun,

luxury buyers are generally willing to pay for a few

extras a person may not exactly need.

Buttery leather seats, real wood dash panels, and

premium sound systems.

However, in their quest for ever greater volumes, some

premium automakers are trying to see if they can get a

few more buyers down at the lower end of the price

range. While there are some advantages to going down

market, there are also some perils.

Sometimes it doesn't work out.

The average new car price in the United States in 2019

was around $33,600 including incentives and dealer

discounts, according to J.D.

Power. That is for all cars, not just luxury.

About 40% of all premium vehicles sold in the US cost

less than $40,000, according to J.D.

Power. BMW, Audi Mercedes, the three largest luxury

brands by volume in the United States, are some of the

biggest sellers of luxury vehicles at any price,

including the lower end.

One very notable example of a luxury car at the lower

end of the price range came from BMW in 1994, the BMW

3 series compact, officially known as the BMW 318ti.

The car was BMW's mid-1990's shot at widening its

highly successful 3 Series range of sports sedans,

which the company had debuted in 1975.

But the three door hatchback sold poorly in the United

States and was discontinued in North America after

just four years on the market.

It enjoyed more success elsewhere in the world though,

and stayed in production through 2004.

A few years after the 318ti, Mercedes-Benz also tried

its hand at selling a cheaper model for the masses.

The Mercedes C-Class Sport Coupe or SportCoupé was a

three door hatchback or lift back car sold in the US

beginning in 2001.

The SportCoupé had a starting price at the time of

$25,575. A pretty low price for a Mercedes.

For a few thousand, more buyers could opt for a bigger

engine and some other features.

However, at least in its basic form, the car lacked

many of the basic elements buyers would expect in a

Mercedes such as leather seats and a CD player.

The SportCoupé failed to make a sustained impression

with customers, and eventually went the way of the BMW

318ti. The model was eventually discontinued in the

US. However, the Germans aren't the only ones who try

their hand at selling a cheaper car that can appeal to

a different kind of buyer.

Jaguar, while under the ownership of the Ford Motor

Company, also tried reaching out to less well-heeled

customers with the X-Type, a mid-sized sedan.

It started at $30,000.

The car sharing underpinnings with a Ford model sold

in Europe called the Mondeo.

It was not considered a bad car, reviewers simply

didn't feel it was good enough to be a Jaguar.

And again, sales were lackluster.

Ford would eventually sell the entire Jaguar brand to

India's Tata Motors.

The automotive arm of the Tata conglomerate.

Despite failures, luxury automakers have continued to

see the promise in dipping into the mainstream market.

Mercedes Benz released these CLA in the U.S.

for the 2014 model year.

It was basically a sporty compact sedan with a

starting price of just under $30,000.

To save money, Mercedes built the CLA on a chassis

shared with another model and assembled the car in low

cost Hungary.

But some reviewers at the time commented that the car

lacked the rich feel of other Mercedes-Benz models.

A reviewer at car blog Jalopnik said the CLA is an

economy car dressed in a fancy suit, but underneath

the dapper garb lies a compromised Benz.

This doesn't mean it was a bad car.

Reviewers still complimented the CLA's outer design

and interiors and said the car drove well, but the

$29,900 dollars starting price did not last, the CLA

250 now slots in at a starting price of around $36,650

as of 2020.

Mercedes-Benz cheapest car in the US is now the

A-class sedan, which starts at around $32,800.

That is nearly $10,000 cheaper than the next larger

class of sedans, the C-Class, which start at around

$41,400. Mercedes still considers the CLA an entry into

the brand, it is just that the newer CLA offers a bit

more than the A-class and a lot more than the original

CLA, which was regarded as pretty barebones for a

Mercedes at the sub $30,000 starting price.

Auto industry insiders note that BMW and Mercedes

brands don't really have mass market brands like many

of their competitors.

So if they want to increase volume, they have little

choice other than offering a wide range of products

under the same brand.

This does offer customers a wide array of options,

which helps the brands cover a broader slice of the

market. Throughout much of their history, both German

automakers specialized in selling top shelf versions

of traditional passenger cars that boasted luxury and

high performance. But since the 1990s, U.S.

consumers have increasingly sought out sport

utilities, and Mercedes-Benz and BMW have responded.

The largest portion of each brand's sales growth in

the US in recent years has come from SUVs.

But both companies have sold cheaper cars in part

because they give each brand a chance to attract new

buyers, especially younger ones who might not yet have

the cash for one of the classic mid or full sized

models. If you have as a what if example, if you have

somebody buy one at 25 even if their next car isn't

necessarily an Audi or Mercedes, maybe they come back

a little bit later on. If you can catch somebody that

young and get them interested into your brand, it

maybe later in their life that they come back, but you

still have a better opportunity of getting them to

come back. It's easier sometimes than to get them in

fresh. Mercedes told CNBC that 70% of CLA buyers come

from other brands and the majority of those are coming

from non-luxury brands.

On average, these customers are eleven years younger

than the typical Mercedes Benz buyer 54% of A-class

buyers in 2019 came from other brands as well.

And those customers most frequently had owned Toyotas,

Hondas, and Lexus vehicles prior to switching over,

Mercedes said. Some industry observers are skeptical

that luxury brands are going to be able to convert a

considerable share of the market by simply offering a

lower priced vehicle when so many of their other

models are going to be simply out of reach for many

customers. But Mercedes told CNBC that two thirds of

CLA buyers have gone on to buy another Mercedes-Benz

vehicle. There is another risk to all this, of course.

Industry observers warn that as with fashion or

similar industries, high end brands risk diluting or

losing the exclusivity associated with their names if

they go too far downmarket or simply become too

common. Brand power is always important and yes, there

can be a point where you saturate your own market and

you then start to feel a little bit run of the mill

and that's a risk.

And I think that for the most part BMW and Mercedes

have defended it pretty well.

In the days of the C230, Mercedes did take some

criticism for broader quality issues that industry

watchers said threatened the brand's premium

reputation. Mercedes told CNBC that it doesn't think

the mere existence of more affordable models will

devalue the brand and that customers can see the

difference between a $33,000 A-class and a $94,000

S-Class. Mercedes is actually doubling or even

tripling down on its strategy, you could say.

The three pointed star has an SUV counterpart to the

CLA called the GLA.

It also released an all new model, the GLB in 2019.

Mercedes hopes these new entry models will continue to

draw new buyers into the brand.

Over the last 20 years, the range of models available

from companies such as BMW, Mercedes, and others has

widened in many ways, not just in terms of price.

In 1999, for example, BMW sold six lines of models the

3 Series, 5 Series, and 7 Series sedans.

The Z Line of Roadsters.

And for the first year in history, BMW's new sport

utility vehicle, the X5.

It also made high-performance versions of its 3 and 5

series sedans.

The M3 and M5.

As of March 2020, BMW's USA lineup consisted of a 2,

3, 4, 5, 7, and 8 series of sedans and coupes, a full

X Line of sport activity vehicles ranging from the X1

to the X7, the Z4 Roadster, the electrified i3 and i8

models and BMW's high performance M batched line.

It is much the same for Mercedes.

Audi likewise has a pretty robust selection of

vehicles in many different forms and for many

different prices. The luxury brands were trying to

grow their volumes so aggressively right?

They came out with cheaper vehicles when the times

were a bit tighter, smaller vehicles that cost less.

Now they're coming out with SUVs, but also swooped

backed more SUVs that are kind of more coupe like.

And I think the problem is that there's so many now.

And whenever there's too many of anything, I feel like

it devalues the brand.

I mean, that's true with just about anything in life

right? Regardless of the risks, carmakers do need to

sell lots of cars.

All of them have to make massive investments in

technologies and businesses that are unlikely to bring

any profit in the near future.

Survival is a numbers game.