More premium car buyers are trading down to mainstream brands, where they’ve discovered they can get a lot of the same technology, comfort and features at a substantially lower price, according to new J.D. Power research.
Why it matters: It’s more bad news for luxury car manufacturers that have been clobbered in recent years by Tesla and now Chinese competitors — and another reflection of how affordability issues are upending the U.S. car market.
Driving the news: JD Power’s latest Automotive OEM Intelligence Report, out today, is flashing warning signals for luxury carmakers like Mercedes, BMW and Audi.
- Their traditional formula — distinctive styling, rich materials and advanced features, all wrapped up with a prestige badge — is losing ground.
By the numbers: Premium vehicles as a share of overall car sales are shrinking, hitting their lowest level since 2020.
- 32% of consumers replacing a premium SUV defected to a mainstream brand, paying an average $51,500 vs. $70,600 for the luxury model they moved on from.
- Defection is highest among Gen Y and Gen Z, and households earning less than $100,000.
- A big reason is because you can get many of the same tech and convenience features once associated only with luxury cars in a Chevy, Toyota or Hyundai.
What we’re watching: Premium brands are carrying more inventory and spending more on incentives — about 7.3% of sticker price in August vs. roughly 6% for mainstream brands, per JD Power — a sign they’re having to work harder to move vehicles.
The bottom line: Mainstream brands are becoming good enough that consumers are increasingly unwilling to pay $20,000 more for a car with the vaunted luxury badge.