Midsize Luxury Cars Struggle to Find Success

Decreasing sales of many midsize luxury cars cross/utility vehicles are tempering perceptions that the segment is home to some of the industry's hottest products.

Of the 12 vehicles in Ward's midsize luxury cars CUV segment, seven were running behind year-ago's sales pace eight months into 2005. Leading the way were the Porsche Cayenne and Volkswagen Touareg, which were down 22.9% and 33.8%, respectively, during January-August vs. like-2004 results. Sales slid 10% or more for four models, while only one product - the BMW X3 - was up more than 10%.

Overall, the midsize luxury cars CUV segment rose slightly eight months into 2005 from year-ago's 252,672 deliveries to 272,419 units. But the 5.4% increase indicates the segment's growth potential may be overrated. For example, that upsurge was nearly equaled by the 5.3% year-to-date increase recorded by the non-descript large-van segment.

In total, nine vehicle segments posted larger sales increases through August.

If the Chrysler Pacifica is included in last year's data for midsize luxury car CUVs, sales through August ran 12% behind like-2004 results. When demand sputtered at its debut in 2003, the Pacifica's price was lowered, dropping it into Ward's middle CUV segment - possibly another indication of the luxury car middle CUV sector's frailty.

"It's clear that it's not quite as good as you think it would be, particularly considering that these should be customers that are not affected by rising gas prices," Rebecca Lindland, sales analyst for Global Insight, says of the segment. "What's sparking this?"

The theory goes something like this: Consumers trading in a broad array of cars and trucks for midsize luxury cars CUVs are exacerbating the already difficult process for auto makers of learning a new segment.

"You're selling this product to a wide-range of people coming in from entry-luxury cars to midsize (SUVs) to fullsize (SUVs)," says Cadillac SRX Marketing Manager Jim Van Kirk. "You get a lot of different people in this segment."

With average transaction prices on the rise, consumer preference seemingly shifting away from the body-on-frame trucks popular in the 1990s to unibody CUVs and baby boomers beginning to downsize their vehicles as they become "empty-nesters," the luxury car middle CUV segment tempted auto makers like gold for a treasure hunter.

The number of entries in the segment has doubled since 2001. Even Porsche AG, a Germany-based niche producer of high-performance sports cars, felt compelled to enter the segment with the Cayenne.

BMW AG, Volkswagen AG and Volvo Cars - all European, previously car-only brands - used their midsize luxury CUVs to change their image and broaden their appeal. Subaru of America Inc., known for its boxy wagons and offbeat persona, is shooting for mainstream luxury car with its recently introduced B9 Tribeca.

But consumer interest can lag quickly if auto makers struggle with demand for accessory packages, engine size and seating capacity. The Touareg, SRX, Infiniti FX and Cayenne all are relatively new on the market, debuting in 2003, but deliveries during the first eight months of 2005 trailed like-2004 results.