Matt Prior: How to survive as a premium manufacturer

I don’t think you can read too much into the recent announcement that Infiniti, the posh arm of Nissan, is going to withdraw from sales in Europe. 

I once sat in a room with Carlos Ghosn, formerly the boss of RenaultNissan, where he said he didn’t care how many cars Infiniti sold in Europe, so long as the sub-brand’s profit margin was into double digits. Although apparently he’s not quite so influential now as he once was. Anyway, it turns out that double digits on naff all is still naff all. 

But in that ‘double digits’ figure you can see why having a posh brand was so appealing to Nissan in Europe. It also reveals how tight profit margins are if you’re not a premium car maker. The market is so cut-throat that normal car makers aspire to moderate single-digit figures, so if they have an underwhelming year, or if they find themselves behind the curve of a new trend, they can be scuppered for ages. 

So they all want a bit of what DS, the posh bit of Peugeot-Citroën, has been similarly explicit about. Premium bits of the car market account for 11% of all car sales, DS says, but 37% of all profits. And so DS would like to sell cars into 70% of this profit-rich environment. 

Which, as Infiniti has found in Europe, is a problem. How do you convince people that your car is worth spending more than average money on? The easiest way is to be German or British or Italian and to have been doing it for a century already. Then you can claim that you’re ‘the ultimate driving machine’ or ‘engineered like no other car’. Which is fine. If it’s still true. 

But here’s the thing: what if it isn’t? Or, at least, what if it’s true for some of your cars but very much not true for others. Because while it’s irresistible for ‘normal’ car makers to try to sell cars in the premium market, it’s similarly tempting, for makers of hitherto posh cars, to try to sell them to people who previously couldn’t afford them. 

So if you want to lease a Mercedes-Benz or an Audi for not much more than £200 a month, you can. Or, in other words, give up a daily latte and a Ford Fiesta, and you can probably have an Audi A1. Doing that doesn’t sound so premium at all – and if you’ve sat in an A1, it probably doesn’t feel it, either. 

And so Audi will keep making R8s and Mercedes will keep making G-Classes because they need to keep reminding you that, deep down, they make top-end cars, even when, quite a lot of the time, they don’t. And I suspect the world’s ordinary manufacturers will keep trying, and, quite often, failing, to find ways of pushing above that line, because they don’t make cars that command six-figure prices and whose performance or engineering we go gooey about. So we’ll never quite buy the fact that a DS is an Audi rival even if it looks different and feels better inside. 

But the lines between the premium and the ordinary have never been more blurred. And while there’s a lot to be gained, if you’re Infiniti or DS, by trying to step above it, if we start to see the reality for what it is, it strikes me there’s a lot to lose for premium car makers who step below the line, too, and expose the whole charade for what it is.