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Luxury Car Models Don't Die, They Multiply

A 2014 Mercedes-Benz S-Class

Photograph by Mercedes-Benz USA

A 2014 Mercedes-Benz S-Class

They sure like to slice the zwiebel ever thinner over in Stuttgart, don’t they?

With the release of the briskly selling CLA sedanMercedes-Benz (DAI:GR) now sells, by my count, 13 different models in the U.S. Everything from that entry luxury four-door at $29,900 all the way up to the $215,500 CL65 coupe.

If you’re in the market for, say, a sedan, you can now get the baby CLA, the slightly larger C-Class, the midsize E-Class, the swoopy CLS, or the full-bore S-Class. Extra Small, Small, Medium, Slim Cut, and Large. If you want a wagon, there’s an E-Class version. A two-door? Well, there are C-Class and E-Class coupes, but there’s also the CL, which is the two-door version of the S-Class (and will be renamed the S-Class Coupe in 2014).

Don’t stop there, because perhaps you’d be interested in a two-door with a convertible top, in which case you can get an E-Class cabriolet—but also an SLK, which is the baby brother to the SL. There’s also the SLS supercar, hardtop or convertible. For something a little more rugged, well, there’s always the GLK, which is the smallest SUV that Mercedes makes, at least until the company starts selling the even-smaller GLA next year. Roomier SUVs include the midsize ML-Class, the three-row GL-Class, and the go-anywhere G-Class.

Still with me? Now, let’s compare this to Mercedes 25 years ago, in 1988. Back then, your showroom at Swabian Motors had: the 190 sedan, the 300 sedan (and coupe and wagon), the 560 SEL sedan (and coupe), and the 560 SL convertible.

That’s it. Mercedes is the example here, but the same goes for other luxury carmakers. BMW (BMW:GR) used to make a 3-Series sedan, a 5-Series sedan (and wagon), a 6-Series coupe, and a 7-Series sedan. Now the company has models in every number from one to seven, not to mention four completely different SUVs, a roadster, and two electric vehicles. In the mid-1980s, Audi (NSU:GR) basically sold three different models in the U.S.; now it sells upwards of 11.

Some of this growth is due to entire new vehicle categories—there wasn’t anything called an “SUV” back when people were all will-they-or-won’t-they about Whitley Gilbert and Dwayne Wayne on A Different World. But even in established segments, things have gotten increasingly atomized. For Mercedes, the C-Class (a direct descendent of the “Baby Benz” of the mid-’80s) has long been the entry point into the company’s lineup. That status now falls to the smaller CLA. Between the medium-sized E-Class and range-topping S-CLass is the CLS, which is actually less roomy than the E, but costs more.

So what’s going on here? Why do luxury automakers need 10 models when three or four used to do just fine? Things have gotten far more competitive, that’s for damn sure. Until the mid-80s, there was no Lexus (TM), no Infiniti (7201:JP), no Acura (HMC). “There were no $60,000 Hyundais (005380:KS),” says Kevin Tynan, an automotive analyst at Bloomberg Industries.

With that increased competition, it’s getting very hard for almost any automaker to support itself with U.S. sales of fewer than 150,000 cars a year. “You need growth, volume,” says Tynan. “Where does that come from? Someplace you aren’t.” That need, coupled with ever more sophisticated customer research, means carmakers are constantly looking for gaps in the marketplace.

It has also become easier to make many different models from the same set of basic components. Audi’s MLB platform, for example, has spawned six different models, from the A4 all the way to the A8. Almost all of Mercedes’s lineup can be reduced to four platforms, and the company is planning to halve that number by the end of the decade.

It may make sense to offer more models, and technology may make it easier and cheaper to spin off new ones from the same set of parts. But model proliferation isn’t without risks. “Think about what happened to Jaguar (TTM),” says Tynan.

Back around the turn of the century, the automaker (then owned by Ford (F)) wanted a smaller four-door that cost less than its flagship XJ6 sedan. The solution, it was thought, was to drop a Jaguar-designed body on Ford’s midsize Mondeo. Who would notice that most of the gear underneath came from the Blue Oval? Everyone, as it turned out. Sales of the X-Type, particularly in the U.S., were never spectacular. In 2005, Jaguar sold 10,941 of them here. In the same year, BMW sold nearly 10 times as many 3-Series. There are some really clever things you can do these days with platforms and component sets, but you still have to nail the execution.

Grobart is a senior writer for Bloomberg Businessweek and the managing editor of Bloomberg Digital Video. Follow him on Twitter @samgrobart.

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