Having crowned their product ranges with mega-priced luxury vehicles, European makers have begun aiming downward.
In coming years, subcompact or compact models wearing Audi, BMW, Mercedes-Benz, Saab and Smart badges will offer the performance and features found in larger vehicles. But the small packages will have considerably higher price tags than comparably sized vehicles sold by U.S. and Asian brands.
The aim: to attract status-oriented youth buyers and then move them into more expensive vehicles within the brand as their incomes increase.
But a big hurdle to overcome is the American perception that small means cheap, and that bigger is better. If not carefully managed, analysts warn, this perception could undermine the brands' premium image.
While the luxury brands have been successful in selling smaller vehicles in Europe, the attempt could backfire in the United States.
"Anytime you go substantially downmarket, you put your image at more and more risk," says George Peterson, president of AutoPacific. "When BMW sold the 318ti, it hurt their image in the United States."
Because American buyers equate price with size, "a premium-priced small car in some ways is an oxymoron here," he says.
BMW Chairman Helmut Panke says the company learned that lesson from its disastrous experience with the underpowered, three-door 318ti hatchback, which the company pulled from the U.S. market in the late 1990s.
Details on the 1 series are slim, but Panke stresses that it won't repeat the mistakes of the 318ti. And it won't be a mass-volume vehicle competing with cars from General Motors, Ford Motor Co. and the Chrysler group. Based on the 3 series, it will be a "true premium vehicle," he says.
It will go on sale next year.
Pointing to the success of BMW's Mini brand, Panke says the secret to protecting brand character is to build it into the vehicle with every component.
"A brand is a promise that has to be fulfilled with each component and each solution," he says. "You can't make it like a Post-it note."