Bentley Arnage T Final Series 8 December 2014 Autogespot

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Was Aston Martin’s expansion into lower reaches of the luxury automotive food chain a good idea? The development of the AM V8 Vantage was at best a dangerous move. Why risk devaluing a storied brand? Looking at top line figures, it seems as if Aston’s “entry level” model is a solid success. Aston Martin’s sales have increased to levels the company hasn’t experienced since . . . ever. Thanks in part to the AM V8, Aston Martin turned a profit in the two years prior to its removal from the FoMoCo family. But looking one level deeper, the British automotive brand’s move down market triggered several less-than-savory consequences. They may be returning to bespoke, fragrant leather coops, but the prodigal chickens are back, and they’re bad.

When a luxury brand faces introduces a substantially cheaper offering, it “pulls forward” potential sales. Aston’s cheaper alternative to a previously ultra-exclusive automotive product gave people who very much wanted to buy into the brand a chance to do it a lot sooner. This sounds exciting to the marketing folks, both in terms of total revenue generated and brand prominence. But the fact that AM intenders were fulfilling their yearning for a luxury product at a much lower price got lost in the buzz.

In other words, in a related, unintended, but hardly unpredictable consequence of lowering the barrier to entry, Aston’s V8 sales reduced the pool of potential customers. Did the AM V8 attract buyers who would otherwise never have thought of an AM? Unlikely. But by putting more people into a cheaper AM, the company ran the very real risk of those customers failing to upgrade to a more expensive model later on. The chances are high that the Vantage V8 fully scratched their owners’ AM itch. Oops.

You can see the same thing happening over at Porsche. Although the Boxster/Cayman twins are cheaper, less powerful and less prestigious than the 911, they’re damn fine automobiles in their own right. If you really love your Boxster or Cayman, why not save yourself some money and stand pat? Which is exactly what has happened.

The 911 is a vastly more profitable car for Porsche. Hence Stuttgart fought nail and claw against this happy-Boxster owner dynamic. It took, what, 13 years before the Germans offered a limited slip differential in their mid-engined marvel? And yet, they caved anyway, offering the usual minor upgrades on their lower-priced model, giving Boxster/Cayman owners an excellent reason not to make the jump to hyper-price.

Note: the Boxster and Cayman did not cannibalize 911 sales directly. I highly doubt many Porsche owners traded down from a 911 to a Boxster. If you look just at the sales numbers, there was no initial negative effect from the Boxster. Armchair analysts tend to forget that Porsche was on the ropes when the Boxster was launched, and customer loyalty meant that 911 sales were relatively robust and stable. However, when the economy boomed in the ’90s and early 2000s, the 911 sales bump was way under expectations, exactly because of the Boxster.

Let’s have a look at Aston Martin’s numbers. [Click here for AM sales chart]

In 2006, the take-off of DB9 and Vanquish sales (seen in 2004 and 2005) reversed abruptly. When the V8 Vantage came to market, the 2005 levels of the high margin cars effectively halved. [I apologize for having only the European numbers in the graph, since I do not have access to global sales ones.]

It’s a familiar story. Jaguar XJ sales effectively halved with the arrival of the S-Type and never recovered. S-Type sales dropped by 40% with the introduction of the X-Type. Other premium brands have perhaps not experienced as pronounced an effect, simply because the much cheaper offering sold in much higher numbers (declines of 30-50 percent For the Bentley Arnage and Lamborghini Murcielago upon the arrivals of Conti GT/Flying Spur and Gallardo). Are these brands really better off for opening the gates wider?

For Aston, the answer seems pretty obvious. If nothing else, Aston residuals have started dropping rapidly. Most of this is due to the current economic crisis, but pre-AM V8 Vantage, the fall would not have been nearly so dramatic. When a seller gets rid of a two-year-old V8 Vantage for $60K, this drives down residuals for the DB9s and Vanquishes as well.

The new Aston Martin Rapide aims to add some luster to a brand tarnished by its own short-sighted model management. Oddly, both Porsche and Lamborghini are following the exact same trajectory at the same time. In all three cases, the brands are ignoring Ben Franklin’s sage advice: it takes many good deeds to build a good reputation, and only one bad one to lose it.

More than that, just as you can’t unring a bell, you can’t drag a brand back upmarket—at least not without waiting a long time for the dissonant echoes to fade.

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