A Condensed History of the American Luxury Automobile Market

1. Introduction

Everything changes. And evolves. The luxury auto segment is no exception.

It is fair to say, that at the dawn of the automobile age, all cars were a luxury item. Relative to personal income, autos were an expensive indulgence. In those days, trolley cars were the chief mode of public transit in most major cities. By 1895, nearly 11,000 miles of track had been built in the United States. By 1912, there were almost 40,000 miles of trackage for overhead-wire electric trolley operation in the U.S.

When Henry Ford began his assembly line in late 1913, he simplified the labor needed down to discrete tasks that could be performed by relatively unskilled labor. Ford reduced the time required to assemble a car from 12.5 to 6 man-hours; within a year, it was down to 93 man-minutes. This made it possible for Henry to cut the price of his Model Ts in half and boost production so that, in 1914, Ford made more cars than all other automakers combined.

Ford dropped the price of the Model T from $850 to $550 in 1913, and $440 in 1915. In 1915, over 500,000 Model Ts were sold. Autos ceased being a luxury item.

2. The Early Years - Pre-Depression

Despite the success of the Ford Model T and other low-priced automobiles, there remained a market for luxury cars. In the early years, there were numerous premium marques, many offered with custom coachbuilt bodies, competing for the dollars of U.S. luxury buyers.

Packard quickly became the most well-known of the premium brands. The first Packard automobile was produced in 1899. From the very beginning, Packard featured innovations, including the modern steering wheel. The marque developed a following among wealthy purchasers both in the United States and abroad. Early in the 20th century, a Packard cost four times the price of an Oldsmobile Runabout. The iconic Packard slogan, "Ask the Man Who Owns One," was first used in a Packard ad in October 1901.

In 1916, Packard sold 10,645 vehicles. In the 1920s, Packard exported more cars than any other in its price class.

When the ticker tape rained down on Charles A. Lindbergh during the New York City parade celebrating his historic flight, he was riding in an open Packard. In 1927, Packard sold over 36,000 cars; the following year, over 50,000 were sold. By the end of the 1920s, Packard was outselling every other luxury car in the world.

Lesser-selling auto marques like Cord, Duesenberg, du Pont, Franklin, Jordan, Marmon, Mercer, Locomobile, Peerless, Pierce Arrow and Stutz were also well-known to well-heeled prospects.

1930 Cord L29 Town Car

Most are long forgotten, victims of the Great Depression of the 1930s. In 1930 - the year after the stock market crash, Packard managed to sell 35,443 cars. Cadillac sold 17,117 vehicles, LaSalle - 14,986 and Cord - 1,700.

The survivors lived on because they became less luxurious.

3. Pre-World War II

The depression of the 1930s, which truly didn't end until the pre-war military build-up of 1940, changed the way wealthy Americans lived. Conspicuous consumption became muted. Household staffs were reduced - fewer gardeners, chauffeurs, maids and other servants. Cars were often piloted by owners themselves. The first three years of the Great Depression slashed the number of U.S. automakers almost in half.

Lincoln wasn't a big seller in 1930 with only 3,212 examples finding new buyers. It was handily outsold that year by Marmon (4,681 units), Pierce Arrow (9,865) and Franklin (5,744). But Lincoln was owned by Ford Motor Co. and could weather the financial storm better than small independent automakers.

Lincoln sold only 1,411 cars in 1935 - all of them big, built-by-hand K-Series models. The firm introduced the lower-cost, non-coachbuilt Lincoln Zephyr in 1936. The sleek, mid-priced Zephyr increased Lincoln sales almost 12-fold and probably saved the company. The economy in 1938 had soured; sales of luxury and near-luxury cars were down. Only 19,111 Zephyrs were sold in the '38 model year. That doesn't sound very good but Zephyr actually sold more cars than General Motors' LaSalle.

By 1939, the big K Lincolns were almost dead. Only 133 units were made and the large Lincoln was no longer offered after the '39 model year.

General Motors' LaSalle had made its debut in 1927 and most Cadillac dealers sold both brands. During the depression, Cadillac moved LaSalle to the forefront. During much of the '30s, LaSalle, described as having "Cadillac quality in a medium-priced car," handily outsold its more expensive sibling.

1934 LaSalle convertible coupe

In 1939, Cadillac sold only 13,000 units, while over 22,000 new LaSalles found owners.

The LaSalle division was killed off after the 1940 model year, not because of poor sales, but because General Motors feared that LaSalle was pirating too many sales from its luxury brand Cadillac. When GM discontinued the LaSalle nameplate, Cadillac offered the Series 61 - an entry-level model - to replace it. The Series 61 cost $125 more than a comparable LaSalle sedan.

Packard Motor Car Co. remained an independent automaker and Packard was its only brand.

Sales of its very luxurious vehicles dropped to 8,000 in 1934. In 1935, the firm introduced the lower-cost 120 models; sales jumped to almost 32,000 units. Packard introduced the Six, a 6-cylinder version of the 120, in 1937 and saw sales soar to over 122,000 cars that year. These lower-priced Packards looked very much like their large brothers.

1937 Packard Six

A comparison of prewar sales from 1930 to 1941 shows that Lincoln was the poorest seller of Detroit's Luxury Three:

Year	Packard sales (units)	Cadillac/LaSalle sales (units)	Lincoln sales (units)
1930	20,633	22,559	3,212
1931	9,441	15,012	3,535
1932	5,941	8,084	3,647
1933	2,407	6,665	1,515
1934	8,000	13,014	2,418
1935	31,889	12,287	1,411
1936	61,027	25,884	16,509
1937	122,593	46,152	30,974
1938	56,168	24,843	19,527
1939	22,075	35,582	21,133
1940	98,000	37,176	22,046
1941	56,155	66,130	21,994

4. Postwar American Luxury

After the war, all auto manufacturers could sell everything they could produce because pent-up consumer demand was so great. Almost everyone offered slightly warmed-over 1942 models for sale immediately after the war. Typically, conversion times from war production to passenger auto production and availability of raw materials and components dictated factories' outputs. Auto supply never really matched demand until 1950 or so.

The postwar luxury was much different than 20 years earlier. The custom coachbuilt market had pretty much dried up. Except for hearses and some limousines, luxury vehicles had become mass-produced, factory-finished items.

In 1949, Cadillac offered the new and desirable two-door pillarless hardtop, the Coupe de Ville. Cadillac also offered the first overhead-valve V8 engine in the luxury field. Lincoln only offered a flathead V8, a modified Ford truck engine, until 1952 when it introduced an overhead-valve V8 motor. Packard stuck with its pre-war L-head straight eight - an obsolete design which wasn't discontinued until 1955 when Packard finally offered a modern, overhead-valve V8 engine.

Cadillac introduced its first postwar body in its 1948 models. Lincoln had all new bodies for its '49 models introduced in April 1948. Packard didn't offer a new body style; it simply updated the prewar Clipper model in 1948, giving it a more bulbous look. These models were known as Bathtub Packards because they reminded people of upside-down bathtubs.

Writing in Mechanix Illustrated, road test guru Tom McCahill referred to the newly designed Packard as "a goat" and "a dowager in a Queen Mary hat." Still, demand for any car was high in those days and Packard sold 92,000 vehicles for 1948 and 116,000 of its 1949 models. And the Fashion Academy of New York named the Bathtub Packard its Fashion Car of the Year. In 1951, Packard finally rebodied its line of cars - a pleasantly modern but undistinguished design.

One would expect that the lack of a modern powerplant combined with styling misfires would have sunk Packard. These shortcomings didn't seem to bother Packard's loyal cadre of aging customers in the early 1950s. What killed Packard was mismanagement and it caused a dramatic sales slide beginning in 1954.

Packard president James J. Nance, a former appliance man - described as having "a wildly-exaggerated notion of his skills as an automotive leader," made several critical mistakes. He decided to produce more components in-house. This led to production problems, which reduced the supply of finished vehicles to dealers. He rejected a merger with Nash, then a relatively healthy auto company, in favor of a merger with Studebaker, a disaster of a car firm. Studebaker was losing money, although Packard's management failed to discover, during its due diligence, that the financial disclosures presented by Studebaker were essentially fraudulent.

The 1954 acquisition of Studebaker and resultant cash problems forced Packard to delay the introduction of its all-new models for a year, leaving 1954 as a year of stale Packard offerings - compared with Cadillac, which sported an all-new body for 1954 and an even more-powerful V8 than before - 230 horsepower. That year, Packard's longer-wheelbase Cavalier model had a 185 horsepower motor. Entry-level Clipper models were powered by engines with as little as 150 hp.

After the last 1954 Packard rolled off the line, the company relocated to a new assembly plant, which caused production difficulties and raised quality issues. The big changes in design of the '55 Packard exacerbated problems. Dealers were becoming fed up with Packard and begun deserting the firm, especially when the all-new 1955 models were fraught with quality, reliability and supply problems. In early 1955, there were 4,000 Studebaker-Packard dealers; by early 1956 there were only 3,000 remaining.

In July 1956, desperate for cash, Studebaker-Packard was effectively taken over by aircraft manufacturer Curtis-Wright. Nance left Studebaker Packard in 1956 when the company was on the verge of insolvency and, ironically, was soon named vice-president of Ford's new division in charge of producing Edsels.

The planned 1957 Packard models were scrapped, replaced by a smaller Studebaker-based Clipper model.

When former Packard dealers were shown previews of the '57 Packardbakers (as detractors called them), many ripped up their franchise contracts in disgust. Customers weren't impressed, either. In two model years, fewer than 6,800 Packardbakers found buyers. The last Packard rolled off the line on July 13, 1958. Of the 1,600,000 Packards produced, 48% were made in the post-war years, which says a lot about the revival of the luxury car market following the war's end.

Where did prospective Packard buyers turn in their quest for a luxury ride? Looking at the sales figures from 1951 through 1960, one can speculate that at least some of them turned to Chrysler's new Imperial - a former Chrysler top-of-the-line model which became a separate nameplate in 1955. And, within a few years, Imperial was giving Lincoln serious competition.

Year	Cadillac sales (units)	Lincoln sales (units)	Packard sales (units)	Imperial sales (units)
1951	110,340	32,574	100,312	--
1952	90,259	27,271	62,921	--
1953	109,651	40,762	89,720	--
1954	96,680	36,993	30,965	--
1955	140,777	27,222	55,517	11,432
1956	154,577	52,878	28,799	10,684
1957	146,681	41,567	4,089	41,123
1958	121,778	29,684	2,622	16,133
1959	142,272	26,906	--	17,269
1960	142,184	24,820	--	17,719

The Lincoln brand had its loyal fans but its sales paled compared with Cadillac.

In 1958, Lincoln made a strategic mistake, offering unitized-body cars made in its brand-new Wixom plant. These new models did not sell well because of the unusual styling and quality issues with the new body construction. At one point, Robert McNamara, who soon was elevated to President of Ford Motor Company, wanted to kill off Lincoln. But he relented when shown prototypes of the next Lincoln model.

Originally proposed as a Thunderbird design, the new, smaller 1961 Lincoln Continental featured clean, simple styling with much less chrome than prior models. It was offered as a four-door sedan and four-door convertible and was priced at the level of the premium 60 Series Cadillac rather than the entry-level Series 62 model. That meant that the base 1961 Lincoln sedan cost almost 19% more than the four-door Cadillac 62 ($6,027 versus $5,080).

Following this groundbreaking redesign, Lincoln sales did not jump-start; volumes grew slowly. Cadillac still outsold Lincoln by more than fivefold in 1963. Cadillac was a brand which had maintained a more consistent identity over the years and offered a variety of body-styles and trim lines not available from Lincoln. Two-door Caddies sometimes represented 20% of total sales and the availability of factory 75 Series limousines with corresponding commercial chassis models for hearses, flower cars and other special bodies gave Cadillac additional luxury cachet. Lincoln's line was limited to only two models.

In 1966, the addition of a coupe model helped Lincoln sales considerably - almost 16,000 coupes were sold in '66. Sales jumped again when the Mark III personal luxury coupe was introduced as a 1969 model.

Year	Cadillac sales (units)	Lincoln sales (units)	Imperial sales (units)
1961	138,379	25,164	12,258
1962	160,184	31,061	14,337
1963	163,174	31,233	14,121
1964	165,959	36,297	23,295
1965	181,435	40,180	18,409
1966	196,675	54,755	13,742
1967	200,000	45,667	17,620
1968	230,003	46,904	15,367
1969	223,237	61,378	22,103
1970	238,745	59,327	11,822

Meanwhile, Imperial sales languished selling at volumes in the 14-24,000 per year range, despite offering two- and four-door hardtops as well as a convertible model. Imperial failed to capture the luxury cachet of Cadillac and Lincoln. Much of the public still thought of it as a mere Chrysler model, although at Jacqueline Kennedy's request, the White House leased a 1960 black Crown Imperial Ghia-built limousine for her use. There was a brief resurgence in sales when the Lincoln-like 1964 Imperial debuted. It had been styled by Elwood Engel, who had designed the 1961 Lincoln. Chrysler Corporation discontinued Imperial as a separate model in the 1975 model year when only 8,830 units were sold.

It is interesting to note that, beginning in 1965, Cadillac sales began a steady climb. This was a deliberate move on General Motors' part. Aggressive tactics and special incentives allowed Cadillac dealers to offer hot deals on certain models. By 1973, Cadillac sales had risen to an annual rate of over 300,000 vehicles. In 1979, 382,958 new Cadillacs found buyers - outselling lower-priced marques such as Chrysler, AMC and Plymouth.

The increased number of Caddys seen on the road may have shaved off a bit of prestige and exclusivity but the high profit levels of Cadillac put lots of money in GM's pocket. John DeLorean once said that the manufacturing cost difference between a Chevrolet Caprice and a Cadillac was only about $300. In 1966, a Caprice four-door hardtop had a list price of $3,063, while a Cadillac Calais hardtop was priced at $5,040. There was plenty of room for GM to make deals on its Caddys.

In 1986, Cadillac reduced the size of their vehicles and offered styling which - from a distance - was hard to distinguish from its lesser stablemates, Buick and Oldsmobile. Lincoln reaped the benefits of this as Caddy's sales dropped by almost 40%. Lincoln outsold Cadillac in 1988 and 1989. Thanks to improved styling, Cadillac recaptured its long-held sales crown in 1990 and has outsold Lincoln ever since.

5. The Rise of The Imports

Prior to World War II, European cars were curiosities in America, imported to satisfy the eccentricities of the Very Rich. After the war, Europe was in shambles - production and distribution of automobiles recovered very slowly. Postwar importation of Mercedes-Benz vehicles began in 1952 under the auspices of foreign car importer Max Hoffman, who handled numerous European makes. Volumes were small, even in the late 1950s. At that time, Mercedes offered 'luxury' sedans, sized like a Rambler sedan (both rode on a 108-inch wheelbase) but priced nearer to a Cadillac. A 1957 Mercedes 219 four-door sedan was priced at $3,889 with a six-cylinder engine and a four-speed column-shift manual transmission. A '57 Cadillac Series 62 four-door hardtop with V8 engine and automatic transmission was priced at $4,781. A 1957 Rambler DeLuxe six-cylinder sedan cost a mere $1,961.

Expensive European cars of the 1950s and '60s lacked many of the little luxury touches standard in premium American offerings. In 1955, only 58,000 foreign autos were imported into the U.S. - most were small economy cars, such as Volkswagen. In 1961, Volkswagen had 87% of the imported vehicle market.

In 1965, Mercedes had set up its own in-house distribution in the U.S. Sales grew slowly but steadily in the 1970s and '80s. Buyers were mostly Americans looking for something different as well as domestic luxury buyers who had been burned by quality issues with U.S. cars. (This is not to say that Mercedes vehicles were perfect. During a 1973 road test on a Mercedes 280, Road & Track magazine reported that "on the first hard corner to the right, the right axle shaft came out of its wheel hub. Some lock washers had been omitted at the factory, it turned out.")

In 1993, Mercedes-Benz sold only 61,899 cars, compared with 255,869 Cadillacs and 177,208 Lincolns that same year.

BMW's U.S. presence started later and grew more slowly than Mercedes. In the 1950s, the Bavarian automaker was mostly known for its motorcycles and the little Isetta bubble car. In the late '60s, the BMW 2002 made its U.S. debut. Light, fuel-efficient, and agile like a sports car, the compact, 98-inch wheelbase coupe offered four comfortable seats and decent legroom. In 1968, a BMW 2002 cost about $2,800 - a relative bargain. BMW sales began to climb. In the period from 1968 to '76, more than 110,000 BMW 2002s were imported to the U.S.

By the late 1970s, BMW was offering a more complete line of cars - the 3, 5 and 7 Series models. Most of the sales in the U.S. were the smaller, sporty 3 Series models. By the late 1980s, BMW had become a serious presence in North America, with sales to match - although they were still significantly below those of Mercedes-Benz.

When Audi was introduced to the U.S. in the 1970s, its offerings were mostly glorified Volkswagen. Over a three-decade period, Audi has gradually gained prestige status in America, even though its entry-level models are still VW-based. Audi sales continue to lag its European rivals and it is still outsold by Cadillac.

In 1986, Honda debuted its Japan-built Acura premium brand, led by the top-of-the-line Legend. For the 1990 model year, two other Japanese competitors entered the luxury fray. Toyota introduced Lexus; Nissan offered Infiniti. Lexus was a stellar market success; by 1999, it was outselling Lincoln, Cadillac and BMW and was closing fast on Mercedes-Benz.

Comparing 2009 sales with those of a decade earlier, BMW and Audi did well, probably at Mercedes' expense. Lexus sales remained relatively flat. Both Lincoln and Cadillac suffered substantial declines (over 53% combined in a single decade), becoming relatively minor players in the luxury field. In 2009, the three Japanese brands had combined sales slightly greater than the combination of Mercedes and BMW:

Brand	1999 sales	2009 sales	Change		Brand	1999 sales	2009 sales	Change
Lexus	185,890	187,410	+1%		Audi	65,959	73,655	+12%
BMW	154,970	176,374	+14%		Lincoln	176,393	72,380	-59%
Mercedes	190,382	170,403	-10%		Infiniti	72,637	70,808	-3%
Acura	118,006	95,148	-19%		Porsche	20,875	17,578	-16%
Cadillac	178,507	94,347	-47%		Jaguar	35,039	10,813	-69%

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