THE SUN SETS ON THE GERMAN CAR THING.

By Peter M. DeLorenzo

Detroit. There is a lot of hand-wringing going on in The Biz right now about German luxury cars and their falling residual values. Automotive News even mentioned it in this week’s issue. One entity quoted in the piece suggested that Tesla was the culprit, insisting that the success of the Model 3 has turned the market upside down. Hardly. That statement is wrong-headed and flat-out silly, and not worth going into.

What’s really going on is that the years of egregious behavior on part of the German automakers is finally taking its toll, and it’s going to get uglier. But before we get into that, let’s remember the halcyon days when the German automakers created their reputations almost solely based on their legacy of performance on the Autobahn, a nirvana-like dream state that driving enthusiasts over here could only imagine, unless they took a trip over to Germany to experience it for themselves.

Back then, German cars felt different, looked different and hell, they even smelled different than what we were used to over here, especially since our domestic auto industry at the time was churning out craptastic monuments to mediocrity at a furious rate. 

Everything about German cars back then was damn-near mesmerizing - the fit, the finish, the details, the quality and most important, the driving difference they offered. It was a whole ‘nother country in terms of the automotive spectrum, and American driving enthusiasts were hungry to partake. 

And the ad themes resonated too: “Engineered Like No Other Car in The World” (Mercedes-Benz). “The Ultimate Driving Machine” (BMW). “There Is No Substitute” (Porsche). The campaigns were filled with Autobahn runs and idyllic coastal drives that implied that you were really missing something and your life would be better if you drove one of these glittering German high-performance machines. People bought into the German Car Thing in droves, and the American market was transformed because of it.

Remember the hilarious scene in Lost in America, the brilliant Albert Brooks film where he was talking on the phone to “Hans” at the Mercedes-Benz dealer about buying a Mercedes and Hans was explaining the details of the car and the cost? It was a minor scene early-on in the movie and then Albert’s character gets blown out of his ad job and he never actually buys the Mercedes, but it spoke volumes. The German Car Thing was actually a thing.

The German Car Thing swept everything in its path, especially at the domestic automakers, as they scrambled to crack the German car code with “Euro-like” entries of their own. American cars sprouted numbers instead of names, vinyl tops and white walls were ditched in favor of black wall performance tires and aluminum wheels, and the designs were heavily influenced by “the German look.”

That didn’t mean, of course, that the American entries had the substance of the German cars, but they scrambled to ride the wave anyway. When I was working at Pontiac’s ad agency back in the day, I remember sitting through a lengthy presentation by Pontiac operatives about how the Pontiac 6000 STE would be The Answer to the German Car Thing. (I fell asleep in the meeting only to be elbowed by a co-worker to wake up; it was that inspiring.)

And who could forget the ill-fated Cadillac Cimarron, the hastily put together and shockingly offensive effort by GM to capture the European wave? Based on the forlorn GM “J” cars (Chevy Cavalier, etc.), the Cimarron was an unmitigated disaster of badge engineering and an absolute low point for GM (one of many, it turns out). 

There were other entries, of course. Ford jump-started its “Euro” efforts by actually importing its Mercury Merkur models from Germany. This seemed like a savvy idea on paper, but Merkur was almost dead on arrival in this market, performing listlessly until the experiment was ended in less than five years. And there were countless other “Touring” and “Sport” models unleashed from the domestic manufacturers too. 

But the largely reactionary efforts did little to stem the tide of the German onslaught on the American market. And slowly but surely the realization came over the American automakers that in order to really compete, they had to actually design and build better cars – what a concept - which we can thank the German manufacturers for.

But the good times couldn’t last, because over time the German automakers got sloppy and greedy. Their collective arrogance deluded them into thinking that everything they touched would automatically turn to gold in the U.S. market. They started churning out models for every niche – both real and imagined – they could think of. Model proliferation became standard operating procedure, and they started playing in segments they had no business being in. Going down-market, the German manufacturers started peeling the luster off of their brand images, layer by layer, year by year.

And even worse, in their quest to generate more and more volume, the German automakers started playing big in the leasing game, becoming so dependent on incentivized leasing to prop up their sales that leasing now accounts for around 50 percent and above of monthly sales volumes for Audi, BMW and Mercedes-Benz. (You’ve all seen the ads. the seductive - and illusory - lease number per month that sounds great until you factor in the down stroke, which adds at least $200-$300 per month to the total.) But those low payments have a devastating cost, resulting in highly depressed residuals at the end of the leases, which is where all of the aforementioned hand-wringing comes in. 

This just in: It simply isn’t sustainable.

So where does that leave the German Car Thing? In tatters, frankly. The democratization of technology has made the finest ingredients in performance and safety available to any automaker that wants to pay for it. You only have to look as far as the elevated car making by the Korean manufacturers to see that. And the American manufacturers have elevated their games too. Not to mention Lexus, which remains formidable. 

Unlike when the German wave first started, consumers have choices. And with the German automakers having moved down-market, they find themselves fighting myriad competitors for smaller – and less profitable – slices of the pie. You’re seeing “suites” of technology equipped on lower-cost models that used to be exclusive to the German luxury manufacturers, but that simply is no longer true. A consumer can get a tremendous car without paying the freight for what used to be a mythically attractive German luxury-performance machine.

The raison d’etre for The German Car Thing has all but been destroyed. Yes, of course, they still make outstanding machines, but you have to spend over six figures to get something really special.

Can this slide be reversed? I don’t see the German manufacturers reducing their collective sales volumes to restore their brand integrity. They’re simply too far gone down the high-volume road to turn back now. 

The ugly reality is that greed ultimately killed The German Car Thing, and now they can put their sunglasses away, because their day in the sun is officially over.

And that’s the High-Octane Truth for this week.