Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

A Disturbing Trend for Automakers: Ford Motor Company (F), General Motors Company (GM)

Page 1 of 2

I’m not sure what it was. Maybe I was just in a good mood. But I enjoyed the Super Bowl commercials more this year than last. There was one in particular that made my jaw drop, and not because it was the funniest or flashiest, but because it just flat out surprised me: The Mercedes-Benz commercial, with Willem Dafoe acting as the devil, showed the luxury CLA model with a sticker price starting at $29,900.

Ford Motor Company (NYSE:F)There’s a big push by automakers to capitalize on the 75 million Americans in the 30- to 40-year-old range, many of whom desire luxury vehicles but can’t afford the $40,000-plus price tag the baby boomers can. Yet as an auto investor, I can’t help noticing that the new entry-level luxury segment is all of a sudden crowded. I’ll show you how many vehicles are in this segment, and why it could lead to big problems for Ford Motor Company (NYSE:F), General Motors Company (NYSE:GM), Toyota Motor Corporation (NYSE:TM) and Honda Motor Co Ltd (NYSE:HMC) . I’ll also cover factors that we, as auto investors, need to keep in mind going forward.

According to Edmunds, there are 27 vehicles in the luxury segment in the $25,000 to $35,000 price range. Looking specifically at the target line of $30,000, here is the list of vehicles competing.

Model Price
Meercedes-Benz CLA $29,900
Audi A3 Diesel $30,250
SAAB 9-3 Wagon $30,330
Acura TSX $30,510
BMW X1 $30,800
BMW 1 Series $31,200
Volvo S60 $31,900
Lexus CT $32,050
Audi A4 $32,500
Cadillac ATS $33,095
Saab 9-4X $33,380
Volvo XC70 $33,600
Hyundai Genesis $34,200
Lincoln MKZ $35,925

It’s unbelievable that the Mercedes CLA comes in cheaper than all those luxury competitors. It also leaves me with mixed feelings. On one hand, the CLA’s price opens up a new potential customer base and puts extra pressure on Toyota and GM’s successful Lexus and Cadillac models. It’s also going to make reviving Ford’s Lincoln brand much more difficult. But on the other hand, Mercedes could have hurt its brand image by offering such a “cheap” Benz. And this isn’t just a one-off experiment: The CLA is the first of three models that will hit the $30,000 price target.

That’s not the only cause for concern. As the line between mainstream and luxury blurs, competition for sales will heat up more rapidly. The expansion of this segment could also come back to haunt automakers if demand for luxury vehicles takes a dive, forcing dealerships to increase incentives to stay competitive.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!