Saturday, March 28, 2015

Why I'm Done With German Cars

German cars once had a reputation as high performance, finely engineered indestructible German tanks.  That has all changed.

I'm done with German cars.  They no longer represent any kind of value to the consumer.  While they were once finely engineered Teutonic cruisers designed for the autobahn, today they are just unnecessarily expensive, delicate, and annoying cars to own.   The compelling need to own a German car - other than to project status - has long since evaporated.

To understand German cars, you have to understand the history of them.   Of course, Mercedes is the first brand that comes to mind.   And historically, Mercedes has always been the purveyor of the "German Tank."   Hitler loved his big, red, supercharged Mercedes - a car nearly as long as a city block and weighing nearly as much as a switch engine.   Mercedes back then were finely engineered and overbuilt cars - a reputation that would continue largely until the mid 1990's.   Today, they are just wildly overpriced Toyotas.   And we'll get to why, later.

BMW started out as a motorcycle manufacturer, and then started making tiny cars (the "Dixie") under license from Austin motors (those Brits do get around, Austin America - the Bantam company - designed the first Jeep.  Sadly, the British motoring industry is largely extinct).  They were just starting to gear up to make serious sporty cars (such as the 328) when World War II broke out.   Of course, like Mercedes, they had experience in aircraft engines (hence the spinning propeller Roundel).  After the war, they sort of floundered around with the hideously outdated "Baroque Angel" and the ridiculous Isettea, which was based on an Italian design.  It wasn't until the mid-1960's that BMW got its act together, making the relatively inexpensive but superior handling 1600 and eventually the famous 2002.

BMW's reputation was hardly secured, though.  Its larger cars, such as the "Bavaria" were generally rustbuckets within a few years of purchase.   A few esoteric models, such as the beautiful and exotic 3.0 CSi coupe were certainly stunning.  But their bread-and-butter car was the 2002 with the nearly bulletproof M10 four-cylinder engine.  No power windows, no A/C, no power steering.   Hardly the stuff luxury cars are made of.   And yes, they rusted too (like most cars of the era).

In 1980, BMW introduced the first "Yuppie" BMW, the 318i, which is wholly unloved by BMW enthusiasts today.  It had luxury features, to be sure, but gave up the sporty go-cart-like handling of its predecessor.   BMW's best car - ever made - arguably was the successor to that car, the E30 3-series (318i, 325i, etc.).   The Bavaria was replaced with the 5-series, and the lumbering 7-series appeared on the horizon.  BMW started selling "luxury" as was Mercedes, with cars coming to America fully loaded with luxury options - and often priced far higher than identical cars sold in Europe.

The reason for this, I discussed before.   In the 1950's, 1960',s and 1970's, those "funny foreign cars" were cheap to buy, because post-war currency exchange rates made them cheap.   So people bought based on price, not luxury or status.  In fact, a foreign car was largely an anti-status symbol.   But by the 1970's, the field had winnowed out to a few foreign importers, and the Japanese had the low-end of the market locked up.   Fiat, Alfa Romeo, Citroen, Renault, Peugeot, and a host of smaller marques had left - or would shortly leave - the market.   The remaining non-Japanese importers had only one choice - move up-market, move sporty, or both.

In order to sell a non-Japanese "foreign car" in America, you had to offer something other than a price proposition.  Fiat, before it left the US, tried to do this, selling sporty cars, upgrading interiors to leather, and jacking the prices to well over $10,000.  Sadly, the reputation of the rusty and cheaply built 1970's models destroyed what little chance they had of remaining.  By the early 1980's, they pulled the plug.  MG. Triumph, and a host of British marques would hang on longer before they too, succumbed to the inevitable.

But the Germans soldiered on.  BMW was now offering "sporting sedans" that had a good reputation for quality, as well as luxury and status.  Indeed, many E30 BMW 3-series from the 1980's and early 1990's still soldier on today, not as collector's items, but as daily drivers.  I dare say I see more E30's on the road today than its successor model, the E36.

By the early 1980's, Mercedes was doing the same thing, albeit in a less sporty mode.  The W123 Mercedes diesel (300D or 300TD) is still coveted today as a 300,000+ mile tank-like car that seems to want to run forever.   Many (including the one I owned) were grey-market imported as they were just ordinary - and ordinarily priced - cars in Germany, but sold in America for thousands (even as much as $10,000) more than in the home country.   Ze Germans convinced us that their ordinary cars were somehow "status symbols" and Americans ate it up.

And in the 1980's, prices were still somewhat reasonable, and the cars being made were, well, German Tanks.  You could justify the cost of a 300D Mercedes or a 325i BMW by the fact that it would easily go well over 150,000 miles - perhaps far more.   But as we shall discuss below, that has changed dramatically in recent years.

But what about Volkswagen?   Well, what about it?   First of all, VW encompasses Porsche and Audi.   Porsche literally shares DNA with VW.  Audi (Auto Union) was once a purveyor of German Tank-like cars in the pre-war era.  Today it is just a brand name for gussied up Volkswagens, with a few exceptions, such as the A8.

VW of course, famously started out making the cheapest car known on the planet.  And while the "Beetle" was wildly popular, it was also a very unsafe piece of crap.  Ralph Nader wrote about the VW before he excoriated the Corvair.  All of the problems of the Corvair could be traced to its spiritual predecessor, the Beetle, which GM slavishly copied (other than the body design, which ironically, became an inspiration for the Neu Classe of mid-1960's BMWs!).

So Volkswagens are crap cars, basically.  Econoboxes that you buy, drive, and dispose of.   When the Beetle became so embarrassingly outdated (and clearly not capable of meeting future safety and emissions standards) they designed the Rabbit or Golf as it was known in Europe.  The first generation Golf was a good car, but trying to compete with Japan, on price, in the USA, was killing VW.    So they opened a UAW plant in Pennsylvania and made second generation Golf's in the USA, with disastrous results.

Have you ever wondered why VW has a 100,000 mile powertrain warranty on its cars?  The reason was the horrific cars they made in the late 1980's.  VW closed the Pennsylvania plant, which is a pretty radical thing to do - as the quality of the cars was so bad, that sales tapered off to nearly nothing, and the company was almost bankrupted by the fiasco.  And yes, I owned one of those Pennsylvania Golfs - a 1987 GTi.

Today, VW is back - and back in America with a new factory and a new de-contented version of its German cars.  Whether this round two will be successful remains to be seen.  Their stated goal is to be the largest carmaker on the planet, but it looks as though they will have to duke it out with Toyota and GM first. (Update:  the diesel scandal nearly killed VW, and the popularity of Pickups and SUVs - even overseas - has made life difficult for them).

Audi are nice VWs, and usually made in the home country (they are imported to the port of Brunswick, right by my house, and come wrapped in silly little blankets).  Porsche, once a bare-bones lightweight racecar, has evolved - out of necessity - into a purveyor of luxury cars and SUVs as well as high-end "exotic" cars.   The new hardtop Cayman (a Boxster with a fixed roof) being more of a throwback to the original, simple, cheap(er) and tossable Porsche (and selling like hotcakes as a result).  Again, German car makers had no choice but to go upmarket, as trying to compete with the Japanese on price just doesn't make any sense.

In the 1980's, German cars made sense - whether it was a BMW 325i, a Mercedes 300D,  or a Volkswagen Rabbit.  They were more expensive than Japanese cars, but they handled better and lasted longer, and were fairly simple to maintain.  Parts were not too dear, and it wasn't impossible to find someone to fix such a car.  A German car was a value proposition.

But, things have changed since then.   Today, the trend toward selling "Luxury" and "Status" has continued.   The German carmakers have no choice, really.  Trying to complete with Honda and Toyota on price is just not in the cards.   VW is bravely trying to hold on, with its de-contended US-made Passat, trying to out-Camry the Camry, and undercut the price to boot.  That doesn't sound like it will end well.

The problem is, these cars have become incredibly complex, costly, and difficult to repair.   Once out of warranty, they are nearly impossible to fix, without taking them to a dealer.   And even the dealers cannot do most major repairs.   If there is a fault code in the transmission, their only solution usually is to remove the transmission and replace it.  They simply don't have the technicians or skills to do major transmission repairs - or even minor ones.

Independent shops often don't have the computers needed to read codes or diagnose complex problems.  They may have an inexpensive OBD II code reader, but not the complicated "Dealer Only" computer than can diagnose problems and also change settings.   Everything today is special tools and special knowledge - the latter often jealously guarded by the manufacturers.

The idea of a Mercedes or a BMW (or a Volkswagen for that matter) going 200,000 miles is becoming harder and harder to realize.   Sure, if you want to throw money at the car, you could do this - or if you got lucky.   But usually what happens to expensive German Luxury cars at about 150,000 miles, is some sort of expensive and difficult engine or transmission repair, which would cost almost as much as the car is worth, to perform.   

The $50,000 Mercedes, at this point, may be worth $10,000 or less.  And a $6000 transmission job just doesn't make much sense, on a car worth only ten grand.  And that is why, in a nutshell, you don't see a lot of BMWs and Mercedes from the 1990's and even early 2000's still on the road - while more plebeian cars are still out there doing yeoman duty.

I have noted before that most cars depreciate about 50% every five years, without much deviation.  The only difference between a $50,000 Mercedes and a $25,000 Toyota is that in five years, you've lost $12,500 in depreciation in the Toyota, but with the Mercedes, you've lost enough to buy another Toyota, outright.  High prices mean high depreciation.

In the past, due to their tank-like construction, a used German car was a value proposition.   Yes, a used Mercedes or BMW cost as much as new anything else.  But what a car!  And it would last longer, too!   Alas, today that is not the case, and many used German cars from the 1990's and 2000's can be utter fright pigs that bankrupt their owners worse than an old Jaguar.

Throw in things like 92 octane gas,  8 quarts of $15 Castrol Syn-Tech, $350 $500 hard-to-find tires, and even "routine" operating expenses escalate the cost of ownership by 2x, 3x, and 4x or more.

Suddenly, this is no longer a "value proposition".

Of course, the US Automakers have largely abandoned the luxury segment of the car market at this point.  The biggest selling "luxury" cars made by the Ford and GM are basically trucks (Lincoln Navigator, Cadillac Escalade) and like their cars, are just warmed-over versions of their lesser brands, slathered with cheap leather and wood and electronic gee-gaws.   Mercedes and BMW are not losing any sleep.

If you want a car today to project status, unless you are a rap star or live in a trailer park, you head off to the German car dealer.   They sell you prestige and the idea that you have sophisticated tastes.  And brainless status-seekers, such as yourself, will go along with the gag.   But to most folks, what you are trying to pull off is readily apparent, particularly if you are a poor driver.   Having the "ultimate driving machine" doesn't mean much if you text while you drive.

And sadly, that is what is turning away what used to be a core constituency for BMWs and Mercedes.  The "sporty sedan" driver who bough a 1988 325i isn't going to be looking at the overwrought and complicated machines being offered today - with magnetic electronic steering with little or no road feel.   The loyal oil-burner who finally had to retire his 300D isn't looking at any diesel models in the Mercedes lineup - if indeed there are any to be had anymore.  The "value" buyer isn't finding "value" at the German car dealer anymore - just horrendous purchase costs, regular maintenance costs, and staggering repair bills that will send their Teutonic jewelry box to the dumpster long before the neighbor's Camry is even broken in.

But the Germans will soldier on and be profitable (BMW is the most profitable car company on the planet, and yes, I am a shareholder - so please go waste money on a new BMW!) mostly because Americans (America is their largest single market) will pay through the nose to impress people they don't even know.  I doubt Lincoln, Cadillac, or Chrysler will ever be able to build cars on a par with their German counterparts, or imbue them with the same level of status.   They have, basically, the market to themselves.

(One fly in the ointment, however, could be the decline in resale values for these technological nightmares.   A used 7-Series or a used S-class can be had for very cheap, after 100,000 miles have rolled over the clock, as no one wants to deal with the horrific repair bills.   Will people keep paying top dollar for these cars if they are so expensive to own?   This effect can filter up to new car pricing, as resale prices drastically affect leasing rates).

Quite frankly, at this point in my life, I no longer want a "look at me!" car but a "blend in with the crowd" car.   I don't want a car with a $6,000 transmission repair, but a car that cost so little that I can just sell it and buy a new one long before such a repair is needed.

And maybe that is just me - getting older and not caring so much about status.   But I think something has changed in the way German cars are made and sold today.   The Teutonic tanks have long disappeared from the showroom.   Replacing them are delicate and fussy cars which demand far too much intervention - and money - on the part of the owner, to own.