It Runs on Cachet and Makes You Pay for It

2008 Audi A3 3.2 Quattro wagon

NOVI, Mich. If I told you that General Motors was selling a wagon that barely had space for five people and not much room for their luggage, a wagon that got 25 miles per gallon on the highway sucking premium unleaded gasoline and that had a base price of nearly $35,000, most of you would laugh, or shake your heads in pity and start counting the days until GM went out of business.

But there is such a wagon, actually a little hatchback, the Audi A3 3.2 Quattro, one of two A3 models introduced in the United States in 2005.

No one is laughing at the little runner. The 3.2 Quattro and its companion A3 2.0T have been selling well -- up 49.2 percent from 5,389 sold in the United States in 2005 to 8,040 sold last year. A3 sales remain strong in 2007, with the most expensive model, the 3.2 Quattro driven for this column, dominating consumer attention.

How is that possible? How can a company offer a vehicle that, in terms of utility and overall value, easily is outclassed by others in its price category and still be successful?

It's simple. It's cachet. German automobile manufacturer Audi has it. GM, in the thinking of many consumers in the American marketplace, doesn't.

Cachet sells. It generates profits through the exploitation of perceived value, as opposed to pulling dollars from the actual worth of a thing itself.

In the 10 years between its birth in Europe and its arrival on U.S. shores, the A3 changed from an economy car to an "entry-level luxury" automobile -- in keeping with Audi's long-range goal to firmly establish itself in the American psyche as a manufacturer of premium cars. For 2008, the A3 remains pretty much as it was in its U.S. debut, with the exception of changes to accommodate iPods, MP3 players and other infotainment electronics consumers now want in their personal vehicles.

"Entry-level luxury car" in A3 parlance means a base price of nearly $26,000 for the front-wheel-drive 2.0T and a few bucks shy of $35,000 for the all-wheel-drive 3.2 Quattro. Let's put that in perspective:

The base A3 2.0T is the closest you can get to a stripper car and still be in an Audi in the U.S. market. It has a standard, six-speed manual transmission; a turbocharged, two-liter, 207-horsepower, four-cylinder engine; a need for premium unleaded gasoline; and a federal fuel-economy rating of 21 miles per gallon in the city and 29 mpg on the highway.

The tested 3.2 Quattro has more oomph with a 3.2-liter, 250-horsepower V-6. It gets 18 miles per gallon in the city and 25 miles per gallon on the highway and comes with that nearly $35,000 price tag.

For similar money, a price range of $26,000 to $35,000, a consumer could buy a much larger, much more utilitarian, front-wheel-drive Chevrolet Impala sedan with a 3.9-liter, 233-horsepower V-6 engine that gets 18 miles per gallon in the city and 28 miles per gallon on the highway -- using less-expensive regular unleaded gasoline.

Granted, this is an apples-and-oranges comparison. The 3.2 Quattro is a compact hatchback and the Impala is a mid-size sedan -- and they are worlds apart from each other in consumer perception. But my point is that the Impala does a substantially better job than the A3 wagons in doing what cars and wagons basically are designed to do: move people and their stuff.