Historically, Cadillac and Lincoln dominated the market for luxury cars, but European and Japanese producers have whittled away their lead. In 1999, American producers were outsold by Mercedes-Benz and Lexus (a Toyota division), while BMW were close behind.

The European carmakers have the finest products; Americans feel that the cars look and drive the best. BMW is associated with driving performance, Volvo with safety, Jaguar with elegance, and Mercedes with reliability. The vibrant economy and the rising stock market have enabled consumers to afford the high prices. Also, European manufacturers have been successful in offering more luxury cars in the lower parts of their price ranges. Helping the luxury car market, sport utility vehicles are falling out of favor due to higher gasoline prices and regulatory pressures to reduce their high emissions and deadliness to other motorists in crashes.

American producers are responding by introducing cheaper versions of European cars, such as the Lincoln LS which is like a BMW 5-series but is $10,000 cheaper. They are also buying interests in European car manufacturers, and hiring their executives.

(Updated March 1, 2000)