Cheaper Symbol, Risky Status

Apple on Tuesday will introduce two iPhones, including a new lower-cost model targeted at overseas countries where expensive smartphones are out of reach for many consumers.

The addition of a cheaper iPhone could help Apple sell tens of millions more phones. But it could also diminish its reputation as a premium brand.

Many luxury companies have faced this challenge before, with wildly different results. Luxury carmakers have introduced less expensive models, but many efforts have tripped up. Tiffany & Company found so much success with its cheaper “Return to Tiffany” jewelry, that it attracted too many teenagers. And Target has paired up with a variety of high-end fashion designers, often with considerable success.

For Apple, the devil will be in the details: just how much lower the price of the cheaper iPhone is, and just how much cheaper it looks and feels. If the iPhone is deemed cheap, it could get into the hands of so many people worldwide that it loses power as a status symbol and turns Apple into a maker of commodity products like Dell, Hewlett-Packard or Asus.

“It’s hard. It’s an art and a science,” said Milton Pedraza, chief executive of the Luxury Institute, a research firm. “It’s hard to know you’ve gone over the line until you do it.”

Makers of luxury cars have long struggled with how to increase their market share with less expensive models, while still retaining the brand’s cachet and exclusivity.

The marriage of Daimler-Benz and Chrysler failed partly because German engineers developing Mercedes sedans were opposed to sharing parts with mainstream Chrysler models made in the United States. While that preserved the integrity of the Mercedes brand, the company missed a golden opportunity to cut overall costs. Still, Mercedes is taking another stab at lower-cost models, introducing the CLA sedan later this year.

Toyota’s Lexus brand stumbled some when it introduced lower-priced IS sedans that lacked the high-end features and overall glitz of its signature models. Lexus has since addressed the issue by making its entry-level cars more powerful and sporty.

The fashion industry has also experimented with going more mainstream. Ralph Lauren offers lower-priced lines while also having a high-end product. But a partnership with Neiman Marcus and Target was a major failure.

Even the travel industry has tried extending luxury brands, like Starwood’s Aloft line of hotels, which is promoted as “a vision of W Hotels,” a top Starwood brand, and “style at a steal.”

Of course, many retailers try to drive up sales by lowering prices, and that effort has become only more prominent in the Internet era, when consumers have technology tools to browse an entire industry and compare prices in nanoseconds.

“This cheaper iPhone is just one part of a whole trend that is going on that is epically changing the face of this industry,” said Robin Lewis, chief executive of The Robin Report, a retail strategy newsletter. “It’s devaluing the definition of the word ‘value.’ And it’s going to affect every premium brand.”

Still, many analysts believe that if Apple can get consumers — particularly those in China and India — to buy a cheaper version of the phone, those people would be more likely to buy Apple’s premium products in the future.

“It’s going to be the TV, it’ll be the wrist watch, it’ll be the integration in your BMW — all these things later down the road that still carries the premium brand,” said Laurence Isaac Balter, chief market strategist at Oracle Investment Research, which has clients that own Apple shares.

Apple has crossed over into pushing nonpremium products before, and failed. In the 1990s, after Steven P. Jobs had been ousted from the company, Apple started a program offering its software to makers of generic personal computers, and some of those manufacturers were able to build computers faster and cheaper than Apple could. The company, having lost its value to consumers as a premium brand offering an exclusive product, almost went bankrupt.

Stephanie Clifford and Bill Vlasic contributed reporting.

Immigrants Find it Cheaper to Send Money Home

The first time Carmen Gonzalez sent money back to her family in Mexico, in 1991, Western Union charged her a $12 fee to wire $100. She earned that $12 working for six hours in a clothing factory in midtown Manhattan, which paid her $2 an hour.

These days Ms. Gonzalez pays $5, which she earns in less than an hour, so she sends a bit more. The family is benefiting from a financial transformation propelled by new technology and increased competition that has driven down the average cost of sending money to Mexico by nearly 80 percent since 1999.

The drop in fees saved Mexican immigrants about $12 billion over the decade that ended in 2010 — five times the amount of official United States aid to Mexico during that time, according to data from the World Bank and recent Mexican government figures. The cost of sending money to other countries has also declined sharply, though not by quite as much.

The benefits are far-reaching, development experts say, providing a powerful means to chip away at poverty in other countries and expanding the hard-won earnings of immigrants in the United States.

The lower costs may be one reason that remittances have held steady even as fewer immigrants from Mexico have come to the United States and the recession has cut into incomes. Overall remittances to Mexico declined during the global recession but picked up again after 2009.

Some experts say more money could flow to countries like Mexico if Congress approves an immigration overhaul granting a path to citizenship to millions of illegal immigrants, because studies have shown that legalization can lead to increased wages. Others argue that with legalization, many immigrants will invest more heavily in the United States, sending less of their income back to relatives.

The total remittance transfers sent across the globe from the United States in recent years are almost $50 billion annually, according to the Bureau of Economic Analysis, or roughly the equivalent of the government’s foreign aid budget. (Estimates by the World Bank suggest that the figure is significantly higher, close to $100 billion per year, according to Dilip Ratha, an economist who leads the World Bank’s remittances program.)

“Remittances may well be the best single way to foment development,” said Nancy Birdsall, the president of the Center for Global Development, a nonprofit research group in Washington. “It turns out that even a modest reduction in the cost of making remittance transfers adds up to a substantial amount compared to official aid.”

Estefana Bautista, who left two children in her native Mexico when she immigrated to Texas in 2005, said she pays $5 less to send them money now than when she first arrived, which she called “a big help.” “I send those 5 dollars to Mexico,” Ms. Bautista said. “My kids know that they’re getting a little more money every two weeks.”

Growing competition among transfer companies has been the driving force behind the steady decline in costs. A decade ago, Western Union and Money Gram dominated the market. Now they contend with dozens of international competitors like Xoom and Ria.

Western Union’s share of the global remittance market has dropped to about 15 percent from around 75 percent in the late 1990s, while Money Gram’s market share has declined to 5 percent from 22 percent in that time, according to the companies and government figures.

“What we’re really seeing is competition not just based on price, but also on service quality,” said W. Alexander Holmes, the chief financial officer of MoneyGram. “It’s a very interesting time in the market.”

Worldwide, costs for sending remittances to any country have come down from around 15 percent per $300 transaction in the late 1990s to below 10 percent today, Mr. Ratha said. For money sent to Mexico, costs have declined from 9.5 percent per $300 to just over 2 percent today.

In addition to fees covering the processing, remittance companies make money from converting currencies. Remittance experts say these exchange rate fees have not come down nearly as much in recent years. In a meeting in 2011, finance ministers from the Group of 20 countries committed to reducing remittance costs over all from around 10 percent to 5 percent per transaction by 2014.

This month, a bipartisan group in the Senate introduced proposals to allow immigrants here illegally to gain legal status and eventually become citizens.

Greentech: Compressing Gas for a Cheaper, Simpler Hybrid

It’s a Hybrid Air — an experimental vehicle that the French automaker PSA Peugeot Citroën has been trumpeting as an exemplar of energy efficiency. While some skeptics wonder if the Hybrid Air is truly a breakthrough technology, the Peugeot and Citroën research cars powered by it may prove to be some of the more intriguing models on display this week at the Geneva motor show. The show opens on Tuesday for two days of press previews and runs through March 17.

Peugeot says a compact model like a Citroën C3 equipped with the technology, which combines hydraulic drive with a conventional gasoline engine, will get about 81 miles per gallon in city driving. That would be significantly better than existing gasoline-electric hybrids like the Toyota Prius can achieve in stop-and-go traffic.

PSA Peugeot Citroën, the second-biggest carmaker in Europe, after Volkswagen, says it plans to begin rolling out Hybrid Air cars by 2015 or 2016.

Like a Prius, the Hybrid Air system recovers energy each time the driver brakes or decelerates. But instead of capturing the kinetic energy of the slowing car with a generator that charges a battery, as in the Prius, the Hybrid Air system uses a reversible hydraulic pump. The pump compresses nitrogen gas in what looks like an oversize scuba tank that also contains hydraulic fluid; the next time the driver presses the accelerator, the compressed gas pushes the hydraulic fluid, in the manner of a syringe, through a gearbox to turn the wheels.

The amount of energy stored in the nitrogen tank is small — equivalent to about five teaspoons of gasoline. While that is only enough to power the car a few hundred yards until the gasoline engine takes over again, when repeated over the course of a day of city driving, those extra teaspoons of energy add up to big improvement in mileage, Peugeot says.

The idea of using so-called hybrid hydraulics to power a car has been around for years. Peugeot prefers to call its system “hybrid air” technology because the energy is stored by compressing nitrogen gas rather than pressurizing hydraulic fluid. In the United States, Chrysler and Ford Motor have each studied the approach, and the Environmental Protection Agency has encouraged the research.

The United Parcel Service has added several dozen hybrid hydraulic delivery vans to its alternative-fuel fleet. Other companies are applying the technology to garbage trucks, which, like U.P.S. vans, are big, make frequent stops and can benefit from recovering energy otherwise wasted in heat generated by the brakes.

The Indian automaker Tata has promised to produce a car powered solely by compressed air, although that uses a different technology, developed by Motor Development International.

The 200-member Hybrid Air team, led by Karim Mokaddem, a Peugeot engineer, appears to be moving the fastest of any at a global automaker to bring this alternative hybrid technology to production.

“The logic of an electric hybrid is completely different,” Andrés Yarce, another of Peugeot’s project leaders, said at the company’s technical center in Carrières-sous-Poissy, near Paris. With an electric hybrid, “you let the vehicle run for a few kilometers, have the engine shut off, then run silently on an electric motor,” Mr. Yarce said. “It took time for people to grasp that the Hybrid Air works differently, but gets the same results.”

When the car is ready for the market, Peugeot plans to price it at about $26,000.

Mr. Mokaddem said that the pricing was meant to make the Hybrid Air a viable option in emerging markets like China and India, where most gasoline-electric hybrids were expensive and too complex for local service and repair operations.

Peugeot says it can undercut existing hybrids on price because its car does not require an expensive battery and electric motor, like a Prius, although the Hybrid Air does employ a standard car battery. The hydraulic system also adds about 220 pounds to the weight of a conventional Citroën or Peugeot. And because of the heat generated by the energy transfer process, the engineers have had to adapt the car’s cooling system.

The most obvious difference between the prototype Hybrid Air and an ordinary car is the presence of two pressure tanks and a special gearbox that manages the energy handoffs between the hydraulics and the 1.2-liter standard gasoline engine. The system’s designers say the setup left them room to keep a standard-size trunk and gasoline tank.

The accumulator, or nitrogen pressure tank, is about four feet long, with a volume of 20 liters, or about five gallons, and a maximum pressure of about 3,600 pounds per square inch. Any rupture in a pressurized steel tank could send metal flying, of course, but the design team says it has shielded against that by installing the tank under the floorboards and adding emergency release valves. They also note that nitrogen gas, which constitutes nearly 80 percent of the air we breathe, is not flammable.