Volkswagen's move into luxury has hardly proved very smart. It is costing Europe's leading car maker a bundle and has prompted it to move production of the venerable Bentley Continental from Crewe in Britain to Dresden in east Germany.
Mercedes, too, is paying a price for taking the opposite route by developing a family of small cars around the eccentric Smart.
Both are persevering with their investments. If losses continue to pile up, they will inevitably be forced to scale back their ambitions. For VW it could simply mean axeing the Phaeton, its luxury flop. For Mercedes, it could entail radical pruning of the Smart brand back to the original two-seater car.
Mercedes is elusive about Smart's financial performance. It continues to lose money and many believe the strategy is flawed. Yet, if the original Smart had problems at the outset, it succeeded in establishing itself as an impractical but highly appealing car for city drivers in search of a statement.
Its roadster version, in contrast, seems to have already peaked. Analysts fear the new four-seater Smart, sharing a Mitsubishi Colt platform, will struggle in an already crowded mass-market. The jury is also out on a small utility vehicle to be built in Brazil, mainly for the US market.
If profitability remains beyond reach, Mercedes might have to bite the bullet, concentrating its efforts on renewing the original two-seater concept. The Smart, after all, is a small luxury - something Mercedes should be far better equipped to execute than Volkswagen.