I think that's mostly incorrect, with all respect.
There have always been people who can afford both reps and gens, and people who will only buy reps because they can't afford gens. The same way there will always be people who can afford both, but would never "waste" money on a gen, or those who would only own gens, because to be seen with a rep would be tacky and classless--regardless of how good the quality of reps has become.
We in the west (and those becoming "Westernized") live in an age of style over substance; plain and simple. To think that the better reps get, the less likely the general populous will be to purchase gens is an improbability and an equivocation.
Low end, less expensive quasi-luxury cars are built much better than they were 10 or 15 years ago, as far as reliability & mechanical longevity are concerned, but that in no way means the market for the 7 series & S class is going to wither away. In fact just the opposite; for instance, you can easily go down and snap up a 25k "European sports-car" like the Mini Cooper--with a turbo BMW engine, Euro-engineered, and a car that will outgun the 911 from 0-60, etc., etc--instead of spending twice as much on the same engine in a 3 or 5 series. Yet, there are more top-of-the-line luxury cars on the roads than ever.
A luxury item like a nice car or a nice watch isn't bought for monetary practicality; it's either bought purely for the status symbol, or an appreciation for the "finer" things in life (i.e., a gen's artistry or craftsmanship).
The same goes for most luxury goods, including watches. Look at the simple sales figures in dollars (or units alone) for almost all high-end brands, and they've done nothing but go up over the past few years--even as reps have improved dramatically. Rolex, Omega, Panerai, Breitling--we've never seen better reps, and yet these companies have never seen better sales. And yet there are supposedly 20 rep Rollies for every gen you see on the wrist. Companies like Rolex have such a demand for their products, most aren't in stock or are on waiting lists that suckers will willingly fork over three times MSRP with a smile, just to get one on their wrist. They only put pressure on the counterfeiters for good PR & sales tactics. A friend at Louis Vuitton in Tampa says for every 100 LVs you see on shoulders, maybe one or two of them are gens; you can go practically anywhere on the planet and find an LV rep, and yet she still can't keep her merchandise on the shelf. $300 keychains, $2000 purses, $900 wallets, and most of it's on indefinite back-order. Like Rolex, Louis never has a sale--their prices only increase exponentially.
A self-perpetuating cycle of style over substance. And you know what--they'll keep on buyin'.