Luxury car sales waaay down - DodgeIntrepid.Net Forums - Dodge Intrepid, Concorde, 300m and Eagle Vision chat
LinkBack Thread Tools Rate Thread Display Modes
post #1 of 1 (permalink) Old 02-21-2009, 09:01 PM Thread Starter

Join Date: Oct 2008
Posts: 336
Feedback: 0 / 0%
Post Luxury car sales waaay down

Daimler AG executives may have thought they had escaped the brutal economics of the mainstream auto market when they got rid of Chrysler in the summer of 2007.

But a little over a year later, Daimler and other luxury carmakers are struggling in a downturn that has buffeted the fanciest nameplates as severely as the rest of the industry.

Daimler reported this week that its Mercedes-Benz Cars division lost $460 million in the fourth quarter of 2008 and it forecast lower Mercedes sales for this year. Moody’s Investors Service lowered its outlook for Daimler and said it may cut its credit rating for BMW, citing concerns about the companies’ profitability.

In contrast with past recessions, this slump is hurting many wealthy people who usually ride out economic ups and downs.

“This recession is one that is not respectful of social class,” said Johan de Nysschen, president of Audi of America. “It’s one that’s cutting very deeply at all layers of society.”

Many premium car buyers work in two of the economy’s most troubled sectors, banking and real estate. People with big savings have seen a steep erosion in their personal wealth — and that hasn’t bottomed out. Last month was the worst January on record for the New York Stock Exchange.

In the United States, traditionally the most lucrative auto market, Mercedes sales plunged 42.9 percent and Cadillac sales slumped 42.5 percent in January, compared with the overall market’s 37.1 percent drop. Bentley sales were off 74.7 percent, while Porsche’s fell 36.1 percent.

While the declines reflect the severity of the recession, auto executives and analysts say underlying trends are aggravating the downturn in luxury car sales — and they worry those may persist well beyond the recession.

One is a newfound austerity that appears to be a backlash to the conspicuous consumption that characterized the booms of recent decades.

“As far back as 2007, a trend away from ostentation and bling was already being remarked on,” said Donna Boland, a spokeswoman for Mercedes-Benz USA in Montvale, N.J. “The economics have accelerated dynamics that were already in place.”

Analyst Rebecca Lindland at consulting firm IHS Global Insight said there were no hard figures. “It’s more anecdotal, but it’s something we’re watching,” she said. “We may see a kind of change in attitude where it may not just be about flaunting your wealth.”

Some luxury brands may be able to withstand this shift in taste better than others, Lindland said. “I think Audi and Acura are two of the less vulnerable brands because they tend to be more understated, and a little more under the radar.”

No desire to show off

In any kind of downturn, people are reluctant to show off, said Jack Nerad, market analyst at Kelley Blue Book.

But the trend is more pronounced in this recession, he said, because of another long-term shift: growing concern for the environment, the effect of car emissions on the earth’s atmosphere, and the planet’s dwindling resources.

A look at who buys the Toyota Prius hybrid, which starts at $22,000, shows how these two trends are dovetailing, he said.

“A lot of potential luxury car customers went into Prius,” Nerad said, while Toyota’s premium Lexus hybrids “have largely fallen flat.”

Prius buyers earn more than $100,000, on average, and many of them could easily afford a flashier nameplate, he said.

Pam Danzinger, president of Unity Marketing, a consulting firm in Stevens, Pa., that studies buying patterns of wealthy people, says premium car purchases fell by almost half in the firm’s fourth-quarter survey after holding steady for several quarters.

“We see more of the affluent reporting that they bought a mass-market brand with luxury features rather than a luxury brand,” she said.

But rather than becoming discreet, Danzinger believes wealthy people want more value for their money. “They’re no longer willing to pay a $20,000 premium to have a Lexus or Mercedes-Benz brand logo.”
Why pay more?

In recent years, as mass-market brands introduced more entertainment and safety features into their models, auto executives have wondered if that might undermine the luxury car business. Traditionally, new technology was available first on luxury vehicles and then, years later, in more affordable models.

But that time gap is shrinking. “As we get more sophisticated, popularly priced cars with features like navigation, a vast array of safety equipment, fantastic sound systems, it becomes harder to justify a luxury brand purchase,” Nerad said.

Pointing to Hyundai’s luxury aspirant, the $32,250 Genesis car, he said: “You can get a non-luxury brand that virtually sings and dances for you.”

Not surprisingly, most luxury carmakers dismiss the idea that luxury is losing its appeal.

“I don’t have indications that our clientele would prefer to drive in small cars that are less safe and less comfortable,” Daimler CEO Dieter Zetsche said.

“What they want,” he said, perhaps because of social pressures tied to the environmental movement, “is lower fuel consumption.” And Daimler will provide that, he said this week.

Toyota’s Lexus, the top-selling luxury brand in the United States, expects premium auto sales to recover. “We are still bullish that the luxury market will grow faster than the mass market in the long run,” said Mark Templin, general manager of Lexus in North America.

“But it may be different,” he said, with more smaller and fuel-efficient vehicles in the luxury lineups of the future.

Executives at BMW say their customers are still loyal to the brand, but some are opting for smaller models. “We see some customers switching from bigger engines to smaller engines, and from larger series to smaller series, from the 5 Series to the 3 Series for example,” said BMW spokesman Jan Ehlen.

A slowdown in leasing linked to the turmoil in the credit markets affected a few brands, such as Cadillac, but did not have a big impact on most luxury brands.

But if the shifts in the luxury car market persist, they will pose a serious challenge for manufacturers. Already, rising cost pressures and falling sales are putting pressure on them. “We have to figure out a way,” Templin said, “to make it as profitable” as the business has been traditionally.

In Germany, Porsche has joined forces with Volkswagen AG, and its Audi brand, while BMW and Mercedes are exploring ways to cooperate and share costs.

In an effort to retain their cachet and their pricing power, luxury carmakers are developing models featuring advanced engine and other technologies to tap into the green movement.

Toyota will introduce the first Lexus designated hybrid, the HS 250h, in the fall, while Mercedes will introduce two hybrid models at the end of the year.

BMW outperformed most of its rivals in January after launching an ultra-clean diesel version of its X5 SUV late last year.Roger Olsen, sales and leasing manager at Suburban Porsche and Audi of Farmington Hills, says Audi sales at the dealership were up in the fourth quarter and in January, helped by new models such as the small and stylish A4.

But Porsche sales were down. Olsen is doing good business with out-of-state buyers attracted by the discounts. “People realize, if you’ve wanted a Porsche,” he said, “there’ll never be a better time to get them.”

But there aren’t many takers in Michigan for the legendary sports cars.

“A sports car is, let’s say, a reward,” Olsen said, and not many people feel like rewarding themselves.

Auto Reporter is offline  
Sponsored Links

Quick Reply

Register Now

In order to be able to post messages on the DodgeIntrepid.Net Forums - Dodge Intrepid, Concorde, 300m and Eagle Vision chat forums, you must first register.
Please enter your desired user name, your email address and other required details in the form below.

Member names may only be composed of alpha-numeric characters. (A-Z and 0-9)

!!ATTENTION ADVERTISERS!! If you intend on advertising anything on this forum, whatsoever, you are required to first contact us here . Additionaly, we do NOT allow BUSINESS NAMES unless you are an Authorized Vendor. If you own a business, and want to do sales on this site via posting or private message, you will need to follow the rules. Shops, Stores, Distributors, Group Buys without being authorized will see your account terminated.

User Name:
Please enter a password for your user account. Note that passwords are case-sensitive.


Confirm Password:
Email Address
Please enter a valid email address for yourself.

Email Address:


Thread Tools
Show Printable Version Show Printable Version
Email this Page Email this Page
Display Modes Rate This Thread
Linear Mode Linear Mode
Rate This Thread:

Posting Rules  
You may post new threads
You may post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On
Trackbacks are On
Pingbacks are On
Refbacks are On

For the best viewing experience please update your browser to Google Chrome