The luxury automotive sector has outperformed the industry at large in 2010 as Audi, Porsche, Mercedes-Benz and Jaguar all increased sales volume by more than 20 percent year-over-year, according to a study by TrueCar.com.
The research indicates that luxury cars have demonstrated more sales stability than the general automotive industry. High-end brands won back buyers as the economic forecast showed signs of improvement.
“What we’ve seen this year has been some of the postponed consumer decisions becoming actual purchases in 2010,” said Jesse Toprak, vice president of industry trends at TrueCar.com, Santa Monica, CA. “The main reason has been the relative improvement in some of the macroeconomic trends that we track.
“When the crisis hit in 2008 we saw most consumers who buy luxury cars – even though they retained the ability to purchase – postponing their purchases because there was a lot of uncertainty,” he said.
“Conversely, this year we’re seeing some relative, though small, improvements in the economy and many luxury purchases are coming back in the luxury market place, actually making the luxury category of vehicles some of the best performing brands in the industry.”
TrueCar analyzes and appraise car prices across geographic regions
Gaining speed
Audi grew sales volume nearly 24 percent year-over-year, moving nearly 74,000 vehicles through three quarters of 2010.
Meanwhile, Porsche recorded about 18,000 sales, also increasing its sales volume by 24 percent.
Mercedes-Benz pushed more than 165,000 units, 22 percent better than in the same time period last year.
And, Land Rover led all luxury SUVS with 21 percent growth, moving 22,000 units from January through September.
Fellow British auto brand Jaguar moved nearly 10,000 units to grow more than 12 percent.
Finally, industry leaders Lexus and BMW both grew 9.2 percent.
The brands are neck-and-neck for sales volume heading into the last quarter, selling 163,000 and 157,000 vehicles, respectively.
High-value vehicles
Luxury brands have been encouraging consumers to step back into the car market by emphasizing value in their marketing efforts, according to Mr. Toprak.
In particular, a number of brands have been doing more to promote the value of their vehicles, especially those in lower price points.
Many upscale consumers looking to buy or lease vehicles have been unenthusiastic about giving up the value and prestige associated with high-end brands, and have therefore opted for entry level offerings.
“We’ve seen many cases where a consumer will buy a cheaper version of a luxury brand,” Mr. Toprak said. “So, instead of a BMW 5 Series, you see people buying 3 series.”
But, sales alone do not tell the whole story.
Luxury automakers have also been luring consumers with favorable leasing offers that have been possible for two reasons:
First, lower production volumes mean used vehicles retain their value longer, meaning dealerships can lower the bottom line on new cars and recoup those costs in the used market.
At the same, the interest rate is still near zero, making borrowing money cheap.
As a result, these brands have appealed to a consumer base much more interested in leasing vehicles than in past years, and leasing nationwide for all cars was around 23 percent, compared to 11 percent in September 2008.
Meanwhile, upscale brands have increased margins by lowering spending on incentives used to clear out old inventory – the result of scaled back production.
The biggest movers and shakers were Land Rover, Porsche, Jaguar and Mercedes-Benz, who cut back on incentive spending by 57 percent, 45 percent, 36 percent and 32 percent respectively.
“We will continue to see stable recovery in the luxury market, and in particular we’re going to see luxury SUVs outperform the rest of the market,” Mr. Toprak said. “The outlook for luxury vehicles is positive, provided that overall macroeconomic recovery continues on the same trajectory.
“We will still be far away from peak sales and the historical heights for luxury cars,” he said. “However, overall analysis of luxury marketers is that it has much more of an upside than downside for the next year at least.”