Welcome to a new glittering age of driving in which sales of high-end automobiles grow faster than the likes of Ford and Honda. Gone are those days when affordable midsize cars would absolutely dominate the car sales figures while luxury marquees grow at crawling pace. In the last couple of years, there has been a complete trend reversal.
Overall, the automobile industry is doing well and most of the major carmakers are posting record sales numbers. However, companies like Honda, Toyota, Ford and other brands that build affordable family cars are now being replaced by the likes of BMW, Audi and Mercedes. And this is not restricted to just one part of the world and rather is a global trend. Luxury auto sales were up 11 percent in the U.S. in 2014 than they did a year earlier while sales of midsize cars such as the Honda were up by just 4.6 percent.
A lot less number of Hondas and Fords are being driven out of the showrooms than before. In comparison, BMW sold 1.81 million cars, outpacing Volkswagen-owned Audi, which sold 1.74 million cars, and Daimler AG’s Mercedes-Benz, which sold 1.65 million vehicles. In terms of growth percentage, BMW sales were up 9.5% last year while Mercedes-Benz sales rose a faster 13% and Audi posted a 10% gain. Luxury marquees, with cars generally selling for more than $40,000, represent a big and growing slice of the car business. They now account for 11% of total new car sales, when measured by number of units sold. In terms of the dollars spent, and their presence grows even larger. Luxury cars account for 18% of all car sales revenue, worth $100 billion
However, the growth is not restricted to only the German luxury automakers. In fact, British car brands are witnessing their best period of sales and growth. Rolls-Royce Motor Cars sold a record number of cars last year, breaking through the 4,000 mark for the first time in its 111-year history. The luxury carmaker sold 4,063 cars, up 12% on last year, and marking the fifth consecutive year of record sales. Same is the case with Bentley. 2014 was a record-breaking year for Bentley, with sales reaching 11,020 units, 9 percent more than the 10,120 cars sold in 2013.
Jaguar Land Rover, which was at the brink of extinction before TATA group took over in 2008, enjoyed its best year on record in 2014. The British automaker managed to sell 462,678 cars across its Jaguar and Land Rover brands, which was 9 percent better than the 425,006 it sold the previous year. However, not all premium European carmakers survived through the economic slowdown in the latter part of last decade. Swedish company Saab petitioned for bankruptcy in 2011 and almost disappeared from the automotive scene. The company is now back under the name ‘National Electric Vehicle Sweden’ selling EVs.
So, what really has helped luxury carmakers do much better as compared to the automobile companies making affordable midsize cars and why are so many buyers springing for an opulent car? A variety of reasons can be attributed to the rise of this new trend in the automobile industry across the world. For starters, the world economy has substantially improved from the lows of the 2008 global economic meltdown and the stock markets are soaring to new highs. This has been backed by the huge fall in crude oil prices in the last two years. In March this year, crude oil price fell to a six-year low and analysts believe the trend is going to continue for the next couple of years. However, these two reasons can’t solely benefit the luxury brands; and in fact, it hasn’t. For anyone in the market looking for a new car, it has become a lot more easier than before to become a luxury car owner. The luxury carmaker are slowly shifting their focus to high-volume, affordable cars.
For example, Mercedes is now selling its CLA for about $30,000, while Audi is in the market with a similar strategy with its new A3. BMW, Jaguar, Land Rover and other brands are doing the same thing by introducing affordable offerings. The relative prices for the luxury segment aren’t nearly as high as they were last year. The weakening Euro as compared to the US dollar has also helped the European car makers leverage it and give out better offers to the buyers. Not only are the the cars in the showroom less expensive but their cost to maintain and upgrade has become more than reasonable, allowing more consumers to own, maintain, and customize European luxury traditionally reserved for the wealthy. Additionally, sites like eEuroparts.com make it possible for owners to inexpensively upgrade their BMWs with aftermarket and performance parts for greater value and usage.
As for the other end of the spectrum where the cars are priced in excess of $200,000, the story is a little different. The growth in this segment indicate high times for the ultra-elite, whose numbers are increasing. A recent report pointed out that there are 268 more billionaires in 2014 than the previous year on the planet. This new breed of super-rich is driving the growth in the luxury car segment. Especially in China, which for the last couple of years has consistently been the biggest market for luxury cars, the list of billionaires is getting bigger by the day. China is closely followed by the UK, US and Canada, which have shown remarkable rise in demand for high-end luxury vehicles. In addition to the developed economies, the high-growth emerging markets like Brazil and India have also witnessed stellar growth in this segment. In India, the luxury car market grew eight-fold since 2007.
So yes, the luxury end of the automobile market is witnessing the best period of sales and growth; however, the bigger question is, how long will this last? Is the growth in this segment sustainable? While, the industry experts believe that it will continue, at least in the near future, but as we have seen in the past, nothing is permanent and it doesn’t take too long for trends to reverse.