THE RISE (AND FALL) AND RISE OF LUXURY VEHICLE SALES

It’s been a tough few years if you were selling Commodores and Falcons, as the rise of the SUV has been accompanied by an increase in the number of luxury vehicles sold.

A slowing of that growth in the first few months of 2017 had some concerned about the potentially negative ramifications for the wider economy, but a robust bounce-back since May has allayed fears.

The rise

Figures from VFACTS and CommSec show that sales of luxury cars, as percentage of total passenger car and SUV sales, rose from just over two per cent in 1995 to nearly 12 per cent in 2016.
The CommSec Luxury Vehicles Index lists the following as luxury vehicle makers: Audi, Aston Martin, BMW, Bentley, Ferrari, Hummer, Jaguar, Lamborghini, Lexus, Lotus, Maserati, Maybach, Mercedes-Benz, Morgan, McLaren, Porsche and Rolls Royce.

2016 was a record year for luxury car sales in Australia. Luxury vehicles accounted for 9.17 per cent of total vehicle sales and a record 11.5 per cent of passenger cars and SUVs.

The fall

Sales of luxury passenger cars and sports utility vehicles (SUVs) were 105,265 in the year to March 2017, down 1.2 per cent from the December 2016 record highs. Annual growth of luxury vehicle sales had fallen to four-year lows.

According to CommSec, in the past a slowdown of luxury vehicle sales has heralded a slowdown of upper-end property sales and prices. In turn, slower growth of top-end home prices has led to softer growth of home prices more generally.

“So the indicator bears watching, with annual growth of luxury vehicles now at the slowest pace in 52 months,” a CommSec ‘Economic Insights’ report reads.

Luxury vehicles account for 11.45 per cent of all passenger cars+SUVs, down from the 11.50 per cent record highs in December. Three years ago, luxury cars accounted for just 8 per cent of passenger cars+SUVs.

Annual growth of new luxury vehicles slowed markedly over the year ending in March. In April 2016 annual growth was 19.7 per cent; in March 2017 it was just 5.2 per cent – the slowest growth in 52 months.

“In economics no relationship is perfect, but in the past a slowdown in sales of luxury vehicles has signalled a slowdown of upper-end property prices. And when the top end cools, invariably this infiltrates the broader market. Luxury vehicle sales are still very good; rather, growth of sales is coming down from stellar levels,” said the report, prepared by CommSec chief economist, Craig James.

The rise again

Nonetheless slow growth is still growth and a boost in consumer confidence from May onwards has seen sales of Mercedes-Benz, Ferrari, Bentley, Maserati, McLaren and Jaguar all reach record highs.

Most luxury car brands generated robust sales growth in May with confidence strong at the top end of the new vehicle market, which has a close link to the buoyant property market and profits made by business owners.

The Porsche Macan enjoyed 10 per cent year-on-year sales growth for the first half of 2017 while the Land Rover Discovery Sport also made a 11.4 per cent gain. Sales of the Lexus NX and Range Rover Evoque also rose in the first half of the year compared to 2016 numbers.

Some German luxury marques struggled (Audi was down 12.0 per cent for the first half-year and BMW down 18.5 per cent) but Mercedes-Benz posted a 7.9 per cent gain on its 2016 figures, selling 22,318 cars in the first six months of the year.

Nissan’s luxury arm, Infiniti, sold 422 cars in the first half of the year, up 18.2 per cent from 2016. The Mercedes GLA-based Q30 and QX30 compact crossover led the way, but Infiniti remains vulnerable.

Ferrari, Aston Martin and McLaren all enjoyed growth in the first half of 2017. Ferrari broke through the 100-car barrier to become the sales leader of the supercar field. Albeit off low bases, these makers enjoyed double-digit percentage gains – triple-digit in McLaren’s case.

McLaren sold 60 cars in the first six months of 2017 compared to 27 in the opening half of 2016.

Ferrari Australia Chief Executive Officer, Herbert Appleroth, said there were buoyant confidence levels across its customer base.

Order books for two to three years out were very strong as patient buyers waited for vehicles with a long waiting list. Consumer confidence surveys which showed niggling concerns in the broader economy weren’t reflected at the upper end of the luxury car market. “We’re the opposite,” he said.

So it would seem that after a blip in the first three months of 2017 the forecast for luxury car sales continues to be ‘onwards and upwards’.

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