The market for so-called ultra-luxury cars remains 25% below its pre-financial crisis peak. Those were the good old days in more ways than one. The crisis and subsequent (never-ending?) recession knocked the ultra market back and gave presumptuous rivals better known for 'affordable luxury' - like BMW, Mercedes, Porsche, Audi and Lexus - a chance to engineer some higher end products. With the newcomers reputation for quality, reliability and ease of maintenance, they are making some inroads in what was previously a very exclusive club.
Part of the reason for their success is geographic: one of the nations suffering most dramatically is Italy, home of both Ferrari and Lamborghini. Bentley and Rolls Royce, two other, ostensibly British, members of the ultra clique, are facing similar disappointments.
The reason for the slowdown in sales in this market segment is not, as we can imagine, because potential purchasers are economizing per se. Many collect these cars the way others collect Old Masters paintings or big houses. Some probably have a taste for all three. But with governments even in places like Russia and China casting a wary eye on egregious displays of wealth and with uncertainty in the global markets raising risk awareness, opting for greater liquidity over hard assets is what passes for prudent behavior these days. JL
Christian Wuestner, Tommaso Ebhardt and Alex Webb report in Bloomberg:
Ferrari, Bentley and Lamborghini are bracing for slower growth as the European debt crisis saps demand even for high-priced toys for the wealthy.
While ultra-luxury nameplates aren’t facing the kind of downturn that’s battering mass-market carmakers like Fiat SpA (F) and PSA Peugeot Citroen (UG), demand for cars costing more than 100,000 euros ($130,000) is set to take a hit.
“We have a very volatile product,” Stephan Winkelmann, the head of Lamborghini, said in a Bloomberg Television interview at the Paris Motor Show. “Our customers buy this product not because they need mobility, but because they want a dream fulfilled. So if it’s not the right time -- even if they have the money -- they might not buy it.”
With about 26,000 ultra-luxury vehicles sold last year, the market remains about 25 percent below its pre-crisis peak, according to Winkelmann. The recovery will drag on as the debt crisis widens into a broader slowdown. Bentley forecast growth for the pinnacle of the automotive market of 5 percent to 6 percent globally next year.
That would represent a marked slowdown for Bentley, whose vehicles range from the 137,400-euro Continental GT V8 coupe to the 246,000-euro Mulsanne sedan. The Volkswagen AG (VOW) unit reported a 32 percent surge in sales in the first half to 3,929 vehicles. In August, the company forecast second-half deliveries higher than the first six months on demand for its entry-level coupe.
‘More Resilient’
“The ultra-luxury auto market is stable at the moment, but not growing in a way people predicted a year ago,” Kevin Rose, head of sales and marketing at Bentley, VW’s British ultra- luxury marque, said in an interview yesterday.
The sovereign-debt crisis, which is prompting Spain, Greece and Italy to push through austerity programs, has caused a slowdown that has spread to other European countries. The U.K. economy shrank 0.4 percent in the second quarter, while unemployment in Germany climbed for a sixth straight month in September. The European Union’s car market is poised to fall 7 percent this year, the fifth straight annual decline and the lowest level since 1995, according to auto industry group ACEA.
“Generally, the global ultra-luxury car market is more resilient than the volume segment, but in extreme crisis it also gets affected,” said Arndt Ellinghorst, a London-based analyst with Credit Suisse Group AG. “The ultra-luxury carmakers will profit in the next years from growth in emerging markets, which they started to develop only in the last five years.”
Faster Cars, Slowing Growth
Slower sales come as competition at the top end of the auto market intensifies. At the Paris show, Daimler AG (DAI)’s Mercedes- Benz introduced an electric version of the SLS gull-wing sportster, which will be the brand’s most expensive model ever with a price tag of 416,500 euros.
McLaren Automotive debuted the P1 supercar, the successor to the F1, which was the fastest road car in the world in 1998. McLaren aims to double sales to 3,000 vehicles by 2016 as it adds at least three models or variants, Managing Director Antony Sheriff said. The carmaker, famed for its Formula One racing arm, will also extend its dealer network to between 70 and 100 from the current 38 in that timeframe. The P1 will start at around 700,000 pounds ($1.13 million), he added.
Bentley looked to polish its image by presenting a race car concept as part of its plan to return to motor sports and challenge Ferrari.
Increased Competition
More competition is on the way. Bayerische Motoren Werke AG (BMW), based in Munich, plans to roll out the i8 hybrid sportster in 2014, a year after Porsche introduces the 918 Spyder, an $845,000 limited-run plug-in hybrid supercar. Porsche, based in Stuttgart, Germany, last week said that it will build fewer than the 155,000 cars and sport-utility vehicles originally planned for next year.
Citing deteriorating business in Europe, Daimler last week said operating profit at its Mercedes cars division will fall this year, lowering a previous target of steady earnings.
Still, the segment is far from in free fall. Demand from China and the U.S. will help Ferrari report near record profit and sales levels this year, Chairman Luca Cordero di Montezemolo said in a Paris interview.
“Our key markets -- Germany and the U.K. -- are doing well, Italy not, of course,” Montezemolo said. “We have to push” in the U.S., Asia and the Middle East, where demand is still strong.
Lamborghini’s Winkelmann is still upbeat about prospects as most markets outside of Europe are stable. Also, the segment is very much driven by new models, which can in turn spark interesting for the entire segment.
“There’s more light than shadow,” he said.
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