Luxury-Car Sales Starting to Jingle Again

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Lux carsEighteen months ago, customers at Jim Snell’s Land Rover dealerships sometimes bought new SUVs that looked just like their old ones.

That way, neighbors and colleagues might not realize that they had purchased a $60,000 vehicle in the midst of a fierce recession.

“With people out of work and worried about the economy, it probably wasn’t the time to be calling attention to your new car,” Snell said.

But bling may slowly be coming back ? along with rising consumer confidence.

Luxury-vehicle sales are increasing as the stock market gathers steam, spurring interest in hot new vehicles such as the Audi A7, Maserati GranTurismo convertible, Porsche Cayenne and Land Rover Evoque.

High-end car sales are an interesting economic indicator because they are purely “want” purchases, made when people with considerable incomes feel good about the future.

Buyers at Snell Motor Cos.’ dealerships in Dallas, Frisco and Austin, for example, are again buying the vehicles and colors they want, proudly displaying their paper license plates.

“I kind of watch the trade-ins we’re getting, and people seem to feel pretty good about the economy,” Snell said.

Typically, sales of luxury and exotic vehicles are the last to fall in a bad economy and the first to rise in a recovery, said Jeff Schuster, executive director of industry forecasting at J.D. Power and Associates.

“Our view is the (luxury) segment as a whole will pick up some share in the next few years,” Schuster said.

But current sales, while improving, also seem to reflect lingering concerns about the economy.

Only four of the 17 luxury and exotic brands had sales increases in the first quarter that matched the overall 20 percent rise in auto sales nationally, according to figures reported by Automotive News.

“Even though we’re seeing some economic recovery, you have consumers who just don’t trust the economy anymore,” said Jesse Toprak, vice president of industry trends at TrueCar.com. “I don’t know when ? or if ? that will change.”

Some luxury dealers believe that attitudes are already improving.

When inventory-constricted Lexus is excluded, the luxury sector “really looks pretty strong,” said Carl Sewell, chairman of Dallas-based Sewell Automotive Cos.

Lexus was among the Japanese automakers whose plants and supplier base were hit hard by the earthquake and tsunami that devastated parts of Japan in March.

“If there is any sluggishness, my instinct is it’s because the real estate side of the economy has not returned as robustly as the equities side,” said Sewell, whose dealerships include Lexus, Cadillac and Infiniti.

Snell said his sales were up 35 percent last year over 2009 and are “tracking even better today.”

At Aston Martin of Dallas, managing partner Kurt Fegraeus expects a 20 percent increase in sales this year of vehicles whose prices start at about $120,000.

But Fegraeus doubts business will return to pre-2008 levels anytime soon.

“Talking to my customers, they’re saying they see signs that the economy is coming back,” he said. “But our entry-level buyers ? the people stretching to pick the low-hanging fruit ? have been wiped out of the market.”
Still, those left have “that Dallas can-do attitude,” Fegraeus said. “They’re saying, ‘Let’s just do business.’ “

Three or four years ago, some luxury customers bought cars purely on impulse, a Saturday afternoon whim.

“Today people are buying what they want, but with an eye toward value,” said Ken Schnitzer, chairman of the Park Place Dealership Group, which includes Mercedes-Benz, Lexus, Porsche, Jaguar, Rolls-Royce, Bentley, Maserati and Bugatti outlets.

“When you go through extraordinary economic events, I think it has real impact on people,” he said. “I think there is a certain caution now.”

Since hitting a low point in sales in September 2008, business at Schnitzer’s dealerships has increased 22 percent.

Although sales aren’t back to pre-2008 levels, he is encouraged by his customers’ optimism.

“There’s stability now in the marketplace,” Schnitzer said.

At Classic BMW in Plano, Texas, sales are a “mixed bag,” said Eric Maas, president of the dealership.

Even in down months, sales this year are better than they were in good months last year, Maas said. Moreover, the best sellers are more expensive 5- and 7-series sedans and crossovers.

Three years ago, the top-selling vehicle at Classic ? and BMW’s bread-and-butter car ? was the high-volume 3-series sedan, a car aimed more at middle-income buyers. Those buyers have been slow to return, Maas said.

“Some of that is the 3-series has gone longer without a redesign than the others,” he said. “But I also don’t think that the economy has come back fully. We are not back to where we were before 2008.”

Overall, the growth in the luxury segment looks pretty healthy, said Toprak of TrueCar.com.

“People at this level did not really lose the ability to buy a car,” he said. “As soon as they got some positive economic news ? the stock market was up, earnings were improved, something like that ? they pulled the trigger.”

But as the first-quarter sales numbers indicate, the recovery may be solid but slow.

Entry-level luxury buyers, for instance, could be the last to return to the segment, still feeling the erosion of middle-class income over the last five years.

“The game has different rules now and a different environment,” said Schuster of J.D. Power and Associates.

“Normally, we see a quick bounce-back in a recovery. We’re not in that environment now.”

Still, Schnitzer and other luxury dealers remain bullish about their business.

“Over the next two or three years, I expect a gradual recovery back to where we were before all this started,” he said.

Source: McClatchy-Tribune Information Services.
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