Americans are taking over Teslas, Bentleys and Lamborghinis as luxury car market booms

More Americans are choosing to buy luxury cars than ever before, a shift fueled by cash-rich buyers who have been able to save their bank savings during the pandemic and increase wealth among high-income shoppers.

The share of new cars sold by luxury brands like BMW, Mercedes-Benz and Tesla has grown steadily in recent years, reaching 17.3% of the total U.S. auto market in June, according to JD Power, a data analytics firm focused on the industry. the cars. Industry data shows that this percentage is more than 14.1% in 2019 and continues the rise that started years ago.

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JD Power data shows that sales of luxury cars considered ultra-high-end – those sold by brands such as Lamborghini, Bentley and Ferrari – are still small but have increased to 6,700 vehicles sold through July of this year, an increase of 35.6% over the same period five years ago. Years. .

“Wealth is growing, so the luxury goods market is growing,” said Alan Favey, sales and marketing board member of Bentley Motors Limited, a unit of Volkswagen AG.

Mr. Favey said that over the past several years, the growing group of wealthy people is providing a larger customer base for brands like Bentley to track. He said that many of these wealthy buyers in the United States are younger, having amassed fortunes in the technology and entertainment industries.

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Analysts and executives said the luxury car market got an extra boost during the pandemic as a stock market rally and rising home prices boosted the purchasing power of many American families.

Premium car sales have hit record levels over the past few years. In 2021, they numbered 2.48 million, up 13.2% from the previous year and above the 1.7% increase recorded by mass-market manufacturers, according to Kelley Blue Book, a research firm specializing in vehicle pricing and valuation.

“Records could have been higher if they weren’t limited in supply,” said Tyson Gomini, an analyst at J.D. Power, referring to the manufacturers.

The trend toward luxury in the auto industry is another example of the broader divide that has emerged in the American economy, as the potential owners continue to splurge, while the less affluent buyers withdraw.

Car dealer Jack Hanania said the demand for high-priced cars was so strong that he decided to open a used car business focused exclusively on $100,000-plus models in the summer of 2020. This proved to be a well-timed bet.

In a typical year, Mr. Hanania said he sells about 10 Lamborghinis, costing up to $250,000. In 2021, he said he sold nearly 30.

Lamborghini is cyan [Lamborghini — Instagram]

“I knew there was some demand,” said Mr. Hanania, who has car dealerships in Florida and Pittsburgh. “But I didn’t know we had so many buyers from all over the world who would come and buy these cars.”

Analysts say there is no single definition of what a luxury car is. Typically, the category includes brands that are built with the goal of targeting more affluent customers and that offer a high-end experience – whether in the types of models they sell or at the dealership. Often times, these vehicles sell at higher price points than their mass market counterparts, although the line has begun to darken more in recent years on some specific vehicle types.

Superpremium refers to models that represent a significant increase in price compared to the more general luxury segment.

In the auto industry, prices for new cars have skyrocketed in recent years as manufacturers grapple with supply chain disruptions and a shortage of stock at dealer parts.

As mainstream models — such as those made by Ford, Toyota and Hyundai — became more expensive and harder to find, many buyers chose to go to market, where the selection was generally better, dealers say.

In some categories, the price gap between luxury and non-luxury models has been greatly reduced.

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For example, the difference in average transaction prices for the Kia Telluride SUV and a similar luxury SUV, the Lexus RX 350, was $6,875 in July, according to data from car-buying site Edmunds. Before the pandemic, the price gap between the two models was around $9,000, company data shows.

Phil Maguire, who owns the Maguire Family of Dealerships, a department store chain in New York State, said high trade values ​​in the used car market also help buyers cross into the luxury zone. “The thought process was to spend a little bit more and go with the luxury premium they really like,” he said.

Executives say car companies are leaning on the moment, prioritizing factory production for their premium offerings and offering more expensive options.

The Wall Street Journal reports that Cadillac, for example, is planning for the first time its most expensive model ever: a $300,000 handmade electric car, called the Celeste.

Mercedes-Benz Group AG is reshaping its global portfolio to focus more on vehicles that typically sell for $100,000 and up, including G-Class SUVs and Mercedes-Maybach models.

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Volkswagen said on Monday it will list high-end sports car maker Porsche in one of its largest initial public offerings in years, valuing it between 60 billion euros and 85 billion euros, or between $59.8 billion and $84.6 billion. Porsche has routinely generated double-digit profit margins for Volkswagen and huge dividend contributions to the net profit of the larger parent company.

Meanwhile, Tesla Inc.’s sales soared. In recent years, which contributed to the growth of the total share of luxury products. With several models priced around $50,000 and up, Tesla’s US market share was 3.8% through June, more than double what it was in the same period last year, according to Kelley Blue Book.

Tom MacBarland, a New Jersey auto buying consultant who helps shoppers find and buy cars, said he sees plenty of luxury car buyers interested in electric vehicles, including those made by well-established brands like BMW. He said more customers are paying for cars with cash or making large down payments.

“People who could buy an $80, $90, and $100,000 car might not have had the same effect as the typical buyer,” said Mr. McBarland.

Dealers and analysts say that in the midst of a broader inventory crunch, luxury brands have kept their products better stocked as car companies seek to use their limited supply of computer chips for high-end models.

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However, Bayerische Motoren Werke AG said in August that it expects business to be affected in the coming months due to inflation, rising interest rates and supply chain challenges.

Demetris Psiliakis, CEO of Mercedes-Benz USA, said he still sees plenty of growth ahead because with cars and trucks in short supply, pent-up demand should make buyers flock to showrooms.

“The market hasn’t shown its full potential,” Psilakis said.

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