Gojirra99

U.S. demand jumps 7 percent this year as economy slumps

By Ed Garsten / The Detroit News


Consumer confidence is sagging, national job growth is slumping and gasoline prices are prowling the $2 a gallon territory again, yet sales of the most expensive cars and trucks are humming.

While U.S. vehicle sales rose just 1 percent through September, demand for luxury brands jumped 7 percent, according to market research firm J.D. Power and Associates.

General Motors Corp.’s Cadillac is headed for a record year, with sales up 10 percent, and combined sales of the Lexus RX330, Acura MDX, Cadillac Escalade and other upscale sport utility vehicles have spiked 19 percent.

Analysts say the strength of the premium market is tied to three factors: status, perceived quality and value.

Indeed, the luxury segment, generally defined to include cars and trucks with prices that start just over $30,000, seems to be immune from any sort of infection the economy may blow its way.

“For the most part, it always has been,” said Art Spinella, an analyst with CNW Marketing Research in Bandon, Ore. “Luxury cars are more of a fashion statement than anything else.”

Strong sales of high-end vehicles reflect American’s growing desire for a taste of the good life, as do $5 lattes at Starbucks, an afternoon at the spa or a Williams-Sonoma table. Market-savvy upscale car brands now offer entry-level vehicles that you don’t have to be an heiress or a CEO to afford.

But posh rides are not coveted only as a status symbol.

Monica and Steve Hickey of Pleasant Ridge based their choice on more practical criteria when they went shopping for a vehicle for Monica, a 46-year-old homemaker. They settled on a new RX330 from Toyota Motor Co.p.’s upscale Lexus marque. The couple had owned several domestic brand vehicles but were dissatisfied.

“It’s not so much a function of luxury, but of quality,” said Steve Hickey, 49, an attorney.

Not so for Lev Berkovich. The 47-year-old Encino, Calif., utility company project manager never even laid eyes on any lesser brands — let alone gave them any consideration — before recently buying a Volvo XC90 SUV.

“I wanted a fair representation of my status,” he said. “I’m a professional making six figures. Once I’m in that bracket, I don’t want to go down.”

Unlike most nonluxury buyers, neither the Hickeys nor Berkovich were influenced by big cash rebates or no-interest financing deals; price was not a major concern.

“We showed up and we didn’t even know there were incentives,” said Steve Hickey. “It was nice, but it had nothing to do with why we settled on Lexus.”

Berkovich said the only deals that interested him were discounts for taking delivery of his Volvo XC90 in Europe, where he frequently travels, and the ability to stick to his personal rule.

“I never buy a vehicle for more than $500 over invoice price,” he said.

Sales incentives may not be the bait that’s luring luxury buyers into showrooms, but they are effective selling tools and automakers are spending nearly as much on discounting high-end vehicles as they do mass market models.

Jesse Toprak, director of pricing and marketing at the Internet auto research Web site Edmunds.com, said the average incentive spending per luxury vehicle in September was $3,157, including $2,084 for luxury sports cars, and $2,710 on luxury SUVs. That compares with average incentive spending industrywide of $3,146 per vehicle.

“Everything is incentivized,” said Rob Pasquinzo, sales manager at Audette Cadillac in West Bloomfield Township. “We have lease incentives, which is good because you’re leasing 95, 96 percent of your models.”

Ford Motor Co.’s Lincoln brand offers as much as $2,000 in cash rebates on some 2005 models and up to $6,000 cash back or no-interest financing on some 2004s.

Most incentives on luxury brands are more subtle: cash that automakers give to dealers to help close sales; low-interest financing offers; or lease programs that offer lower monthly payments because the manufacturer absorbs some of the vehicle’s depreciation.

Automakers are careful not to advertise the deals as aggressively as they do incentives on nonluxury marques.

“They want to keep their brand image,” Toprak said. “Any time you advertise high incentives, it has a negative impact.”

Baron Meade is president of the Meade Group in Metro Detroit, which owns one Dodge and two Lexus dealerships. About 65 percent of his customers lease rather than own, and some of them wouldn’t otherwise be able to afford such a high-priced vehicle — one reason the segment is doing so well.

Sticker price and cash rebates mean much less to these buyers than the ability of Lexus vehicles to hold their value over time — what’s called its residual value.

“If a car has a very good residual value, very often it has an attractive lease,” said Meade. “It makes people shopping lease payments in the same range of payments as those looking at midline makes.”

While the luxury segment as a whole has seen sales increase, buyer enthusiasm is not equally divided among brands.

The big gainers include Cadillac, up 10.3 percent; BMW, up 7.2 percent; Lexus, up 12.3 percent; and Porsche, with demand up 14.2 percent during the first nine months of the year.

Among the luxury losers are Hummer, down 20 percent; Jaguar, down 15.5 percent; Lincoln, down 13 percent; Saab, down 22.8 percent; and Mercedes-Benz, down 1.2 percent.

CNW’s Spinella says the winners have maintained or improved quality and styling, or introduced interesting new products, while the losers have mostly suffered self-inflicted wounds.

“Lincoln is old product; it’s basically for geezers,” Spinella said. “Jaguar truly offended core buyers by introducing entry-level stuff. Hummer saturated the market. And with Mercedes there’s the perception quality has deteriorated.”

That situation should be temporary, though, as all of the luxury brands get ready to launch new products.

The flood of new models, coupled with continued economic stability among the wealthiest consumers, should keep the sparkle on luxury vehicle sales for at least the next 18 months, Spinella said.

Volvo owner Berkovich is certainly confident.

“We are not,” he said, “in the Great Depression.”



source HERE

CK6Speed

iTrader: (1)

If I'm reading the numbers correctly, it looks like Acura has the largest increase at 16%, Porsche at 14%, and Lexus at 12%.

Gojirra99

Missed Acura

GFerg

OMG. Okay, I'm calling it right now. Next year, Acura will pass up Mercedes. You heard it from me first. 2005 its gonna be Lexus, BMW, Cadillac, Acura, MB.

LexusLuver

infiniti's growth has slown down.

Lexus as usual is dominating.

LexFather

I don't think so.

-J-P-L-

Magneto may have something here. Remember the new RL will significantly boost sales
for Acura. Either way it should be close between MB and Acura.

For some reason I didn't think Cadillac was #3. I thought it's been Lexus, BMW, & MB on top for a while.
Obviously a result of CTS's and Escalades.

Gojirra99

Remember MB will have new models Vision B, Vision R & the CLS coming out next year too that should help their sales.

Vegassc400

Maybe. With MB decline in quality and the well founded notion you should never buy a car during it's first year in production, I don't think it will rebound for a couple years. That might be all the time Acura needs.