BMW, Mercedes, Lexus Car Sales May Drop to 13-Year Low in U.S.
01-09-09, 11:00 PM
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BMW, Mercedes, Lexus Car Sales May Drop to 13-Year Low in U.S.
Bloomberg News
BMW, Mercedes, Lexus Car Sales May Drop to 13-Year Low in U.S.
Jan. 9 (Bloomberg) -- Bayerische Motoren Werke AG, Mercedes-Benz and Toyota Motor Corp.’s Lexus division may see U.S. sales of luxury cars plunge again this year, after the financial crisis sparked the segment’s biggest decline in at least two decades in 2008.
Industry sales of the vehicles may fall below 1 million in the U.S. for the first time since 1996 as premium brands drop faster than mainstream models, unlike in previous recessions, said Rebecca Lindland, an IHS Global Insight Inc. analyst. Sales of the premium cars and sport-utility vehicles may slide 13 percent this year after falling 19 percent in 2008, she said.
“If you go to dinner parties, there’s a certain atmosphere of almost fear in the air,” said Jim O’Donnell, president of BMW of North America LLC, which in 2008 had its first U.S. sales decline in 16 years. “People are sitting on the sidelines wondering what’s happening.”
The crisis that started in the housing market spread across the U.S. economy including Wall Street, where many buyers of expensive products are employed. More than 232,000 bankers and brokers have lost their jobs. The meltdown amounts to a $325 billion drag on consumer spending, with luxury goods taking a disproportionately large hit, Goldman, Sachs & Co. estimates.
Audi, Bentley
The luxury category is defined by brand image as well as price, sweeping in the A3 of Volkswagen AG’s Audi at less than $30,000 and the $330,000 Azure from Volkswagen’s Bentley.
Entry-level buyers are among those hurt most by the slump. Those customers used rising home equity or stock portfolios to trade up, helping luxury sales almost double from 1996 to 2004, said Greg Goodwin, chief executive officer of Kuni Automotive in Vancouver, Washington. Kuni has 11 dealerships, including Lexus and BMW stores.
Sales of BMW 3-Series sedans and Lexus ES models at Kuni dealerships in Washington, Oregon and Colorado are falling, as are the entry-level SUVs such as the BMW X3, Goodwin said. Declines at his stores matched the 15 percent slide for BMW and 21 percent drop for Lexus nationally, he said.
Even business owners and executives whose jobs are secure are reluctant to purchase a new luxury car when they may have to fire workers or make other cuts, Goodwin said.
This recession affects wealthier consumers more than past slumps because more people have 401(k) retirement plans and other assets directly pinned to the stock market, said Lindland, of IHS Global in Lexington, Massachusetts.
“The people that are being impacted, the typical luxury buyer, are usually much more insulated,” she said.
Luxury car sales may fall to 901,505 this year from 1.04 million last year and luxury SUV volume may slide to 467,416 from 525,221, according to IHS Global.
Lehman Brothers Effect
BMW sales dropped first in California and Florida when those real estate markets collapsed, O’Donnell said. He said sales in those states were starting to stabilize for the German carmaker until the Sept. 15 Lehman Brothers Holdings Inc. bankruptcy erased demand in the U.S. Northeast.
“The lights just went out,” he said.
BMW will try to keep dealers profitable by focusing more on used cars, O’Donnell said. Dealers sold a record 11,700 pre- owned BMW models in December, he said.
Daimler AG’s Mercedes-Benz posted an 11 percent decline in sales last year. “The luxury buyers are certainly going through a lot of the pain the mainstream market is,” said Donna Boland, spokeswoman for Mercedes-Benz in Montvale, New Jersey. “The bottom line is that they feel less wealthy.”
The German company hasn’t ramped up incentives to sell more vehicles, though it has cut production in the U.S., she said.
Avoiding Incentives
Sales of General Motors Corp.’s Cadillac brand fell 25 percent in 2008, while Honda Motor Co.’s Acura was down 20 percent and Nissan Motor Co.’s Infiniti dropped 11 percent, according to Woodcliff Lake, New Jersey-based Autodata Corp. Lexus has been the U.S. luxury leader since 2000, after unseating Mercedes in 1999. The last year a U.S. brand lead the market was Lincoln in 1998.
“We don’t know how bad it can possibly get at this point, or how much will new product help us this year,” said Greg Thome, a spokesman for Lexus in Torrance, California, which doesn’t have a 2009 forecast. “Last year, we didn’t get a bump from any new high-volume product.”
U.S. sales of Germany’s Porsche SE fell 25 percent in 2008, dragged down by a 31 percent drop in sales of its 911 Carrera sports car. Porsche won’t use incentives to help sell cars, said Tony Fouladpour, a spokesman based in Atlanta.
“Even in times like these, our top priority is to hold the value of our models for our current customers and maintain the integrity of the Porsche,” he said.
Brand Image
Large cash rebates hurt brand image, said Jesse Toprak, director of market forecasting for Santa Monica, California- based Edmunds.com, which tracks incentives for consumers. The premium manufacturers use incentives to dealers and support for more affordable lease payments instead, he said.
Sales may improve after a proposed stimulus package from President-elect Barack Obama and U.S. interest-rate cuts take hold, said Dana Johnson, chief economist of Comerica Bank in Dallas.
“This is a time when people are behaving conservatively,” he said. “The concerns about job losses are far more widespread, across more business sectors, than normal, particularly with the financial services losses.”
BMW, Mercedes, Lexus Car Sales May Drop to 13-Year Low in U.S.
Jan. 9 (Bloomberg) -- Bayerische Motoren Werke AG, Mercedes-Benz and Toyota Motor Corp.’s Lexus division may see U.S. sales of luxury cars plunge again this year, after the financial crisis sparked the segment’s biggest decline in at least two decades in 2008.
Industry sales of the vehicles may fall below 1 million in the U.S. for the first time since 1996 as premium brands drop faster than mainstream models, unlike in previous recessions, said Rebecca Lindland, an IHS Global Insight Inc. analyst. Sales of the premium cars and sport-utility vehicles may slide 13 percent this year after falling 19 percent in 2008, she said.
“If you go to dinner parties, there’s a certain atmosphere of almost fear in the air,” said Jim O’Donnell, president of BMW of North America LLC, which in 2008 had its first U.S. sales decline in 16 years. “People are sitting on the sidelines wondering what’s happening.”
The crisis that started in the housing market spread across the U.S. economy including Wall Street, where many buyers of expensive products are employed. More than 232,000 bankers and brokers have lost their jobs. The meltdown amounts to a $325 billion drag on consumer spending, with luxury goods taking a disproportionately large hit, Goldman, Sachs & Co. estimates.
Audi, Bentley
The luxury category is defined by brand image as well as price, sweeping in the A3 of Volkswagen AG’s Audi at less than $30,000 and the $330,000 Azure from Volkswagen’s Bentley.
Entry-level buyers are among those hurt most by the slump. Those customers used rising home equity or stock portfolios to trade up, helping luxury sales almost double from 1996 to 2004, said Greg Goodwin, chief executive officer of Kuni Automotive in Vancouver, Washington. Kuni has 11 dealerships, including Lexus and BMW stores.
Sales of BMW 3-Series sedans and Lexus ES models at Kuni dealerships in Washington, Oregon and Colorado are falling, as are the entry-level SUVs such as the BMW X3, Goodwin said. Declines at his stores matched the 15 percent slide for BMW and 21 percent drop for Lexus nationally, he said.
Even business owners and executives whose jobs are secure are reluctant to purchase a new luxury car when they may have to fire workers or make other cuts, Goodwin said.
This recession affects wealthier consumers more than past slumps because more people have 401(k) retirement plans and other assets directly pinned to the stock market, said Lindland, of IHS Global in Lexington, Massachusetts.
“The people that are being impacted, the typical luxury buyer, are usually much more insulated,” she said.
Luxury car sales may fall to 901,505 this year from 1.04 million last year and luxury SUV volume may slide to 467,416 from 525,221, according to IHS Global.
Lehman Brothers Effect
BMW sales dropped first in California and Florida when those real estate markets collapsed, O’Donnell said. He said sales in those states were starting to stabilize for the German carmaker until the Sept. 15 Lehman Brothers Holdings Inc. bankruptcy erased demand in the U.S. Northeast.
“The lights just went out,” he said.
BMW will try to keep dealers profitable by focusing more on used cars, O’Donnell said. Dealers sold a record 11,700 pre- owned BMW models in December, he said.
Daimler AG’s Mercedes-Benz posted an 11 percent decline in sales last year. “The luxury buyers are certainly going through a lot of the pain the mainstream market is,” said Donna Boland, spokeswoman for Mercedes-Benz in Montvale, New Jersey. “The bottom line is that they feel less wealthy.”
The German company hasn’t ramped up incentives to sell more vehicles, though it has cut production in the U.S., she said.
Avoiding Incentives
Sales of General Motors Corp.’s Cadillac brand fell 25 percent in 2008, while Honda Motor Co.’s Acura was down 20 percent and Nissan Motor Co.’s Infiniti dropped 11 percent, according to Woodcliff Lake, New Jersey-based Autodata Corp. Lexus has been the U.S. luxury leader since 2000, after unseating Mercedes in 1999. The last year a U.S. brand lead the market was Lincoln in 1998.
“We don’t know how bad it can possibly get at this point, or how much will new product help us this year,” said Greg Thome, a spokesman for Lexus in Torrance, California, which doesn’t have a 2009 forecast. “Last year, we didn’t get a bump from any new high-volume product.”
U.S. sales of Germany’s Porsche SE fell 25 percent in 2008, dragged down by a 31 percent drop in sales of its 911 Carrera sports car. Porsche won’t use incentives to help sell cars, said Tony Fouladpour, a spokesman based in Atlanta.
“Even in times like these, our top priority is to hold the value of our models for our current customers and maintain the integrity of the Porsche,” he said.
Brand Image
Large cash rebates hurt brand image, said Jesse Toprak, director of market forecasting for Santa Monica, California- based Edmunds.com, which tracks incentives for consumers. The premium manufacturers use incentives to dealers and support for more affordable lease payments instead, he said.
Sales may improve after a proposed stimulus package from President-elect Barack Obama and U.S. interest-rate cuts take hold, said Dana Johnson, chief economist of Comerica Bank in Dallas.
“This is a time when people are behaving conservatively,” he said. “The concerns about job losses are far more widespread, across more business sectors, than normal, particularly with the financial services losses.”
01-09-09, 11:30 PM
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I am not surprised. I don't follow BMW and Mercedes as much as I do Lexus. IMO Lexus needs to trim some of its excess deadweight from its line up right now.
The SC430 and GS have to go. The must. They sold 17k units in 2008. This is deadweight in its lineup right now.
LS, ES, IS...RX, GX, LX are all doing fine. SC and GS must go.
Replacing the manufacturing capacity with the upcoming Lexus Hybrid and perhaps something else like a 1 series car will help.
The SC430 and GS have to go. The must. They sold 17k units in 2008. This is deadweight in its lineup right now.
LS, ES, IS...RX, GX, LX are all doing fine. SC and GS must go.
Replacing the manufacturing capacity with the upcoming Lexus Hybrid and perhaps something else like a 1 series car will help.
01-09-09, 11:58 PM
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There really is no point to the GS. It is excess manufacturing that Lexus needs to trim.
01-10-09, 12:11 AM
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i'd like to see the sales numbers for los angeles. i continue to see fresh, new, minty cars from audi benz and lexus being driven off the lots. infact, what seems to be faster than ever. maybe it's my area, maybe they still have paper plates on. but i drive through three distinct income areas, and i haven't noticed a difference in luxury badges. so i wonder if some areas are worse than others?
where i have seen a street decline is american sub-compact and truck and SUV counts.
where i have seen a street decline is american sub-compact and truck and SUV counts.
01-10-09, 12:14 AM
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The GS is not going anywhere, it was the 3rd best selling in class. Not bad considering its not a home run and lease deals are not aggresive and they don't have as many varients as the 5 or E,
The GS competes in the mid size luxury segement and has since 1993. More mindless drivel.
If anything Lexus is hard at work making the 4GS a grandslam like the 2GS
Also the GS has the limited production GS450h, the only one in its class and the only hybrid luxury sedan outside the LS. That is no small feat.
The GS competes in the mid size luxury segement and has since 1993. More mindless drivel.
If anything Lexus is hard at work making the 4GS a grandslam like the 2GS
Also the GS has the limited production GS450h, the only one in its class and the only hybrid luxury sedan outside the LS. That is no small feat.
01-10-09, 12:24 AM
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Oh yeah the SC isn't going anywhere too...
Last edited by Trexus; 01-10-09 at 12:32 AM.
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01-10-09, 03:55 AM
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I think Lexus will remain to do fine, at least they are focusing on cars that will sell fine such as the new IS-C, RX, and HS, rather than like a small SUV like the FX , RDX, X3, and GLK. The GS remains to be a decent seller in it's segment I don't think it needs to go, unless the ES 350 all of a sudden came out with AWD I would assume it's sales would drop significantly especially in the NE.
01-10-09, 09:11 PM
#9
Frankly with all the product development $$$ spent to create the 350/450h/460 derivatives, I think they would keep the GS in the lineup to recoup those costs.
As for next year, wow...this analysis casts more gloom, when people are hoping 2009 is better than 2008...
As for next year, wow...this analysis casts more gloom, when people are hoping 2009 is better than 2008...
01-11-09, 12:18 AM
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The GS has to stay. The IS is the entry level Lexus and there is nothing between the ES and LS (which are worlds apart). It would be suicide if they canceled it...well at least in the luxury performance sedan class (BMW 5 series, etc).
On a side note, I can't even fit into an IS height wise...you would think they were meant for the Japanese market only...
On a side note, I can't even fit into an IS height wise...you would think they were meant for the Japanese market only...
01-11-09, 12:23 AM
#11
LOL, I've met some pretty tall guys in Japan too. 
But yes, the IS is a compact car indeed...I wonder if they thought that it should stay that way to leave the roomy market to the ES. But could it work to have a roomier IS and ES?
But yes, the IS is a compact car indeed...I wonder if they thought that it should stay that way to leave the roomy market to the ES. But could it work to have a roomier IS and ES?
01-11-09, 12:33 AM
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^^ Well I know for a fact that simply cutting a seat rail that is attached to the floor by a bit gives you quite a bit more room (the dealer offered to do it when I was looking at buying an IS). Also, if you find one without the sunroof, you also gain quite a bit of space. However, unless you want a base IS and to void your warranty on the seats, there is not much you can do. However, designing better seats would give it the same headroom as the GS.
The ES on the other hand, seems to be roomer than both the IS and GS...at least in terms of headroom and interior room. But I fail to see why they would want to market the IS to people of lower height and the GS or ES for people of larger height...since height varies from person to person (even in the same country).
The ES on the other hand, seems to be roomer than both the IS and GS...at least in terms of headroom and interior room. But I fail to see why they would want to market the IS to people of lower height and the GS or ES for people of larger height...since height varies from person to person (even in the same country).
Last edited by ivanz; 01-11-09 at 12:41 AM.
01-11-09, 03:36 AM
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The SC must go. It should have been dropped a long time ago but instead Lexus tries to create appeal by releasing one Pebble Beach edition (figuratively speaking) after the other. Can that car. End of story. Lexus then has the choice of releasing a newer, more competitive version or dropping it altogether. I think a new SC would be a good move, but it has to look good and drive good too, because those two aspects seem to be really important in the class the SC competes in.
The GS should remain. My biggest problem with the GS is that despite selling well, the finer points of that car are a huge disappointment. Lexus did a poor job of utilizing interior space in the GS for example. The cabin feels cramped and leg space in front and in the rear feels "in short supply". As with most Lexus sedans, the payload capacity is relatively low. Lexus should work on improving this.
And what about a GS-F?
The GS should remain. My biggest problem with the GS is that despite selling well, the finer points of that car are a huge disappointment. Lexus did a poor job of utilizing interior space in the GS for example. The cabin feels cramped and leg space in front and in the rear feels "in short supply". As with most Lexus sedans, the payload capacity is relatively low. Lexus should work on improving this.
And what about a GS-F?
01-11-09, 04:55 AM
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The SC must go.
The GS should remain
Move the ES to RWD. Offer the softer Lexus of today with a slightly firmer riding ES.
As for the LS. Lexus has huge potential. The LS is very good but it is now behind the S-Class and the 7series. The S-Class and the 7 Series took a giant leap ahead of the LS.
Lexus could move LS to super luxury flagship status and you have a winner. Its almost as though Lexus is scared of entering the super luxury status from fear of rejection.
Just imagine. Instead of offering the poser V12 LS600hl sedan. Lexus could of developed a super strong v10 or v12. Share the engine costs with the Toyota Supra/SC-F/GS-F/LS-V12 and you have a winner.
Last edited by pagemaster; 01-11-09 at 04:58 AM.
