Luxury makers smash August sales records in Canada
Managers for Lamborghini and Lincoln decried the state of sales for their high-end cars, arguing that their well-heeled American buyers are fearful of flaunting their money with lavish purchases at a time when the United States is still gripped in financial scandals and climbing unemployment. “Keeping up with the Joneses is passé,” lamented Ford Motor Co.’s Mark Fields.
Somebody forgot to tell that to Canadians.
Amid the worst job market in 15 years, several luxury automakers smashed August sales records in Canada. Mercedes-Benz reported a 20 per cent increase in sales and has sold 2,318 more vehicles this year than last. BMW and Lexus are also besting last year’s tally with double-digit percentage increases last month. Audi nearly doubled its sales in August over a year ago, and has sold 27 per cent more vehicles this year.
The country is in a recession and yet the luxury market is holding up. Meanwhile, sales of the most affordable vehicles, subcompacts, are down 26 per cent through the first eight months.
“It’s totally counter-intuitive,” said John White, chief executive of Volkswagen Group Canada, Inc., which comprises the Volkswagen and Audi brands.
“It’s taken us a little bit by surprise. And the Audi division has had to turn around and ask [headquarters] for more cars because we didn’t think the demand would be as strong in a down market.”
Mr. White’s read on the situation is that Canadians who believe they are secure in their jobs are pulling the trigger on buying middle-of-the-road luxury vehicles like the A4 sedan and BMW 3-Series, not the higher-end models. He said the luxury segment has become hyper-competitive as BMW and Mercedes “are out there as aggressive as you’ll see mainstream competitors,” offering deals that were unthinkable only a few years ago and making it easier for buyers to step into premium cars.
Mercedes is offering lease deals such as $398 per month on its 2010 C250 car, based on an interest rate of 4.9 per cent for 36 months. That’s on par with a similarly-equipped Honda Accord or Mazda6, according to the Automobile Protection Association.
Roughly 40 per cent of luxury vehicle sales transactions in Canada are leases, according to J.D. Power & Associates’ Power Information Network. One third of people pay cash while the rest take out a loan.
Sales growth is particularly strong in one sub-segment of the premium market: compact luxury SUVs. Volvo, Mercedes and Audi have launched new vehicles into that category this year, which has helped boost sales volumes 66 per cent over 2008 levels, said industry analyst Dennis DesRosiers.
“We’re still a society that needs to carry stuff,” said J.D. Power analyst Geoff Helby in explaining why SUV models like the Volvo XC60 and Audi Q5 are clicking with buyers. “[People] are stepping away from the previous generation of minivans and big honking SUVs and they’re going into something smaller” without giving up luxury features.
In the mind of the Canadian luxury buyer, downsizing is the compromise they’re making in the recession, Mr. Helby said.
Mary Weil is proof. The media relations professional and her husband started looking around for a new vehicle earlier this year after the lease on a larger sports utility vehicle he drove expired, she recalls. They decided on a Mercedes GLK compact SUV.
“The price point was surprisingly not that much higher than comparable vehicles.”
In a Jan. 15 analysis, Mr. DesRosiers predicted the luxury market in Canada overall will drop 5 per cent this year. Automakers sold 131,436 luxury vehicles in 2008, a 3 per cent decline over the year before.
Photograph by: Peter J. Thompson/National Post