Luxury Automobile Industry Analysis
Luxury auto vehicles (as most luxury goods) are high priced products which offer superior design qualities, finishes, and advanced safety and electronic technology which are not generally found in mass-market automobiles. A high percentage of these luxury automobiles are leased, thus creating a steady flow of returning customers in addition to those newly able to afford a premium brand. Auto companies usually have brand-exclusive luxury vehicle divisions, for instance Toyota and Lexus, Nissan and Infiniti and Honda and Acura.
BMW, Mercedes Benz and Audi are three of the prominent luxury car brands across the globe and together they dominate about 80% of the global luxury car market. For instance more than 1.8 million cars were sold under the BMW brand in 2014.
Key Market Segments
Luxury automobiles globally can be broadly segmented as:
Limousines: These luxury automobiles are generally rented. There are about 12,000 limousine companies operating more than 126,000 limousine vehicles in the USA alone. Stretch limousines, motor coaches and limo buses are some of the types of limousines offered to customers in the USA.
Luxury crossovers: Luxury crossovers have become popular as they provide both the functionality of a utility vehicle and the comfort and design of a luxury car. Luxury crossover sales are growing across the globe such as Europe, Australia and the USA. In Canada small premium utility vehicle sales are booming led by Audi Q5. Lexus NX, another crossover brand, is increasingly gaining acceptance in the USA.
Premium sports cars: Luxury sports cars are designed to be driven hard and fast. Porsche and Chevrolet are two of the leading brands for sports cars in the USA. In China, there is great demand for luxury sports cars and they are one of the fastest growing segments within the premium vehicles market.
Regional Market Shares
The global market for luxury cars, worth more than $390 billion,is primarily driven by emerging Asia and the advanced economies. The key geographies mentioned below contribute significantly to the premium vehicle market.
The USA: Demand for luxury cars is rising in the USA due to new attractive leases and improving stock portfolios of wealthy consumers. Luxury brands make up about 20% of the USA car sales, generating more than $100 billion in revenues and include brand names such as Lexus, Audi, Ferrari and Cadillac. Sales for premium cars in the country are likely to be more than 2.3 million units by 2020 according to McKinsey.
China: Premium car manufacturers have found an increasing demand from China's growing wealthy consumers thereby creating a huge market for luxury cars in this country. China overtook the USA to become BMW's biggest single market in a recent year. McKinsey forecasts luxury car sales in China will reach 3 million units by 2020. According to McKinsey survey analysis, only 12% owners expressed interest in driving pre-owned premium cars while the rest mostly favored new cars. This is a huge opportunity for the new luxury car market in China.
Europe’s improving economy fueled demand for premium cars. For instance, Audi, which is one of the leading premium vehicle brands, recorded recent sales of more than 760,000 cars thus experiencing an upward growth compared to recent past years. Germany’s luxury car brands, such as Mercedes-Benz, BMW and Audi are dominant in this industry worldwide.