Luxury cars have become terribly common, potentially expensive

[LoudPipes]

Luxury cars have become terribly common, potentially expensive

Date May 26, 2015
Michael Pascoe
BusinessDay contributing editor


Accelerating: New Porsche 911s now sell in bigger numbers than the Volkswagen Beetle that originally spawned it.


It seems the "C" in Mercedes-Benz C class sedan stands for "common": there are more of them being sold this year than Ford Falcons. Include the C class coupes and there are more than Falcons and Toyota Aurions combined.

That says as much about the decline of the Aussie family car as the rise of Mercedes' Car of the Year, but Mercedes overall has lost any claim of being an exclusive brand. More Berlin taxis than Hondas are being driven out of our showrooms.

It's not just Mercedes. Australian sales of the obvious German rivals, BMW and Audi, are booming, too. That's partly thanks to cheaper entry-level models, but also to lower interest rates and fuel prices promoting an extraordinary willingness to splurge on expensive new cars when consumers are supposed to lack confidence and the economy is soft.


C-class models like Mercedes-Benz's C200 are now more commonly bought than much humbler vehicles like the Toyota Aurion or Ford Falcon.


I'll come to a problem building in that for many buyers – and an opportunity for those who are more patient – but first marvel at our new-found indulgence in flashy metal.

Mercedes passenger car sales in the first third of the year are up by 21 per cent, BMW 16 per cent, Audi 14. Total Mercedes vehicle sales, including SUVs and vans, were 11,474 units, up 23 per cent.

But that sort of sales growth is stuck in the slow lane compared with the supercars fanging it down the centre line. The fastest growing segment of the Australian vehicle market is "sports cars over $200,000". Dealers sold 527 vehicles in this category, 30 per cent more than last year.

The breakdown of the Federal Chamber of Automotive Industries figures for the first four months of the year confirm new vehicle sales are going gangbusters, on track for a record high – and that's before any rush for cheap utes pre-June 30.

Who cares about utes though when the most expensive cars are growing fastest? In the first four months, Lamborghini sales were up 820 per cent to 46 units. Ferrari sales, 64 of them, were up 107 per cent. Maserati sales quadrupled to 177.

Porsche 911s are a bit pedestrian in this company, but April was a good month for them as 43 were sold, taking the year-to-date total to 148 – up a modest 7 per cent.

While 911 sales growth wasn't speedy, Porsche overall sold 1293 of its V-dubs-on-steroids, 62 per cent more than this time last year. As an exclusivity measure, new Porsche 911s this year are more common than new VW Beetles (78 sold) and Golf cabriolets (114).

By stark comparison, there have been 2029 Falcons bought in the first four months and just 956 Aurions. The increasingly-common Mercedes C class? Try 3264 (the new model up 102 per cent on the old) plus 731 coupes.

Sales of all Merc passenger cars were up 21 per cent to 8126. Sales of all Ford passenger cars were down 41 per cent to 7022. The three-pointed star is leaving the blue oval in the dust.

Sales of all locally manufactured vehicles were down 9 per cent to 28,995 – only 8 per cent of the 359,250 total sales.

If the industry beats the 2013 sales record of 1.136 million, Australians will have purchased nearly 5.5 million new vehicles in five years – rather amazing for a mature market with a population that averaged about 23 million people over that period.

The rise in popularity of the more expensive marques is not limited to Australia. The US is experiencing the same boom with a recent Bloomberg story Low Rates Mean You Can Now Get a Mercedes with a Chevy Income. The story carried the telling subhead: "But should you?"

"This is a tempting time to be a lover of cool cars. Thanks to lease offers, low interest rates, and low gas prices, it's gotten dangerously easy to drive off the dealer lot with a brand new luxury car.

"Buying a used car is almost always a better deal over the long term than buying or leasing a new one. That's the classic personal finance advice, and it still applies. But in recent years the irresponsible choice has gotten a lot more enticing."

Auto loan interest rates tend to feature more prominently in American car selling and are more enticing than the local offerings. And then there's the oil price:

"Gas prices have also tumbled. That has little direct impact on car buyers, but it has a psychological one, says Bloomberg Intelligence senior auto analyst Kevin Tynan. When prices are high, consumers tend to be more conservative. Now that they're low, drivers can feel like using their savings to upgrade their wheels."

Perhaps that's what's happened to the missing petrol price dividend in Australia. Some retailers have complained that consumers haven't been spending the cheaper fuel windfall in their shops – maybe they're too busy buying Masers.

The looming problem for buyers of new wheels though is the greater depreciation that will come with a more crowded used-car market in three years' time when the leases on many vehicles will hit the balloon.

That's the great extra cost of buying a new car – the eye-watering drop in worth as soon as the rubber meets the road. The scarcity value of luxury models has cushioned some of that pain, but it looks like they won't be so scarce along Parramatta road come 2018.

Which is where opportunity knocks for the more patient. However tempting that new thoroughbred might look today, it could be a bargain if you wait a while.


Footnotes of random facts of possible interest to those inclined:

The rise in luxury car sales is all the more remarkable because total passenger car sales are going backwards – the overall growth is in SUVs with a smaller contribution from light commercials.

Passenger car sales were down 10.3 per cent last month and are off 4.4 per cent for the year so far with private, business, government and rental sectors all negative. SUV sales were up 17 per cent for the month and 15.7 this year. In the first third of last year, car sales of 171,344 led SUVs by 63,442 units. This year, the gap has narrowed to 38,889 with 124,885 SUVs sold.

Light commercial sales are up a more modest 4.3 per cent to 61,410. Intriguingly, private sales are where the growth is in this category, up 15.5 per cent to 24,888 units while business sales are down 3.3 per cent. Bring on Happy Joe's sub-$20K van sale for small businesses.

The FCAI figures also provide a fascinating breakdown of 25 countries from which we import vehicles. We bought 2686 Argentine-made vehicles in the first four months, up 6.2 per cent – turns out that delightful but benighted country of rampant protectionism and bad governance is where the VW Amarok is made.

And how the once-mighty Swedes have fallen. We only bought 170 vehicles that were made in Sweden, just ahead of the 155 from Portugal.

Japan is our biggest source with 107,803 vehicles (down 1 per cent), but second-place may be a surprise to those who don't follow the impact of somewhat-free trade agreements and cheaper labour closely: Thailand, with 75,994 units (up 14 per cent). Korea took bronze with 40,762 ahead of Germany's 28,626.

And I have a theory about what is most likely to kill off a model in the Australian market. Of the extraordinarily long list of vehicles sold here this year and last, the following are models that went sale-less in April: J1, Up!, Almera, Corsa, Gen.2, S16, Roomster, Insight, Tilda, Astra, Persona, Fluence, Volt, C30, Insignia, V50, Maxima, Legend, M, Q70, Vito Wagon, Zafira Tourer, Viano, 1 Series coupe/convertible, CR-Z, 207 convertible, Eos, C70, 3 Series coupe/convertible, IS250C, XK, SLS-Class, Aero.

What I suggest they mostly have in common is really dumb names. Seriously, they were trying to sell something called a Roomster. No wonder the Up! is out. How do you drop into a conversation that you're driving an IS250C – it sounds like a standard for toaster wiring – or avoid the suspicion that Fluence suggests flatulence. Heavens knows how the Tilda lasted as long as it did, testimony to the rental car industry's willingness to put punters into any name of whitegoods at a price. Oh sweet Cedric!

http://www.smh.com.au/business/comme...26-gh9v6e.html