Savour International

The salient feature of the luxury-car market has traditionally been high-priced cars sold in small numbers. But this market has totally changed – an evolution that began even before sales took a nosedive in 2008.

 

Whether it’s Mercedes with Maybach, Volkswagen with the Phaeton, or BMW with Rolls Royce, all makers of luxury cars are facing a problem because perpetually high margins threaten to turn into a long and painful dry spell for sales of these high-end vehicles.

 

Thus, for example, the formulaic statement to the effect that “luxury always sells” has recently been replaced by the following sobering fact: “Sales losses will continue to afflict Bentley and Lamborghini in 2010 as well.” This statement was made by Volkswagen CFO Hans Dieter Pötsch during the presentation of the company’s balance sheet in early March. In 2009, Bentley registered a 194 million euro loss, compared to a 10 million euro profit in the prior year.

The sales figures speak for themselves. Lamborghini sales decreased in 2009 from 2,424 to 1,253 vehicles; Bentley sales dropped from 7,674 to 3,637; and VW Phaeton sales went from 6,189 to 4,071.

 

Concealed in the balance sheets

Although it’s doubtful whether high earnings can be attained with these kinds of sales figures, you’d never know it from looking at the balance sheets of the companies concerned. As brands or models, Lamborghini and Phaeton dilute the profits of Audi and Volkswagen, whose account books only report sales.

Mercedes is doing likewise with its proprietary luxury car Maybach. In 2002 sales, Mercedes indicated that they were planning on annual sales of 1,000 units of this vehicle (named after Wilhelm Maybach, the Stuttgart-born engineer); but according to the company’s annual report, only 300 were sold in 2008; and last year sales fell to 200. The Stuttgart-based company’s annual report indicates that this luxury brand is only one of many S-class models.

Only BMW shone last year, thanks to its subsidiary Rolls-Royce. Although the Munich-based automaker registered a 17.3 percent loss, compared to the competition, BMW is “the undisputed market leader in the absolute-luxury segment.” BMW sold 1,002 Rolls-Royces in 2009, and 1,212 in 2008.

In view of the decline in luxury-car sales, auto industry experts such as University of Duisburg-Essen’s Ferdinand Dudenhöffer go as far as to offer the following advice: “Volkswagen should discontinue the Phaeton.” But Volkswagen apparently has no intention of doing any such thing. When the Phaeton was launched nine years ago, the company announced ambitious plans to produce 20,000 units at a sale price of 65,800 euros.

A turnaround in 2012?

But some experts don’t go along with the luxury car swan-song scenario – to the contrary. For example, GfK, the Nuremberg-based market research agency, thinks that fancy cars may be poised to stage a comeback in 2012. And Autofacts, PricewaterhouseCoopers’ auto industry specialists, feel that the situation could be turned around by scaling down luxury cars to make them affordable for more customers. Bentley has already done this successfully with its Continental; likewise for the Rolls-Royce Ghost. The other option is to keep bringing out new models – a strategy successfully pursued by Porsche.

But the experts agree on one thing: the future lies in eco-cars, which means that luxury cars will simply have to integrate hybrid and electric engines.