One trend BMW execs have noticed during this recession? Buyers are increasingly downsizing from larger models into smaller offerings, like the 1 Series shown here at the SEMA Show.
According to a report in the Detroit News, January sales of luxury brand vehicles in the U.S. took a harder hit than the industry average. While the overall market dropped 37.1%, Mercedes posted a nearly 43% decline; Cadillac a 42.5% drop; and Porsche just under the average with a 36.1% slump.
Analysts attribute the decline to both fewer traditional buyers from struggling banking and real estate industries, as well as what DetNews writer Christine Tierney calls a "newfound austerity," and an attitude shift away from conspicuous consumption.
Jack Nerad, a market analyst at Kelley Blue Book, tells Tierney that people are reluctant to show off during economic downturns and cites examples of traditional luxury car customers opting for a Toyota Prius, while Lexus hybrid sales fall flat (Nerad adds that this is also driven by increased concern for environmental responsibility).
The luxury segment of the specialty-equipment market is likewise not immune to these attitude shifts.
Victor Carrillo, president of The ID Agency, a creative firm representing clients including CEC, Mercedes-Benz, Lexus, Brembo and Recaro, has seen the luxury segment of the aftermarket take a big hit—and we’re only seeing the beginning of it, he says.
“The biggest change will be in the wheel market. A lot of companies that were just marketing [shells] will go away. Some of the tuning companies will go out of business without dramatically scaling back overhead. They just can’t sustain."
Carrillo sees the landscape shifting back to what it looked like when he entered the industry: a handful of solid, major players that innovate and focus on R&D.
“Ultimately you'll have companies that are committed, that are going to stay around, that have to be more innovative and [competitive] on pricing," he explains. "And the consumer ultimately wins."
As part of the New Austerity, Tierney cites BMW executives who've noticed a trend among their customers into smaller models and smaller engines—a 5 Series downsizing to a 3 Series, for example.
Carrillo notices the same trend. He’s even a part of it.
“I’m a die-hard Audi guy,” he says. “I had an A4 completely tuned. And as business started to do better for me, I stepped into an A6 three years ago. The lease is up now, and I still love Audis. But I’m going back to an A4.”
Lower monthly payments and insurance premiums leave a little leftover for wheels and exhaust, to satisfy performance enthusiast cravings. And with several great smaller options available these days—the BMW 1 Series, Audi A3, MINI Clubman—Carrillo says it's a great time to downsize your car.
And despite seemingly dismal news daily, Carrillo also notes that in this downturn lies opportunity. Carrillo's brother runs noted Porsche tuner TechArt North America who has struggled to make headway with new-car dealers.
“A year and a half ago, it was hard for him to get the attention of dealers,” he says. “Hard to get meetings, hard to get dealers to listen to aftermarket companies and what they were pitching.”
Now, he says, his brother goes to a dealer meeting and receives their full attention.
“He’s talking to the sales department, the parts department, the sales managers. They’re trying to maximize profits on the cars they do sell, which they probably should’ve been doing all along, but was almost kind of a headache when the money was rolling in. They're struggling to sell cars so there’s definitely opportunity there." — Dan Frio