Luxury cars losing their sheen in the US

NEW YORK • Sales of luxury cars in the United States have stalled in the slow lane.

Over the past several years, top-end makers such as BMW and Mercedes-Benz have added a dizzying array of variations to their model lines, in hopes of attracting buyers from rival brands.

But the strategy is not working out. Fresh evidence of the auto industry's woes arrived on Monday when carmakers reported that sales of new cars and trucks in the US declined 3 per cent in June from a year earlier, the sixth consecutive monthly decline. And luxury cars were no exception.

In recent years, the industry has been riding high, with low petrol prices pushing buyers towards bigger - and for companies, more profitable - cars such as sport utility vehicles (SUVs) and trucks.

But the high-end sector, so often a bright spot, has lost its sheen. "The luxury industry is pretty flat right now," said Mr William Fay, senior vice-president of automotive operations for Toyota North America.

Among the luxury brands, BMW suffered a decline of 2.8 per cent last month while sales at Mercedes-Benz fell slightly. Toyota's Lexus division reported that its new-vehicle sales fell 5 per cent.

The challenges to the category have not been for lack of variety.

The BMW 3-series compact, for example, is available as a four-door sedan, a hatchback, a station wagon, a diesel and a plug-in hybrid.

Other variants made from the same basic parts but called the 4-series include a convertible, a two-door coupe and a four-door coupe.

Still, sales of BMW 3 and 4 cars plunged 24 per cent last year and have fallen another 8 per cent this year.

Another issue is that American consumers now prefer SUVs and crossovers and are moving away from cars, the traditional strength of the premium brands.

"We are getting to a point where the market is pushing close to 65 per cent trucks" once SUVs and minivans are included, Mr Fay said.

To drive new sales, Lexus will kick off sales promotions, including increases in subsidised leases and financing offers. Two luxury rivals, Acura and Infiniti, saw big gains in June sales after offering discounts and other deals.

Luxury-car makers began to grab an increasing slice of the US car market as baby boomers reached their peak income years and splurged on upscale models.

In 2007, they had 11.8 per cent of the market, up from about 9 per cent in 2001.

After the recession, the carmakers developed new models in a bid to accelerate the upward trend.

They had some initial success, but many models rolled out in the past several years are floundering.

As consumers flock to SUVs, manufacturers are also finding that luxury buyers are not as enthralled with horsepower and racetrack handling anymore.

More road blocks for the luxury brands may be on the way. Their efforts to sell new cars this year are facing increased competition from used cars that were leased two or three years ago and have been turned in to dealers.

Many have been driven fewer than 64,000km and sell for about half the price of new models.

Next year, an even larger number of luxury cars will re-enter the market as used vehicles, according to industry analysts.

"The cars coming off lease are a very attractive deal and that lowers prices of new cars," said Mr Jim Ursomarso, vice-president of Union Park Automotive Group in Delaware, which operates BMW, Jaguar and Volvo franchises.


A version of this article appeared in the print edition of The Straits Times on July 08, 2017, with the headline 'Luxury cars losing their sheen in the US'. Print Edition | Subscribe