Wealth Effect' Revenue Up Luxury Cars -- WSJ
01 March 2017 - 7:04PM
Dow Jones News
'Wealth effect' and 'Trump bump' boost sales of superluxury cars
in the U.S.
By Chester Dawson
A soaring U.S. stock market is propelling sales of superluxury
cars.
Buyers are feeling more confident about shelling out six figures
for a set of wheels as market investors have been on a tear in
recent months, pushing the Dow Jones Industrial Average solidly
past 20000, on bets that the Trump administration will enact
business-friendly policies.
Sales of vehicles made by Volkswagen AG's Bentley, Ferrari SpA,
Fiat Automobiles NV's Maserati, Porsche AG and BMW AG's Rolls-Royce
jumped an estimated 18% since the Nov. 8 U.S. presidential election
through January, compared with the same period in 2016, according
to Autodata Corp. That far outpaces the gains these upscale brands
had been notching through the prior 10 months. U.S. auto sales as a
whole, meanwhile, were flat in the three months following the
election, according to Autodata.
Rolls-Royce sales, for example, jumped 42% between November and
January, to nearly 300 vehicles, according to Autodata.
"There's no doubt the stock market is the leading indicator for
luxury car sales," said Pedro Mota, president of Rolls-Royce Motor
Cars LLC's North American business. "It's not that our customers
didn't have the money before, but you don't want to indulge when
you're laying off employees," he said.
Dubbed the "wealth effect" by economists, perceived gains in
portfolio values can prompt ultrahigh net worth buyers to splurge
on hard assets such as fine art, real estate and luxury cars. Some
in the auto industry also are seeing a "Trump bump" based on
expectations of fiscal stimulus and potential tax cuts under the
new administration that will boost corporate profits and keep
stocks on the ascent.
"Buyers held off in late October and early November. Since the
election, we've had only positive signals from the market," said
Alessandro Farmeschi, chief operating officer of Automobili
Lamborghini America. "January is usually not such a strong month
after the holidays, but this year it was," he said.
Lamborghini said its U.S. sales in January rose 15% compared
with a year ago, according to a spokeswoman.
Typically, sales of high-end luxury cars -- those with sticker
prices routinely exceeding $250,000 -- can vary greatly because of
smaller volume and based on the number of new product launches in a
year. Also, because production volumes are limited, regional
volumes can be disproportionately affected by trends in other
global markets, such as a slowdown in China or Western Europe.
Rolls-Royce, a unit of BMW AG selling cars that easily exceed
$300,000, posted a third consecutive year of record U.S. sales
volume in 2016 with 921 cars sold. Autodata estimates there were
about 7,000 deliveries of Rolls Royce, Bentley, Ferrari and
Lamborghini in 2016.
Both Tata Motor Ltd.'s Jaguar and Volkswagen AG's Porsche brands
sell in the tens of thousands of vehicles a year in the U.S.,
mostly due to the popularity of their SUVs.
Attractive financing and, in some cases sizable discounts, are
also aiding sales of the most expensive vehicles on the market.
Jaguar offers 1.9% financing for some 2017 models and leases of
$609 a month for the $62,700 F-Type Coupe. A dealer in Thousand
Oaks, a suburb of Los Angeles, advertises the 2017 model year
Maserati Quattroporte S, which carries a $108,525 sticker price,
for $788 a month on a three-year lease. A new 2016 model, $260,550
Rolls-Royce Wraith leases for $1,795 a month on a two-year lease
from a dealer in Naples, Florida.
"There's an uptick, but business is being bought by companies
putting [generous] lease programs on their cars to push volumes,"
said Barry Gilfix, the owner of LeaseByTel, a Troy, Mich., leasing
company that specializes in financing luxury models for buyers
nationwide. "Eventually, the bubble is going to burst," Mr. Gilfix
said, adding that returned lease vehicles will ultimately take a
toll on new and used-car values.
Write to Chester Dawson at chester.dawson@wsj.com
(END) Dow Jones Newswires
March 01, 2017 02:49 ET (07:49 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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