Luxury-vehicle sales, long considered invulnerable to a sluggish economy, are showing surprising signs of weakness. Not only did Cadillac, Lincoln, Infiniti and Porsche see declines in their SUV sales through October, but Lincoln, Jaguar and BMW all posted slides in car sales in the first 10 months of 2005, according to Automotive News.
Worse still, researcher GFK Automotive said there is a slowdown in luxury prospects' intentions to buy-a bad sign for the coming months. And that could trigger what was once considered unseemly behavior from segment leaders. "There's food fights in the luxury market, which used to be a gentleman's market," said Doug Scott, GFK analyst.
Cadillac's Jim Taylor, general manager, said the entire segment was hurt by higher gas prices and the pull-ahead effect of Detroit's summer employee-discount program. Cadillac's Escalade sales this year fell 12%.
Even though the lower-end of the category is more sensitive to economic uncertainties, the Iraq war is a depressant at the upper end, said Susan Jacobs, president of auto consultant Jacob & Associates, adding that the lukewarm stock market isn't generating "a sense of prosperity" that promotes luxury sales. Part of the slowdown can be blamed on product cycles; new SUV models tend to sell well for a few years but peter out until their next redo, she said.
Still, said Ms. Jacobs, Japanese vehicle marketers are gaining ground in the luxury category dominated for decades by Detroit until 1999 when Mercedes-Benz won the sales crown. She predicted Japanese luxury brands will see U.S. market-share rise to 39.8% this year from 37.6% in 2004.
Toyota Motor Sales USA's Lexus is poised to remain the luxury top-seller for the sixth consecutive year and is one of only three upscale brands-the others are Acura and BMW North America-to tally increases in both car and truck sales through October vs. a year ago, according to Automotive News. Lexus was the biggest ad spender in the category in the first half of 2005, at $119 million in measured media, according to TNS Media Intelligence. Publicis Groupe's Team One, El Segundo, Calif., handles Lexus.
In 2005, car sales at Lexus grew by nearly 7% through October vs. just 1.4% for its SUVs. "We are really focused on new-car launches," said Deborah Meyer, VP-marketing at Lexus, which launched the second-generation, entry-level IS sedan and third-generation GS performance sedan this year. In addition to traditional media, Lexus tried to improve the experiences at its events, which included sponsoring Paul McCartney's 30-stop tour and 12-city "Taste of Lexus" ride and drives.
BMW, ranking second in luxury sales almost 26,000 units behind Lexus, ranked sixth in ad spending among its luxury counterparts, laying out just $65 million in measured media. The American Honda Motor Co. marque topped Mercedes-Benz USA in vehicle sales through October and Acura proclaimed its best U.S. sales year in its 20-year history. Acura spent $106 million in measured media in the first half of 2005, making it the third-highest spender behind Infiniti's $108 million. Independent RPA, Santa Monica, handles Acura, while Omnicom Group's TBWA/ Chiat/Day, Playa del Rey, Calif., handles Infinti.