Sunday, November 28, 2010

Luxury Car Sales Finally Drop in North America

 
Luxury auto brands, which until recently had been outperforming the rest of the U.S. market, have started to sag. Many people had thought high-end Italian sports cars would remain as invulnerable to the economic downturn as Hamptons real estate and Louis Vuitton bags, but that's beginning to change. To some extent, the higher you go in the luxury spectrum, the stronger the market remains, but even ultraluxurious brands—such as Bentley, which is down 27.9% this year—are showing vulnerability. And "mass luxury" brands, such as Mercedes-Benz (DAI), Porsche (PSHG), and Toyota's (TM) Lexus division, have seen some of the greatest drop-offs in sales, especially with their most expensive models.
That's because North American sales the past few years were artificially inflated by the housing boom and access to easy credit. As more Americans fooled themselves into thinking they were richer than they were, luxury automakers raised their production capacity and sales targets and enjoyed boom years. Customers who could never have afforded such cars as the Mercedes-Benz S-Class, the Porsche 911, or the Lexus LS, found that carmakers, banks, and dealers were happy to toss them the car keys. Now, for those who were borrowing against the ever-increasing value of their homes or planning to spend their fat Wall Street bonuses, the drive is over.

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