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Jim Motavalli
Aug. 7, 2018 11:39 a.m. ET The 2019 Rolls-Royce Cullinan, priced at $350,000, will be available later in 2018. Rolls-Royce photo

High-end luxury cars are speeding off dealer lots, and the market—in sync with the stock market—is booming. “We expect that the premium market is going to outpace the mainstream segment in the next decade,” Sam Abuelsamid, Detroit-based senior auto analyst at Navigant Research, told Penta.

The biggest near-term growth for premium luxury models will be Asia Pacific and China, Abuelsamid says, at least through the mid-2020s. In both India and China, “premium vehicles are expected to be the growth driver as mainstream urban dwellers increasingly adopt mobility services—ride-hailing and carsharing,” he says.

In the U.S. and Canada, overall car and truck sales will stay relatively flat, masking a drop in mainstream vehicle sales and fast growth in premium segments, according to Navigant.

Mordor Intelligence, a market research firm, projects a compound annual growth rate (CAGR) of 11.3% in the global luxury market, which will reach US$178 billion by 2023. Consumers have more disposable income, and that’s “propelling the demand for luxury cars,” the company says.

ResearchandMarkets.com forecasts an 11.51 CAGR for luxury automobiles globally, and attributes it partly to rising demand for luxury SUVs—especially in North America.

This clear trend has inspired SUVs in the $150,000-and-up category from Lamborghini (the Urus), Bentley (the Bentayga), Maserati (the Levante) and Rolls-Royce (the Cullinan). Gerry Spahn, head of communications at Rolls-Royce, told Penta he is “extremely bullish” about the market for ultra-luxury vehicles over $250,000.

“There’s good consumer sentiment for making quality purchases,” Spahn says. “There’s a clear correlation between the performance of equity markets and sales, so barring any big shifts in those markets or in society, we expect positive performance.”

Spahn said SUVs could be 40% to 50% of the ultra-luxury market in a few years, adding that there’s a clear distinction between the demand for luxury and for high performance. “The supercar market stays steady, but ultra-luxury grows and contracts, depending on new models,” he says.

Tied to Stock Market

Michelle Krebs, Detroit-based executive analyst for Autotrader, told Penta, “We expect luxury will hold up better than the non-luxury market because luxury buyers have been beneficiaries of a booming stock market. There’s a direct correlation between the stock market, luxury vehicle sales and the Trump tax cut.”

She added that baby boomers are mostly buying the cars—millennials may want to move up to luxury, but aren’t in an appropriate income bracket yet.

Krebs says “the consumer shift away from traditional cars to utility vehicles is accelerating in the luxury market just as much as it is in the non-luxury market. So the luxury market will continue to see two different worlds—slumping car sales and rising utility sales.”

Automakers have made sure that new high-end SUVs are available to fuel demand. The 2019 Cullinan (named after the largest diamond ever discovered, known as“The Star of Africa”) will start at $350,000 when it goes on sale in late 2018. It’s powered by a 6.8-liter twin-turbo V-12 producing 563 horsepower, and is said to be equally adept on the highway and off road.

Henrik Fisker, the international car designer best known for his short-lived Fisker Karma plug-in hybrid (a competitor to the Tesla Model S produced in 2011 and 2012) is coming back with a high-end $130,000-to-$200,000 luxury electric called the EMotion.

“It will be fun to drive, but it will also be very luxurious,” he says. “It won’t be a super high-volume project.” Sales are projected to start in 2020, but there could be delays as Fisker waits for innovative solid-state battery technology to be finalized.

Fisker is also bullish on luxury. “Hard-core performance cars will slip into a unique niche segment with a small market share,” he says. It’s worth noting that high-end luxury cars are usually also capable of high performance. The EMotion, for instance, will have electric motors developing approximately 780 horsepower, and will reportedly reach 160 miles per hour. But the zero-to-60 time (under three seconds, in this case) is not the biggest draw.

As Spahn points out, ultra-high luxury is itself a small niche segment, with sales in the single-digit thousands per year. Rolls-Royce itself sells 3,000 to 4,000 cars annually (3,362 last year). But this rarefied market is geared to making profits on very low volumes. And the segment is experiencing solid sales, with growth ahead.

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