Luxury brand autos thriving

The world’s biggest carmakers have had a tough time selling their wares in recent months, but the economic meltdown appears to have left scarcely a dent in some Canadians’ desire for the sleek, growling power of a luxury automobile.

TORONTO — The world’s biggest carmakers have had a tough time selling their wares in recent months, but the economic meltdown appears to have left scarcely a dent in some Canadians’ desire for the sleek, growling power of a luxury automobile.

In September, BMW, Mercedes-Benz, Lexus and Audi all saw their sales increase by more than 10 per cent compared to a year earlier. By comparison, overall Canadian auto sales were down 3.5 per cent compared to September 2008.

That may seem out of step with reality, given the impact of the recession on non-luxury brands and the general state of an auto industry hard-hit by a slump in consumer confidence.

But “real money is just as abundant in a bad economy as in a good economy,” and those with real money are looking for quality, said analyst Dennis DesRosiers.

DesRosiers said the luxury vehicle segment is offering an impressive range of products, including diesel-powered cars and SUVs and smaller, “entry-level” vehicles.

“These are much smaller vehicles, so they’ve accommodated the luxury buyer that still wants luxury but is constrained on cost,” he said.

In addition, a “price war” between German luxury carmakers Mercedes and BMW has created a buyers’ market for some luxury vehicles, he said.

“The interesting part of this BMW-Mercedes love-hate relationship is the consumer’s been a big winner with fabulous product that’s never been priced better,” DesRosiers said.

He said both companies have been particularly aggressive in slashing their lease rates, which have particular appeal to luxury car buyers, who tend to turn in their cars every three to four years and thus can save money by leasing rather than paying cash.

The presidents of both Mercedes-Benz Canada and BMW Canada denied that there is a price war going on. Rather, they said, a combination of value and product has kept consumers buying their vehicles despite the state of the economy.

Marcus , president and CEO of Mercedes-Benz Canada, said the company has continued to invest in new products and technology despite the economic downturn, and this decision seems to be paying off.

“In the part of Germany where I am from originally, we always said, ’We’re too poor to buy Jeeps,”’ Breitschwerdt said in an interview.

“So instead of buying three times something which is inexpensive but which is not really fitting your needs and maybe is not as durable or reliable, you’d rather spend a little bit more at the beginning and then have a 100 per cent perfect match.”

Breitschwerdt doesn’t make any apologies for Mercedes’ exclusive reputation — in fact, he said the company has been able to attract “middle-class” consumers even during the recession because of the sense that owning a Mercedes comes with “membership in a club.”

He said consumers feel that the North American automakers and even the Japanese automakers have lost their way and so are increasingly turning to luxury brands to fill their desire for quality.

“The domestic manufacturers lost first their focus on quality, on innovation and on brand, and then they lost their customers, and the customers were gained by the Japanese and Asian import brands,” Breitschwerdt said.

“Those brands now have their issues too, because they have a certain lack of authenticity and also innovation and also of showing new directions in the car industry, so people now have a tendency to go a step farther and buy brands which can really show something on that side.”

Franz Jung, president and CEO of BMW Canada, agreed that it’s the quality of the product that keeps consumers coming back to luxury brands despite the recession.

“I think due to new product offensives and due to new design and due to the fact that we are the benchmark in all areas when it comes to fuel efficiency… that together stimulates a lot of the market,” Jung said.

He added that BMW has been offering some consumer incentives during the recession, but said that alone isn’t enough to explain the company’s impressive 50.1 per cent jump in sales last month.

“We do no more and we do no less than the competition, and the good thing is if we do fight with the same weapons like the competition does, the BMW brand has such a strong impact that we sell more cars,” he said.

BMW led the luxury segment in Canada in September, with its sales up 50.1 per cent to 2,402. Mercedes’ sales were up 24.9 per cent to 2,248, while Audi saw its sales increase 17.1 per cent to 1,111 and Lexus saw its sales climb 11.3 per cent to 1,504.

By comparison, General Motors saw its sales decline by 23.4 per cent, Honda’s sales were down 12.2 per cent and Toyota’s sales declined by 11.1 per cent.