Who Cares About Luxury Cars?
An auto journalist was talking with an executive from a Korean-based carmaker when the subject of luxury cars came up. The Korean marque had just introduced a vehicle that was luxurious and pricey for the brand, and this prompted the journalist to ask if the executive really thought his brand could succeed in selling such a car.
“Yes, I think we can,” the executive said. “Our research told us that buyers of traditional luxury brands are more open to lower-priced alternatives than you might think. What they found once they owned a luxury car was it didn’t change their life.”
Now, new research reinforces that view. Almost 1 in 3 luxury-car owners has a more negative attitude toward purchasing another luxury vehicle in the future, according to a recent survey conducted by TNS, a global market research firm. Since the Korean automaker introduced its own lower-priced alternative to traditional luxury cars, the overall economic situation has turned even more in favor of a switch down. With the unknown future of the European debt crisis, continued economic concerns throughout the U.S. and the potential of slower growth in global auto markets, consumers’ fears are prompting concerns that the past sales growth the luxury-car segment has enjoyed could be over.
Why are well-heeled buyers cooling off on the idea of buying another luxury car? The most common reason cited focuses on their questions and fears regarding the current and future affordability of ownership (74 percent). Some 43 percent cited insurance and maintenance as a pivotal concern for future purchase. This is one big reason why most luxury-car manufacturers are offering “free maintenance” plans these days.
“Clearly the high visibility of the recent debt crisis and the ensuing mayhem in the financial markets is causing negative sentiment toward the luxury-vehicle segment,” says William Bruno, vice president of TNS. “What is most telling is the similar level of negative attitudes expressed by a large portion of existing luxury-vehicle owners, as well as non-owners who aspire to own luxury vehicles.”
The research also suggests that many current luxury-car owners and those who might aspire to luxury-car ownership aren’t as financially secure as one might perceive. According to the survey, 19 percent of luxury-vehicle owners who showed negative attitudes toward purchase cited the lack of fuel economy in most luxury brands as being the reason they were shifting away from the luxury segment.
“The high focus on fuel economy is surprising to us because, according to our research, many luxury brands offer competitive gas mileage when compared to similarly equipped, non-luxury midsized vehicles,” says Bruno. “The overall perceptions aren’t matching up with reality, and this is a great opportunity for marketers and manufacturers to continue demonstrating the real economics associated with luxury brands.”
Worrying about what the neighbors will think was also a reason that was given for avoiding or putting off a luxury-car purchase, the survey found. Some 13 percent of respondents cited an inappropriate or out-of-tune image as being the main reason for steering clear of buying a luxury-brand vehicle. When times are tough, many consumers don’t want to appear to be flaunting their relative wealth by buying an expensive luxury car.