Skift Take

Mirroring the larger luxury sector, car manufacturers are finding that a legacy brand is not enough to attract the interest of newly affluent customers. They must adapt to demands while maintaining their standard brand quality to thrive into the future.

Luxury vehicles are entering the “third wave” of connectivity in which manufacturers invest in cloud-based technologies, environmentally-friendly models and smarter marketing techniques to win the loyalty of affluent drivers. And they’re in a good position to do so.

Luxury cars remained the top-performing segment of the luxury goods markets in 2016, growing 8 percent, according 2016 Bain Luxury Study by Bain & Company. An even greater 15.9 percent increase in sales was reported by JATO Statistics, which also stated a record 28,500 super luxury cars were sold in 2016.

Another new report found millennials are more interested in owning a luxury vehicle than previous generations. Even if it does not translate immediately into higher sales, it will likely drive innovation in terms of features.

The United States maintained its position as the world’s largest market for ultra-luxury cars accounting for 30 percent of global sales, however, growth was just over 1 percent. The most important market is undeniably China,  third largest market after the UK, with recorded an incredible 54.2 percent growth in sales.

The growth in luxury car sales is also likely fueled by an increase in billionaires. The latest Forbes list of billionaires reported that the number of billionaires worldwide increased by 233 people to reach a total 2,043 billionaires worldwide.

The top brands remained relatively the same year to year with five brands – Bentley, Ferrari, Lamborghini, Rolls-Royce and Aston Martin – capturing 92 percent of the market.

Bentley experienced the greatest growth, 26 percent, largely due to introducing an SUV model. Increasing production of SUVs, a new make for the luxury sector, isn’t the only change that’s driving growth for these manufacturers.

They are also taking strides towards electric or hybrid vehicles as well as complimentary technology that improves the driving experience and facilitates upkeep.

Electric Ambitions

Of ten brands in the ultra luxury vehicle sector, nine have announced plans to introduce full-electric or hybrid vehicles, according to JATO. Full-electric vehicles will also be a reality for the likes of Mercedes-Benz, Porsche and BMW in the near future.

At this year’s Geneva car show, Lamborghini CEO Stefano Domenicali said, “Electrification is an area of great attention for us.”

Some believe luxury manufacturers’ growing interest in hybrid vehicles means trouble for Tesla, which surpassed Ford Motor Co. in market value for the first time in April.

The demand for the electric/hybrid model is evident, but Tesla’s high-end electric vehicles do not offer luxury buyers the same materials, interior design or brand status of traditional luxury manufacturers, argues critics.

Mobile Complements

Another trend consuming the luxury vehicle industry is perceived demand for ambitious connected technology that not only finds parking but automatically installs new tech.

If the first wave of connected cars was hands-free calls, and the second was infotainment in the form of streaming music, then the third was is all about cloud-based updates, according to Scott Frank, VP of marketing for Airbiquity which enables connected vehicle technologies.

All major brands, luxury or not, are investing in customized mobile applications.

According to L2’s 2017 Auto report, “Major app releases underscore a shift away from Apple and Android applications to developing their own propriety platforms offering features such as concierge services and semi-autonomous driving.”

The apps, depending on the brand, allow drivers to find and pay for parking, compare nearby gas prices, control car settings remotely, manage car payments, and call a concierge service. Bentley will even deliver rental cars or gas on demand through its app.

There is still a technology adoption curve and many drivers are not making full use of the connect car features due to an inconsistent user experience or lack of awareness. The industry expects these systems and technologies to become more mainstream.

For affluent drivers not interested in environmental or connected technology, it’s worth recognizing that the buying experience itself is changing. Just consider this 15-story “vending machine” that delivers luxury vehicles to interested buyers in Singapore in two-minutes max and you will realize that no aspect of the luxury car market is sitting still.


The Daily Newsletter

Our daily coverage of the global travel industry. Written by editors and analysts from across Skift’s brands.

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Tags: electric cars, luxury, smartphones

Photo credit: In this photo taken on Friday, Nov. 6, 2015, Ferrari cars are parked at the Push-Start test-drive service, in Maranello, Italy. 161978 / 161978

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