In the lap of luxury
Premium cars are top sellers in Canada and don’t expect the trend to change soon
Household debt? What household debt?
Numbers, statistics and fear-mongering be damned.
We Canadians love our houses and cars. We can’t seem to buy enough of them and are even willing to shell out a few extra bucks, if they add eye-candy value.
A recent Scotiabank report highlighted what has become a sustained trend: Canadians are not just buying new cars in record numbers but are buying more luxury and premium cars than ever. The study found luxury cars a key factor behind May’s record-breaking sales. It’s not a blip. “Luxury vehicles are the fastestgrowing segment in Canada and across many nations this year. Purchases are being driven by rising household wealth — the key driver of the luxury auto market — which is being buoyed by strong equity market performances across much of the globe and ongoing house price appreciation” said Carlos Gomes, Scotiabank senior economist, in a news release for the study.
So was the story last year, and the year before that.
Look at any premium or luxury brand, and you will find that most have seen enviable sales increases. Many even grew through the recession years.
In Canada, Audi sales went from 8,230 in 2007 to 24,514 in 2014. That’s triple the volume. In the same period, Infiniti clocked 6,756 in sales to 10,291, plus Cadillac did 8,593 to 10,538, and BMW went from 24,000 to 32,085 in sales.
The growth has been even more spectacular on the upper end.
Porsche, a blueblood luxury brand, inched close to the 6,000 mark in sales last year, up from about 2,000 sold in 2007. Maserati quadrupled its sales.
“Luxury vehicles are the fastest-growing segment in Canada and across many nations this year.” CARLOS GOMES SCOTIABANK
As pointed out by Gomes, Canadians seem to have more money and they are willing to spend it. That may seem contradictory to what we largely hear about stagnating income growth, but the truth is that at least the upper half of the social divide has seen very strong uptick in their net worth in the last two decades (which brings us to the income inequality debate, but that’s a whole different issue).
Statistics Canada data reveals that net worth of the top 20 per cent of Canadians almost doubled between 1999 and 2012, up from $721,900 to $1.3 million. The bottom 20 per cent didn’t grow nearly as much.
Incomes have probably surged as well for this top quintile, as they are more likely to work in the tech or finance sectors, where salaries have boomed.
Cheap credit also helps. What’s been true for the housing market also holds for car-buying.
A large chunk of that rising net worth can be attributed to incredible growth in house prices, which has been largely fuelled by superlow interest rates.
Interestingly, for all the talk about courting millennials, its boomers who are purchasing luxury cars in larger numbers. Again, housingfuelled net worth maybe a factor here.
So will this trend continue? You can bet on it, at least for the short term.
Finance deals aren’t disappearing any time soon; even the Bank of Canada ensured that with its recent rate cut.
Luxury and premium automakers are constantly introducing more affordable variations of their models: think Audi A3 and Mercedes CLA.
Does this mean that some of these brands will lose their allure down the road? When does a BMW start to feel like a Ford or a Honda? Ummm . . .
But, no worries. If you truly want to stand out, there’s always Tesla. Kumar Saha is a Toronto-based automotive analyst with global research firm Frost & Sullivan.