Auto Buyers Lean to Luxury as Premium Brands Lead Industry

Updated on

Luxury auto sales are outpacing U.S. industry gains as BMW and Mercedes-Benz lure buyers from mainstream brands by offering lower-priced models.

Deliveries for Daimler AG’s Mercedes surged 13 percent from a year earlier to 29,188 for the brand’s best April ever. BMW reported that sales rose 6.9 percent to 26,952, also a record. Toyota Motor Corp.’s Lexus sold 25,876 vehicles, a 12 percent gain and 50 shy of its peak level for the month.

The luxury segment will expand 7 percent to 8 percent this year, outpacing the 5 percent growth expected for total auto sales, said Larry Dominique, president of ALG Inc., which sets auto resale values for the industry.

Much of the growth is coming from the luxury-auto makers introducing lower-priced models to bring in younger buyers, Dominique said. Even as luxury sales are growing, average prices are falling as less expensive vehicles are added to lineups and discount leases are offered, he said.

“You can now get a Mercedes CLA for the same price as a Honda Accord,” Dominique said. “Some people are willing to sacrifice a few of the bells and whistles to get a lower-cost luxury brand. There’s still a strong aspiration to have a luxury moniker on the front of your car.”

Mercedes, BMW

Mercedes’s gains were led by its entry-level models, the C-Class and CLA sedans and the new GLA small sport utility vehicle. For the year through April, sales have risen 9 percent to 107,344.

BMW AG’s namesake brand posted increases of 5.9 percent for the 3 and 4 Series and 8.1 percent for the 5 Series. For the year, BMW deliveries have climbed 8.1 percent to 105,444.

The results exclude Daimler’s Sprinter vans and Smart cars and BMW’s Mini brand, which aren’t luxury vehicles.

Toyota said Lexus is off to its best four-month start in its 26-year history, increasing 17 percent to 103,056. Lexus estimated that sales for all U.S. luxury-auto brands advanced 9 percent in April. Industrywide deliveries rose 4.6 percent last month, according to researcher Autodata Corp.

Luxury sales have tracked the growth in the stock market since the end of the recession, Mark Strand, an analyst, said in an interview.

“It gives a wealth effect,” he said. “Upper incomes are feeling flush with cash and that’s driving luxury results right across the board.”

Audi, Cadillac

Audi’s U.S. sales rose 7.5 percent to an April record 16,827, the brand’s 52th straight monthly gain. Deliveries surged 58 percent for the entry-level A3 and climbed 14 percent for the Q5 SUV. For the year, the Volkswagen AG unit is up 12 percent to 56,925.

General Motors Co.’s Cadillac brand reported a 14 percent sales gain to 15,801, as the Escalade and Escalade ESV more than doubled and the SRX sport utility vehicle rose 41 percent. Through April, Cadillac slid 1 percent to 52,976.

Acura, the luxury unit of Honda Motor Co., said monthly sales climbed 5.3 percent to 14,874, led by its MDX and RDX sport utility vehicles and TLX sedan. For the year, Acura deliveries have increased 4.7 percent to 54,518.

“There’s so much new product among the luxury competitors,” said Jeff Bracken, who heads Lexus in the U.S., on a conference call. “We’re not surprised at the performance of the luxury industry and we don’t see any change in it. It will outpace the general market this year and into next.”