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Why the $100,000-and-up car market is booming

Last year, Canadians bought an astonishing number of S-Class cars from Mercedes-Benz.

The least-expensive S-Class retails for $110,900, so with nearly 1,100 sold, a single model line constitutes a growing $120 million-plus business for Mercedes in Canada alone – an automotive market notorious for penny-pinching buyers.

The S-Class is a big revenue spinner for Merc here and globally. In 2014, Merc's parent Daimler reported net profit of $10.4-billion while touting the S-Class line as a key contributor to earnings. So, of course, we're going to see more and more of the S-Class and variants.

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At the upcoming Geneva auto show, in fact, Mercedes is said to be revealing something along the lines of the S-Class Pullman. This would make sense. This Swiss auto show, hosted in one of the world's wealthiest economies, is a car showcase for the rich and famous. Audi is expected to show the R8 e-tron as a pure electric super car, one surely wearing a $200,000-ish sticker – and also as the launch pad for the Prologue Avant station wagon concept.

But you needn't go all the way to Switzerland to see this trend up close. At the recent Toronto auto show, Mercedes announced pricing for the latest S-Class variants, the 2016 Mercedes-AMG GT S at $149,900 and the Mercedes-Maybach S600 at $231,200. Maybach?

Didn't Merc kill its money-losing Maybach brand a few years back? Yes, but Maybach is back and for good reasons, first among them the relatively explosive growth of the number of wealthy people. Earlier this year, Oxfam reported that at the end of 2014, the richest one per cent owned 48 per cent of global wealth, a jump from 44 percent in 2009. Today, the richest 20 per cent have 80 per cent of global wealth. . Daimler is one of the many companies mining the upper-income market class for growth and profits.

Mercedes, arguably, is at the leading edge of a hot worldwide segment – the $100,000-plus car.

And these ultra-priced vehicles are part of a bigger explosion in the premium marketplace. Last year in Canada, for example, more than one in 10 buyers went luxury with a new vehicle. This is not a blip, but a trend. Each of the last five years, luxury sales have set a record and over the past quarter century, luxury sales have more than tripled.

"Over the last decade," says automotive economist Dennis DesRosiers, "the luxury market for new vehicles has increased by about 50 per cent, for used vehicles by about 100 per cent and for parts and service by about 150 per cent. Some brands have grown by twice these levels."

At the very top of the market, buyers own multiple vehicles, perhaps as many as a dozen or more, say dealers and distributors who cater to this market. These owners have varied automotive needs and wants and have the resources to satisfy them.

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As well, the market for more mainstream premium vehicles in the $35,000-$70,000 range is also growing rapidly as baby boomers near, or in retirement treat themselves using a lifetime of accumulated wealth. And a third trend, experts say, involves younger buyers moving to premium brands that now offer entry models such as the Mercedes CLA and B-class in the low-$30,000s. These developments together largely explain the astounding growth in luxury vehicle sales.

At the highest end, new models and derivatives are arriving at a stunning rate. Take the S600 and AMG GT S. These join an exploding range of vehicles using the S-Class architecture – from S400, to S550, to S-class coupe and the racy S63 AMG and S65 AMG models. At least one more Maybach model is coming, and perhaps additional S-Class variants, too.

"The S-Class was our flagship car; it is now our flagship platform," Mercedes-Benz USA president Steve Cannon told reporters at the Los Angeles auto show. Mercedes-Benz Canada president Tim Reuss and others envision a building trend. "The luxury market will continue to outpace the overall market," he says emphatically, chuckling at the notion that Canadians might just have lost their minds.

Reuss is spending a massive chunk of his time as a real estate developer. In 2014, Canada's No. 1 luxury brand by sales added four dealer points and totally rebuilt three others. This year, Merc is adding a third dealer point in Calgary while opening new stores in Brampton, Ont., and Montreal East. Rebuilds are under way in Winnipeg, Edmonton, Toronto (Steeles), Trois-Rivières, and one other.

"I have a hard hat with my name on it," says Reuss – and scissors for ribbon-cuttings.

The most demanding consumers fancy cars like the largely aluminum-bodied AMG GT S, with its new 4.0-litre V-8 turbo engine churning out 503 horsepower and a seven-speed AMG gearbox. The 0-100 km/h time: 3.8 seconds. The flagship Maybach S600, a stretched version of the regular S (by 20 cm), offers first-class legroom for a chauffeur-driven owner who perches on leather-stitched seats and may opt for a hot-stone massage.

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Daimler isn't new to luxury cars, nor are Bentley, a Volkswagen Group brand, and Rolls-Royce which is owned by BMW. What is new is the increased emphasis on serving One Per Centers, a market that is exploding in relative terms.

At last fall's Paris auto show, Rolls-Royce wowed the world with a limited-edition Phantom Metropolitan sedan, with a cabin boasting 500 individual wood veneer pieces and onboard available picnic tables. It may sound almost silly, but the car is sold out at €450,075. Rolls-Royce chief Torsten Mueller-Oetvoes said in Paris that this particular car is aimed at customers who have at least 10 or 12 other cars, perhaps as many as 100. This is a point echoed by other luxury car makers.

"For most people in the S-Class, it's a multiple car garage and in many cases it's a multiple Mercedes garage," says Ola Källenius, head of global sales and marketing for Mercedes and a member of Daimler's management board.

This explains why Cadillac, General Motors' global luxury brand, plans later this year to launch a new flagship sedan to rival the S-Class, BMW's 7-Series, Audi's A8 and others. The Cadillac CT6 is likely to ride on a new rear-wheel drive platform which most assuredly will be spun off to create other models, much as Merc is doing with the S.

Cadillac expects to show the CT6 at the New York auto show in April. If Cadillac is to be taken serious as a top-tier luxury car maker, a flagship is essential.

Between now and the end of the year, car makers will keep pumping out new super-luxury cars. At Geneva's auto show, Aston Martin is planning to show the Vantage GT3, for example. Aston also will show the Vulcan, a limited-edition supercar that, according to Aston, will be "the most extreme Aston Martin in our 102-year history." Reports suggest the car's V-12 engine will produce more than 750 hp, and production will be limited to 30 models.

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Bentley is expected to show a concept in Geneva and it may hint at the on- and off-road capabilities of its upcoming luxury SUV, the Bentayga. Like VW's Bentley, BMW's Rolls-Royce has confirmed plans for its first SUV without actually calling the as-yet unnamed rig an SUV – instead calling it an "all-new, high bodied Rolls-Royce" in a letter to employees from CEO Torsten Müller-Ötvös and chairman Peter Schwarzenbauer. More details will come in Geneva, along with news of a Continental GT facelift.

Other new beauties expected at Geneva include a re-styled Ferrari called the 488 GTB powered by what looks to be a new 3.9-litre turbo V-8 mated to a seven-speed dual clutch automatic. Various reports also tell us to look for the McLaren 675LT coupe, part of a renamed "Super Series"; the McLaren P1 GTR, the production version of a concept shown last summer at the Pebble Beach Concours; and Merc's S-Class Pullman.

At the Los Angeles show, Audi design boss Marc Lichte indicated the Prologue would be the styling template for future A8, A7 and A6 cars.

As the rich get richer, car companies are growing increasingly creative at siphoning off chunks of that wealth into their own coffers.

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