A year-end slugfest among luxury auto makers is convincing consumers to surrender to the industry’s old sales pitch: Now is a great time to buy a new car.
A flood of low-interest loans, cash rebates and employee-pricing schemes is happening at all levels of the market, but it’s particularly notable among luxury sellers, which are pushing to meet year-end sales targets or grab the No. 1 sales ranking in the segment.
The growth in luxury auto sales is helping to propel overall vehicle sales close to record territory – even though the recovery from the recession is still sluggish and Canadian consumers are being warned almost daily about household debt levels mushrooming out of control.
Depending on how December ends up, vehicle sales could hit 1.7 million this year for only the second time in Canadian history, just shy of the 1.73 million record in 2002.
A combination of factors is heating up luxury sales. These include baby boomers moving through their highest-earning years, the rise in value of the Canadian dollar and aggressive moves by luxury auto makers into segments they once ignored, such as compacts and crossovers.
Adding to that – especially this month – is the drive to meet the sales targets and hang on to market share.
Luxury sales are poised to hit their highest share yet of the Canadian market. They sat at 9.4 per cent for the year to date as of the end of November, up from 8.4 per cent at the end of 2011. While the overall market has risen 7 per cent, sales by luxury makers have jumped 11 per cent.
Incentives include 0.9-per-cent financing on some BMW Canada Inc. and Mercedes-Benz Canada Inc. models and, from almost all luxury companies, low interest rates on lease payments, which is where the battle is truly fought in the segment. Interest rates on leases have been discounted to as low as zero in some cases and 2.9 per cent for many manufacturers. For sales, cash discounts of thousands of dollars are prevalent in the industry.
“Certainly, the level of incentives in the market is very, very high and a lot of folks are vying for that No. 1 position – whatever that’s worth,” said Lindsay Duffield, president of Jaguar Land Rover Canada ULC, which is offering low lease and financing rates on some models, although not as cut-rate as some of its competitors.
BMW and Mercedes, bitter rivals around the world, are in a battle for top spot in the Canadian luxury market, although each company insists publicly its incentives are not designed to help win the No. 1 position.
More important, said BMW Canada president Eduardo Villaverde, is that sales here will hit a record in 2012 and place the Canadian unit among the top 10 BMW markets around the world.
Mercedes-Benz spokeswoman JoAnne Caza said the company’s December incentives are aimed at meeting internal sales targets.
Some of the growth in new luxury vehicle sales arises from the import of hundreds of thousands of used luxury vehicles from the United States in the 2000s, when the rise in value of the Canadian dollar to parity made such purchases less expensive.
Many Canadians got a taste of luxury and now that those vehicles are aging, their owners are looking for new luxury wheels, said industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. of Richmond Hill, Ont.
“If you have a 10-year-old BMW and you get tired of it, are you going to go [back] to the mass market? No,” Mr. DesRosiers said.
The growth has also been fuelled by luxury manufacturers moving into virtually every segment of the marketplace, poaching on territory once occupied by mass market companies.
“What used to be kind of a pyramid is now an hourglass, where you have the luxury [brands] from the top moving down into the lower segments,” Mr. Duffield said.
Jaguar Land Rover isn’t interested in competing for top spot, he said, but plans to double sales to 10,000 a year by the end of the decade.
BMW and Mercedes-Benz are both heading for record years. So is a third Germany-based luxury company, Audi AG, which is expected to top 20,000 in sales this year for the first time and is getting closer to joining the other two companies in the top tier of luxury auto makers in Canada.
“At Audi, our rate of increase over the past three years has been the highest of the three,” said Carl Munro, vice-president of operations of Speedway Motors Ltd., in Victoria, which owns Audi, Porsche and Volkswagen dealerships.
“They’re still higher, but we’re closing the gap on them. Every year we close the gap a little bit more.”