Why Australians love luxury cars

[Express]

Why Australians love luxury cars



We investigate why Aussies are buying record numbers of luxury cars


Toby Hagon
11 December, 2015



Racetrack showdown: Porsche 911 GT3 v Mercedes-AMG GT S v Audi R8 LMX. Photo: Cristian Brunelli


Australians are buying luxury cars in record numbers – and it's not looking like slowing down any time soon. Come December 31 some 120,000 cars from brands as diverse as Mercedes-Benz, Mini and Maserati will have added to the 1.1-million-plus tally of new vehicles on Australian roads.

In 2015 more people than ever are likely to consider a BMW or Audi over a Ford or Holden.

According to an exclusive Drive analysis of industry-supplied figures, this year more than one in 10 new vehicles sold wears a premium badge or is a luxury vehicle. It is the highest penetration of luxury models ever in Australia, almost double the levels seen in 2000, where 20 per cent of the luxury cars were locally produced Fords and Holdens.

In the late 1990s Ford and Holden used to sell a combined 10,000 of their respective locally produced limousines annually. By last year three of the four long-running luxury nameplates – Statesman, Fairlane and LTD – had been killed off, leaving just Holden's Caprice, which accounted for a meagre 1218 sales, many to fleets and governments.

Australians have shown a clear love of bespoke luxury brands, predominantly from Europe. This year, at least 11 of the 18 luxury brands investigated by Drive will post record sales in Australia – and all have done so in just 11 months.

Social commentator David Chalke puts it down to the wealth of the nation and our love of cars.

"We have always loved cars. We are amongst the richest people on the face of the planet. We have spent on just about everything else we've already got … so why wouldn't I spoil myself and buy a [Mercedes-Benz] C-Class?" he says.

"We've got a lot of money, we love cars, why wouldn't you buy a good one?"

Chalke says the luxury growth is underpinned by credible new vehicles rather than brand snobbery.

"It's almost part of an Aussie character: 'Nah, I'm not going to be fooled by a brand, I buy the Mercedes because it's strong enough to lift up by its door handles'," says Chalke.

"There's almost an inverse anti-brand built into the Australian psyche, but we justify them because they are superbly made motor cars and they are the best in class, not the brand – brackets: 'I like having the brand'."

Yet new brands struggle to muscle in on the luxury domain; many have tried and failed to take on the dominant luxury players, and even Lexus – 25 years after it arrived in Australia – still sells about one-third the vehicles of BMW and Mercedes-Benz.

Chalke says luxury is about heritage and credibility, something that has to be earned.

"You can't just appear from nowhere, unless you're somebody like Tesla, who has totally broken all the rules and made an electric car that's faster than anything else on the planet."

Success also takes time, money and longevity, as Audi learnt. The former clear No. 3 has posted some of the most aggressive growth since the early 2000s, when it sold about one third as many cars as its prime German competitors, BMW and Mercedes-Benz. By the end of this year the brand will have experienced an eight-fold increase in its Australian sales in 15 years.

Audi Australia managing director Andrew Doyle puts the growth down to an extension of the models offered – something all luxury brands have done over the last decade or more – and expansion and investment in the dealer network, which is all part of boosting the customer service that is crucial for a premium brand.

It also didn't hurt that Audi set up its own factory-backed distribution centre, rather than relying on a local importer, something that led to a significant investment in branding.

"The branding is a lot stronger, so we're on people's consideration list a lot earlier," says Doyle.

Audi plans to lead the local luxury market by 2020, something that would involve barging past Mercedes-Benz, currently a clear leader with a 20 per cent lead over second-placed BMW.

Doyle says there are new models and significantly improved replacements, including the long awaited A4; the brand's former top seller is these days outsold by SUVs such as the Q3 and Q5. A new model is planned to better take the fight to the dominant Mercedes-Benz C-Class.

The C-Class is in many ways a mainstream car; it outsells the Ford Falcon almost two to one, and is the second-best-selling mid-sized car on the market (outdone only by the fleet-friendly Toyota Camry), ahead of the Subaru Liberty and Mazda6.

In 2016 Mercedes-Benz is shaping up to be the first luxury brand to break into the list of top 10-selling brands in a calendar year. Already outselling the likes of Kia and Suzuki, the German giant is gearing up to overtake Honda with a rush of updates and new models, including the just released new GLC mid-sized SUV that until now has been a rare gaping hole in the brand's sales.

Yet Mercedes-Benz Australia CEO Horst von Sanden says positioning on the sales charts is not a goal of the company.

"This is not an objective for us … entering into the top 10 does not give us any additional benefit."

He puts the impressive luxury sales growth down to more competitive pricing – especially at the lower end of the luxury market – and better vehicles. Then there's the model explosion that has forced Benz to embark on a rebranding initiative because it had so many derivatives with often confusing nomenclature.

Von Sanden says the expansion of model ranges is a result of consumers asking for more variety.

"We are not inventing niches for the sake of inventing them – they're only the result of customer demand, where certain lifestyle choices trigger the birth of a new segment or niche," says von Sanden.

Doyle says the expansion has added complexity to the business of selling luxury cars, "but it's a good problem to have; there's that much more for the customer to choose between".

The shift in luxury vehicles has dragged Mercedes-Benz, BMW and Audi into the automotive mainstream. And the line between exclusive luxury and everyday mainstream has never been more blurred.

BMW, Mercedes-Benz and BMW each produce sub-$40,000 hatchbacks that are more about the brand and attention to detail than treading the traditional luxury car path. And at the other end of the spectrum Toyota produces $100,000-plus LandCruisers that deliver on the luxury ambience, space and accoutrements. Volkswagen, too, plays in the middle ground with luxury fighters such as the Passat and Touareg.

Yet the top end of town hasn't been ignored in the rush to expand. Ferrari has returned to its pre-GFC sales highs while Rolls-Royce had a record year in 2014. Lamborghini, too, is benefiting from its freshest and most convincing model range ever.

For Porsche, its expansion into the booming SUV segment has been a major win for sales. The brand has tripled its Australian sales since 2012, almost all of it with the new Macan SUV and growth in its Cayenne big brother.

"In the last two years Porsche Cars Australia has been the strongest growth market for Porsche worldwide, exceeding markets like China and other emerging markets," says PCA managing director Sam Curtis.

He points out that the growth hasn't impacted the brand's traditional sports car models.

"We're a sports car manufacturer first and foremost and we're delivering sports cars that people want."

Yet the classic 911 – the heart of the Porsche brand – hasn't grown markedly. This year about 400 911s will be sold; in 2001 there were 401, although Curtis says more people are demanding the faster, more expensive variants, such as the GT3, GT3 RS and GTS.

Crucially, the conquest of new customers – typically away from other brands – gives Porsche a ready-made database of opportunities to transition people from SUVs to its sports cars.

"Ultimately we'd like to think that entrant who buys the Macan … will stay loyal to the brand and progress through other models," says Curtis.

Porsche is playing in a happy space. SUVs are hot property and fast cars even hotter.

Performance cars have been instrumental to the luxury growth. Mercedes-Benz has led the way with its AMG brand, which at times accounts for upwards of 10 per cent of its total sales. Australia and New Zealand have the highest penetration of AMG models in any Mercedes market globally. As well as incremental sales it's helped reposition the Mercedes brand.

"Some people might have perceived Mercedes-Benz as a somewhat conservative brand and I think AMG has worked really well in taking us away from that conservative angle into this high performance and high desirability corner," says von Sanden.

"AMG certainly has done an enormous job and played an important role in positioning our brand in a more dynamic way."

The fact it's so difficult to enjoy high performance cars in such a heavily policed country doesn't deter people either.

"It's Bathurst, it's Brock, it's the V8, it's Mad Max," says Chalke.

"It's part of our psyche that says we like big, in particular, big V8 motor cars."

Von Sanden says the appeal of AMG is more than the performance.

"It's clearly based on that extreme passion of Australians for high performance vehicles," he says.

"It's the overall concept of the design, the sound and the performance – from one red traffic light to the next."

The growth in luxury demand is unlikely to end soon. Many marques are currently enjoying a steep upward trajectory, something few think will slow.

According to Audi's Doyle, the brand sees plenty of upside.

"The premium market used to represent 5 to 6 per cent of the total market, now it's about 9.8, 9.9 per cent, so it's almost doubled in the last five to 10 years," he says.

"In Europe it's 15 to 20 per cent, so as I see it that's a great opportunity for us."

Doyle says the hoped for abolition of the luxury car tax will add impetus for further growth.

"It would stimulate the market if you progressively reduce the luxury car tax … it's a really smart thing to do," he says, adding that it will lead to better cars with more features for less money.

Porsche isn't as bold about future predictions, suggesting its stratospheric growth will slow to a still impressive "8 or 9 per cent" in coming years.

"I would not expect that Porsche Cars Australia will grow at the growth rate of the last two or three years. We had some catching up to do and we've achieved that," says Curtis. "Going forward it'll be organic growth … new engine model variants."


Growing, growing…

Despite the unprecedented growth in the take-up of luxury models there's no sign things are about to slow down. Traditional luxury brands are looking at further expanding their portfolios. Mercedes-Benz, for example, has announced it will produce a ute from 2018. While there will be more mainstream models – to compete with everything from Toyota Hiluxes and Ford Rangers to a newcomer from Renault – the brand has also hinted it will produce high-end luxury models that could push the ute price north of $80,000.

And there's more growth to come from the booming SUV segment. In 2016 Range Rover will begin selling a convertible version of its Evoke, for example.

Australia can also expect at least two new luxury brands in the next few years.

Hyundai's slow-selling Genesis will spin out into a separate brand – Genesis – complete with a range of luxury models. History suggests it will be a long and expensive road, and one made no easier by the dominance and continued growth of the existing market leaders.

US icon Cadillac, part of General Motors, is planning to return to Australia once it bolsters its right-hand-drive model range from about 2020. With the imminent demise of the locally made Caprice from sister brand Holden, it would dovetail nicely with the former top-selling marque.


Taxing times

Since 1979 some cars in Australia have had a luxury tax. But when the tax was first introduced it targeted a tiny proportion of the market – 2.5 per cent, according to the Federal Chamber of Automotive Industries. These days more than one in 10 new cars attracts the tax of up to 33 per cent on vehicles costing more than $63,184, accounting for some $500 million in annual revenue.

The industry has lobbied against LCT for years but is quietly hopeful that the new government under recently appointed Prime Minister Malcolm Turnbull will phase it out.

"It distorts the market … and there are cars impacted by it that clearly weren't intended to," says Mercedes-Benz senior manager of corporate communications David McCarthy, who is hopeful current discussions will see the end of the controversial tax.

"The current government when in opposition opposed the increase to the LCT and the current opposition think it should be reviewed."

McCarthy also points to the Henry Tax Review, which recommended dropping the LCT.

Discussions are also taking place between Australia and the European Union to introduce a free trade agreement, which would abolish the 5 per cent import tariff on many cars sold in Australia. As part of those discussions the EU has requested the abolition of the LCT, further raising hopes that the controversial tax's days are numbered.

Car makers argue no other luxury items – be it expensive jewellery, private jets or yachts – attract a luxury tax and that it slows the introduction of innovative safety and fuel-saving technologies, which typically debut in more expensive models.

http://www.drive.com.au/motor-featur...07-glhkmp.html

[Wretched]

Originally Posted by tempted

Simple explanation...People have been splurging money around like drunken sailors by using the equity in their homes like an unlimited atm. Or financed up to the eyeballs and living well beyond their means. Lots of people out there with delusions of grandeur and trying to portray an image of someone they're not.
Wait until we hit really hard times in this country and watch all these luxury cars flood the repossession auctions.

That bubble will burst and i think it will be the leveler that we need in this country.

[marty351]

Bench seats and no air-conditioning. (When the bubble bursts)

[GASWAGON]

Ye all the cheap credit has created a mountain of retail spending never seen before.

Too bad when the time comes to pay the bill when things tighten up though.

There definately will be some cheap used luxury cars around come late 2016!

[Express]

Originally Posted by CoolBFWagon

There definately will be some cheap used luxury cars around come late 2016!

You can’t complain about that unless you happened to buy one new.

[Ford_The_Win]

It reminds me of Kath 'n Kim -

"I want to be effluent mum, effluent!!"

[Brazen]

In the 50s the FX Holden took 2 years average full time wage to buy. Nowadays a brand new C Class takes 10 months average full time wage to buy.

[mik]

Originally Posted by Brazen

In the 50s the FX Holden took 2 years average full time wage to buy. Nowadays a brand new C Class takes 10 months average full time wage to buy.

yeah but is that taking into account how much of that wage is disposable income ? its a lot more expensive to live these days.

[Brazen]

Originally Posted by mik

yeah but is that taking into account how much of that wage is disposable income ? its a lot more expensive to live these days.

Yeah but mums didn't work back then, many family's nowadays are dual income.

Lots of things are more expensive now, houses are the real killer and are just ridiculous. A 60k Merc is nothing in the bigger scheme of things (still I can't afford one lol), not unheard of some people spend more on stamp duty on the family home!

[carwant.com.au]

It could also be the ratio of (as an example) a new C class Merc against the average wage.

Example: year 1990, average wage $27,000 and C class Merc (equivalent) was $45,000. So just under two years wage.

Today, average wage is about $78,000 and new C class is around $70,000. So just under one years wage.

Sounds a reasonable theory to me!

[Sprintey]

Originally Posted by marty351

Bench seats and no air-conditioning. (When the bubble bursts)

Mercedes C Class do have column shifters...

That's the real reason for the sales boom!

[Sprintey]

Going to the Audi dealer, looking around and inside the cars, they really are finished beautifully. The whole industrial design part of what they do has been superb in the last 5 years or so, and this shows in sales.

Affordability helps as well (as does easy finance).

[tranquilized]

Lots of sweeping generalisations being made in this thread - how do you know everyone driving around in a Euro is in debt to their eyeballs? Isn't it possible they're just doing quite well and in fact living well within their means? Just a thought...

[Brazen]

Australians have the third highest GDP per capita so there is money around. Some of these purchases are cash, the majority are probably financed. I don't think it's a sudden wave of irresponsible borrowing - just people's buying patterns changing and the luxury market becoming better value and more attainable. There are probably people spending more money on Rangers and Hiluxes than many of the Euro buyers.

[Express]

Originally Posted by tempted

they can also empty your wallet and bank account beautifully when it comes to servicing, repairs, insurance etc.

bs .

[Express]

Originally Posted by Brazen

Australians have the third highest GDP per capita so there is money around. Some of these purchases are cash, the majority are probably financed. I don't think it's a sudden wave of irresponsible borrowing - just people's buying patterns changing and the luxury market becoming better value and more attainable. There are probably people spending more money on Rangers and Hiluxes than many of the Euro buyers.

I tend to agree, when my parents were young hardly anyone had cars, when I was young Falcon 500s and Kingswoods were all the rage but as the years progressed mums and dads started buying higher spec cars and the entry level models became fleet cars then that was followed by multiple car families and now we’ve arrived at people purchasing even higher level spec vehicles.

Going Euro is just a transition in a market that reflects the increase in community wealth.

[99AUXR]

Originally Posted by Express

Going Euro is just a transition in a market that reflects the increase in community wealth.

This.

[Franco Cozzo]

Not so much higher end Euros out here but lots of 200 Series Land Cruisers and late model import F250/Silverado/RAM

There is money around.

I don't mind, these people with 200 series are coming in and buying stuff from me, it would be nice if they spend more

[99AUXR]

Originally Posted by Big Damo

Not so much higher end Euros out here but lots of 200 Series Land Cruisers and late model import F250/Silverado/RAM

There is money around.

I don't mind, these people with 200 series are coming in and buying stuff from me, it would be nice if they spend more

I certainly noticing it in NZ with people coming in wanted mods for the dual cab utes.

[Beastie]

Originally Posted by tempted

But this wealth you speak of is merely a delusion...The mining boom is done and dusted and was a one off, the property market is a ponzi scheme that will eventually collapse and one day we will wake up and realise that we have been so busy selling our assets (and souls) to the Chinese that there will be nothing left to sell.
Enjoy this "wealth" while is lasts, because we are in for a rude awakening when tough times hit.
Look at Clive Palmer for instance... From the top of the rich list to facing bankruptcy in the blink of an eye.

Having watched Nathan Tinkler rise and then fall, I thought Clive Palmer was slightly smarter than Tinkler. Both of them made ridiculous amounts of money from mining, but what happened to all that money? They both spent it on what ever they wanted, planes, cars, race teams, dinosaurs, titanic and so on.

I'm sure they will have plenty of cash stashed in someone else's name and they won't be driving around in base model fords or holdens.

To me I will never understand how they can have (or should I say had) so much money and then lose it (from what we see in the press anyway).

[FairmontGS]

Tinkler and Palmer are both facing the poor house because they are idiots and mismanaged their money accordingly. The average Australian isn't an idiot.

[BLUEYBA]

Originally Posted by Express

bs .

So are they expensive to service/repairs or not.

Thinking of an Audi as the next purchase one day but this has me thinking twice.

[STEALTHY]

Heres a thought some havn't even considered.

Maybe people just want a well made car?

My 2004 Audi has more features than my 2008 FPV, and is alot more refined in the cabin (plastics etc). And was a third of the cost!

Also just for comparison, the Audi is cheaper for servicing, and maintainence, likewise insurance (when we moved to VIC, the F6X went up 30p/m, the Audi went down 30p/m)

Other than the fact the F6X is rare (and a F6 will be added to the garage), the next purchases will be Audi's

[Franco Cozzo]

Originally Posted by BLUEYBA

So are they expensive to service/repairs or not.

Thinking of an Audi as the next purchase one day but this has me thinking twice.

VW/Audi spare parts prices are ridiculous, if you're buying new no problem because its covered by warranty but if its outside of warranty, hope you got deep pockets man.

So much so I will refuse to work with customers who own these two in particular, as they don't want to pay what the parts cost and chuck a teary about it, unless they are a good customer of mine then we will do it for them, if you're new and off the street with one of these cars, we won't work on it, go somewhere else.

Its just not worth the arguing/fighting about how much things cost.

2003 BA Falcon door lock assembly - around $300

2003 VW Golf door lock assembly - $1100

[blueoval]

Originally Posted by Big Damo

VW/Audi spare parts prices are ridiculous, if you're buying new no problem because its covered by warranty but if its outside of warranty, hope you got deep pockets man.

So much so I will refuse to work with customers who own these two in particular, as they don't want to pay what the parts cost and chuck a teary about it, unless they are a good customer of mine then we will do it for them, if you're new and off the street with one of these cars, we won't work on it, go somewhere else.

Its just not worth the arguing/fighting about how much things cost.

2003 BA Falcon door lock assembly - around $300

2003 VW Golf door lock assembly - $1100

I find the mentality of people who go to the effort of owning a prestige Euro car will crack the biggest fits when it comes to parts/servicing etc. It's like they want to look all 'upper class' but only want to pay like a bogan for the privilege. Parts for Euro cars have ALWAYS been high and this should be a HUGE consideration when you decide to jump on the 'look how well Im doing' bandwagon. Before anyone gets their knickers in a knot, this is not a blanket statement and does not apply to all who own a prestige vehicle. But for those who think they are 'stepping up' by getting a 112i BMW for e.g, just make sure you research all there is to know before having a cry at your next out of warranty service. If you want to play the game, pay the price.

[BENT_8]

Originally Posted by FairmontGS

The average Australian isn't an idiot.

..., actually...

[mik]

Originally Posted by The Beast

Having watched Nathan Tinkler rise and then fall, I thought Clive Palmer was slightly smarter than Tinkler. Both of them made ridiculous amounts of money from mining, but what happened to all that money? They both spent it on what ever they wanted, planes, cars, race teams, dinosaurs, titanic and so on.

I'm sure they will have plenty of cash stashed in someone else's name and they won't be driving around in base model fords or holdens.

To me I will never understand how they can have (or should I say had) so much money and then lose it (from what we see in the press anyway).

have you had a look at BHP share price lately ? i can remember not so long ago 1 share = $ 46.50 , not a good sign .

[Beastie]

I live in Newcastle and have seen the effects of the mining 'bust' first hand through several of my customers closing their businesses etc.

I was actually having a go at the two I mentioned

I should add, Tinkler was the classic case of borrowing against his new found wealth (which originally was in cash, not on paper). Then the greed and very poor advice from those around him got the better of him as he tried to become the richest bogan in Newcastle.

[malazn mafia]

Originally Posted by blueoval

I find the mentality of people who go to the effort of owning a prestige Euro car will crack the biggest fits when it comes to parts/servicing etc. It's like they want to look all 'upper class' but only want to pay like a bogan for the privilege. Parts for Euro cars have ALWAYS been high and this should be a HUGE consideration when you decide to jump on the 'look how well Im doing' bandwagon. Before anyone gets their knickers in a knot, this is not a blanket statement and does not apply to all who own a prestige vehicle. But for those who think they are 'stepping up' by getting a 112i BMW for e.g, just make sure you research all there is to know before having a cry at your next out of warranty service. If you want to play the game, pay the price.

Source the parts overseas and don't pay local prices, and a BMW/Merc is easily maintainable for no more than a Ford or a Toyota. The problem is Australia is filled with opportunist shark businesses who cite lack of economies of scale, as a reason for price gouging.

[Franco Cozzo]

Originally Posted by malazn mafia

Source the parts overseas and don't pay local prices, and a BMW/Merc is easily maintainable for no more than a Ford or a Toyota. The problem is Australia is filled with opportunist shark businesses who cite lack of economies of scale, as a reason for price gouging.

If a customer is happy to supply parts ill fit them, no worries.

The way this works is you supply parts its your problem to cover warranty and you'll be paying my time to remove it again and refit if it needs to go back for warranty.

At least with locally sourced parts if they send out the wrong parts or something craps itself then you have peace of mind to send it back and they'll exchange/refund.