America’s SUV thirst hits luxury brands behind the scenes

Mercedes extended its U.S. sales lead among luxury brands in October, with the German brand’s total deliveries rising 1 percent, excluding van models or Smart small cars.

Luxury automakers benefiting from red-hot demand for lucrative SUVs and crossovers are dealing with a behind-the-scenes headache because of just how swiftly consumer demand has shifted away from their sedans.

The glut of vehicles being returned after their leases expire disproportionately affects premium brands such as Mercedes-Benz, BMW, Lexus and Audi, because they rely more on leasing than mainstream brands. Sales for luxury manufacturers’ car models have dropped dramatically the last few years, leaving them in a bind with both too much supply and falling demand.

“It’s not necessarily the overwhelming amount of vehicles, it’s the mix of those flood of vehicles,” Scott Keogh, president of Audi of America, said in an interview last week at Bloomberg’s New York headquarters. “You’re throwing all these cars into the marketplace a couple years after it has evaporated and jumped into SUVs.”

Luxury automakers reported fresh figures this week showing just how pronounced the preference for sport utility vehicles has become. Demand surged last month for models like the Audi Q5, Mercedes GLE and Lexus GX, and slumped for sedans including the Mercedes S-Class, Audi A4 and Lexus GS.

Mercedes extended its sales lead for the year, with the German brand’s total deliveries rising 1 percent, excluding van models or Smart small cars. With a 9.6 percent sales gain in October, Audi continued to narrow its gap with Lexus, which reported a 7.7 percent drop. BMW — which delayed reporting sales 24 hours following an IT issue — saw October deliveries fall 3.4 percent.

The surplus of luxury coupes and sedans returning after leases poses obvious challenges to the used-car market. Significantly more passenger cars were leased a few years ago than there’s appetite for now — SUVs and crossovers have surged to 56 percent of luxury sales this year through September, compared with just 42 percent three years ago, according to car-shopping website Edmunds.

Costlier leasing

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