Luxury sales profits drive automakers

first_imgDETROIT – Despite consumers’ growing affection for smaller and more fuel-efficient cars, luxury vehicles are holding their own in the U.S. market, and automakers hope to maintain that momentum with new models that will be introduced this week at the New York Auto Show. Mercedes-Benz plans to simulate an electrical storm with lightning bolts to debut the redesigned E-Class sedan. Lexus will show a hybrid sports car, while Audi AG will introduce the redesigned 2008 TT coupe and Infiniti will debut the 2007 G35 sedan. BMW AG’s Z4 coupe will make its U.S. debut, and Acura will show a production-ready version of its RDX crossover vehicle. The New York show opens to the public Friday. Automakers are responding by emphasizing that luxury vehicles can be fuel efficient and clean as well as powerful. Saab will have an ethanol-powered concept coupe called the Aero X at the New York show. The Aero X has a 400-horsepower V-6 engine but emits less greenhouse gas and cuts dependence on foreign oil, Saab says. Lexus says its 2007 GS 450h is the world’s first rear-wheel-drive hybrid sport sedan. The car, which will be in New York and will go on sale in May, has a 3.5-liter, V-6 engine that, when combined with an electric motor, performs like a 4.5-liter V8. The GS 450h has an estimated fuel economy of 20 miles per gallon, Lexus says. Automakers have a lot riding on luxury brands. As sales of SUVs fall, so do the healthy profit margins those vehicles provide, estimated at $10,000 per vehicle or more. Luxury sales can soften the blow. Nowhere is that more true than at General Motors Corp., which has been struggling with falling U.S. sales and lost $10.6 billion last year. Its revamped Cadillac lineup is widely viewed as a success, and the automaker is now turning its attention to Saab, the luxury brand that has been in the red since GM acquired it in 2000. Saab’s annual U.S. sales peaked at 47,400 in 1986 but sank as low as 18,800 in 1993. The brand sold 38,343 vehicles in 2005; by comparison, Lexus sold 302,895.160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set! AD Quality Auto 360p 720p 1080p Top articles1/5READ MOREOregon Ducks football players get stuck on Disney ride during Rose Bowl eventSales of luxury vehicles rose 6 percent in the first quarter compared with an industrywide sales increase of 1 percent, according to Tom Libby, the senior director of industry analysis at the Power Information Network. Luxury sales now make up 11.2 percent of the market, Libby said. The Power Information Network, which is a division of J.D. Power and Associates, considers 14 brands to be luxury, including Lincoln, Cadillac, BMW, Volvo and Audi. Luxury sales will continue to grow this year because household wealth and consumer confidence are on the rise, said Paul Taylor, chief economist with the National Automobile Dealers Association. Luxury sales last surged in 2000, but had been trending downward since 2001 in part because of weakness in the economy, Taylor said. But the U.S. luxury market isn’t universally healthy. While entry-level and mid-size cars like the Acura TSX and the BMW 3-series were up between 4 percent and 5 percent in the first quarter and large sport utility vehicle sales were up 8 percent thanks to the revamped Cadillac Escalade, sales of mid-size luxury SUVs dropped 5 percent, Libby said. Hummer saw the largest sales increases because of its new H3 SUV; Jaguar performed worst, with sales dropping 41 percent. There’s also evidence that high gas prices could stifle luxury sales, Taylor said. They are already hurting sales of used luxury vehicles, he said, and he expects full-size SUVs to take a hit this summer if gas prices rise to $3 a gallon. Full-size luxury SUVs won’t catch their stride unless gas prices fall to $2.50 a gallon or below, he said. last_img read more