MONTEREY, Calif. — The goal in the car business is to follow the money, and cashing in lately has meant chasing the the high end of the market — luxury cars all the way up to exotics and so-called supercars
As simple as that sounds, the model is under threat. The dip in China's stock market and continuing trouble in Russian are causing automakers to reevaluate, putting their hopes again on the U.S. and a recovering Europe, markets that before seemed so humdrum.
That brought a bevy of them to greater Monterey, to one of California's richest enclaves over the weekend, where they could appeal directly to potential buyers turning out for a week of car events culminating Sunday with the Pebble Beach Concours d'Elegance.
Whether it was a chance to test drive a Tesla Model S or kick the tires of Acura's new NSX super sports car, automakers pulled out the stops to try to make a case on why their brand is worth the extra money.
The consensus is that these have been golden times in the luxury auto business. Not only do luxury vehicles have far thicker profit margins, executives say the growth rate for luxury in a booming U.S. economy has been running at about twice the 3.9% rate overall that Autodata reports for cars and trucks overall in the first half of the year.
But as good as times are with fundamentals that point to continued growth in luxury, "there will be blips along the way," says Steve Cannon, CEO for Mercedes-Benz in the U.S.
For the moment, China is one of those blips where automakers are being forced to hedge their bets on what had been the world's most robust auto market. "If markets can fall on Greece, what they are they going to do on China?" Cannon asks.
The response to uncertainty in the Chinese economy is falling sales. Luxury automakers have been offering discounts of up to 30%, Bloomberg News found recently.
After years of shaping new models around China's consumer preferences first, the the U.S. and Europe's second, automakers seeing the what had been the world's hottest auto market rapidly cooling. Bentley Motors CEO Wolfgang Durheimer says Europe has bounced back as China has weakened, now outselling it when it comes to his super-luxe brand.
That's okay, he says. As much as Bentley would like all regions to be prosperous, Durheimer says he recognizes they will rise and fall. Expecting "perfect conditions in every market would be foolish," he says.
While luxury buyers often have enough wealth to ride through tougher times, they also are keenly aware they are interested in automotive baubles. "You don't buy a Lamborghini because you need one," said Lamborghini CEO Stephan Winkelmann as he showed off a new, lusterous blue $530,000 supercar Friday at the Quail Motorsports Gathering near here. "It's a dream."
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Lately, the safe haven for luxury automakers has been the U.S. A surging economy, the shale-oil boom, emerging affluence among Millennials and Boomers looking for comfortable retirements, and low gas prices have combined to create a vibrant market for luxury.
"Conditions in the U.S. are as good as they get," says Mike Jackson, CEO of AutoNation, the country's largest auto dealer chain. "I've never seen a period where I can't see a cloud on the horizon."
Instead, he says, the challenge has been getting enough luxury vehicles to be able offer for sale. Americans lately have wanted more luxury SUVs and trucks, among the most profitable vehicles on the dealer's lot. We "can't get enough," and part of the reason has been because automakers were shifting more to China and overseas market. Now, he says, that's changing.
Some of the automakers who were taking some of their best product overseas are now paying far more attention to their U.S. sales outlets, says Robert DiStanislao, whose RDS Automotive Group sells Porsches, Maseratis and McLarens in greater Philadelphia.
Having been "tempted to take the quick dime instead of the smart nickel," DiStanislao says automakers are becoming more pragmatic about catering to their best customers.