Luxury Cars Dominate the Automobiles Market

Luxury automobiles' growth and profitability continue to outpace mass-market cars.

FREMONT, CA: Several trends have led to electrification levels in the USD 150,000-to-500,000 price bands, including an influx of disrupters focused on electric vehicles and a strong supply chain push. While several mainstream luxury brands and EV disrupters already offer EV models, many top luxury brands will likely stay away until 2025, when they should introduce their first EV models. New regulations and technology will play a role in the supply-side push. Based on the political momentum behind them and shifting consumer sentiments, additional city bans on ICE vehicles by 2031 will likely increase the scope of zero-emission mandates. Due to technological advancements, car manufacturers can now offer electric vehicles with similar or even better performance than luxury ICE cars.

The top luxury and performance brands will likely feel this challenge acutely due to their drastic under-scale by mainstream-automobile standards. As a result, these brands cannot change course quickly regarding technologies or assets, so they are delaying the adoption of electrification.

Luxury-EV market: With more OEMs electrifying and introducing SUV in segments traditionally dominated by sports cars and limousines, the popularity of SUV in the USD 80,000-to-149,000 segment is migrating to EVs and higher luxury tiers. In the USD 150,000-to-USD 299,000 and USD 300,000-to-USD 500,000 luxury car markets, OEMs have announced about ten new BEV SUVs in sports, coupes, and crossover categories. As more brands emphasize sustainability, this number is likely to grow. Between 2021 and 2031, the share of SUV sales is likely to increase from less than 25 percent to 40 percent. Meanwhile, only two to three announcements are expected in the sedan category. The market share of other popular segments, such as sedans and sports cars, is expected to decline from 25 to 50 percent in 2021 to 20 and 40 percent, respectively. About half of the sales in the above- USD 500,000 price range in 2031 will be electric SUVs, an increase from less than 15 percent in 2021.

Check Out This : Electrical Business Review

As a result of perceived safety, convenience, styling, and practicality, SUVs have been popular in the global automotive market since the early 2000s. Due to the broader regional applicability of SUVs, many wealthy buyers prefer greater resilience. A McKinsey survey found that almost half of the premium- and luxury-car buyers are looking for SUV as their next car. Some of the biggest luxury car manufacturers respond to the demand by introducing their SUV.

Shifting value pools: EV disrupters can break even if they take a loss on their initial purchase by monetizing the life cycle of their vehicles. There can be a seven percent increase in profits by 2026 due to radical levers and new business models like direct-to-consumer (DTC), electric vehicles as a service, and advanced driver-assistance systems (ADAS). In the future, incumbent luxury players should also be able to offer software via over-the-air (OTA) updates since upselling and point-of-sale options can drive profitability. Research shows over 70 percent of Chinese customers prefer subscription plans or pay-per-use upgrades for post-purchase upgrades.