Luxury Car Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

Luxury Car Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The global luxury car market was valued at around USD 410 billion in 2020. The market is projected to grow to USD 566 billion in 2026, with a CAGR of approximately 5% during the forecast period (2021-2026).

The COVID-19 pandemic had a profound effect on the luxury car market directly in the short term as the sales and production witnessed a decline in 2020. Furthermore, the pandemic has greatly affected the spending power of every individual. After the restrictions were lifted, the market gradually started gaining its lost momentum.

A significant growth of tangible luxury offerings in vehicles, shifting consumer preferences from sedans to SUVs, and increasing disposable incomes of consumers have been propelling the demand for luxury cars worldwide. However, there are a few factors, such as an increase in import tariffs, which are expected to hinder the growth of the luxury car market. For instance, the US President-elect is expected to increase the import tariffs on German luxury cars. The BMW and other German luxury car manufacturers might have to face a 35% import duty for cars not built in the United States.

Luxury cars provide a high level of comfort and safety features, creating opportunities for the market. Moreover, the growing trend of electric luxury vehicles worldwide is fueling the demand for luxury cars. Major luxury car manufacturers are launching electric variants of their vehicles, due to growing environmental concerns and increasing fuel prices. This is also likely to accelerate the growth of the luxury car market over the forecast period.

Some of the major players in the market are Mercedes-Benz, BMW, Lexus, Audi, Volvo, Land Rover, Jaguar, and Tesla. The other players in the market include Ferrari, Lamborghini, and Porsche, amongst others.

Key Market TrendsIC Engines Expected to Witness Slow Growth Rate

The IC engine segment is currently leading the market. However, it is anticipated that the demand for IC engine vehicles will slow down over the forecast period. At present, major players, such as Mercedes-Benz, BMW, and Audi, cover a significant percentage of share in the drive type market segmentation in the global luxury car market.

With the growing environmental concerns, owing to rising exhaust emissions, governments and environmental associations across the world are tightening emission norms. As a result, the demand for sustainable and environment-friendly transportation, such as EVs, is increasing, with governments offering higher incentives and subsidies to these vehicle owners.

· For instance, China registered the highest number of new EV registrations in 2020.

· However, North America is expected to lead the luxury EV sales, owing to higher disposable incomes and EV infrastructure availability in the region.

· Automakers are launching EVs even in developing markets. For instance, in August 2020, Mercedes-Benz announced the start of sales of its first electric vehicle EQC 400, in Brazil, at its dealer network.

The growing demand for and focus on style, power, and advanced telematics, are expected to continue to propel the demand for luxury EVs.

· Additionally, luxury car component manufacturers are focusing on the development of next-generation smart mobility technologies, such as autonomous driving, personal voice assistance, and retina recognition, which are also expected to boost the sales of luxury EVs over the forecast period.

Asia-Pacific is Expected to Lead the Market

Currently, China has the highest growth potential among all the developing countries in the luxury car market. Premium carmakers, such as Audi, Mercedes-Benz, BMW, Lexus, and Volvo, have always maintained positive growth in the Chinese luxury car market. According to the China Automobile Dealers Association, the country's luxury car dealers sold 277,000 vehicles in April 2020, an 11.1% increase over April 2019. Luxury car sales accounted for 18.7% of the market in April 2020, representing a 3.6% rise over April 2019 and a 0.4% increase over the market share in March.

During the peak of the pandemic, when major European carmakers faced interruption in the supply chain, it created an opportunity for the local companies to introduce their luxury models. For instance, the 2020 Hongqi H9 was by Rolls-Royce ex-designer Giles Taylor and other stylist Dinh Yanfeng. In China, Hongqi cars are only available for high-ranking government officials. China is also one the biggest markets for Mercedes-Maybach. In 2019, Mercedes-Benz sold around 12,000 luxury Maybachs in the country.

India is also one of the growing markets in Asia-Pacific. However, owing to COVID-19, the market witnessed its lowest figure. For instance, according to the Federation of Automobile Dealers Associations (FADA), the data for new vehicle registration in July 2020 revealed that the overall share of luxury car players in the total passenger vehicle market contracted to 0.50% in the month, compared to 1.11% for the same month last year. July 2020 sales figures of the ten luxury carmakers in India showed that demand dropped by 59%.

Mercedes and BMW dominated the luxury sedan segment of the Indian market. As of in the first three months of 2020, Mercedes sold 2,386 units, followed by BMW India who sold 2,365 units. After a decline in the second quarter due to pandemic, the market gradully started gaining momentum in the last quarter. Moreover, in 2020, Mercedes-Benz India sold over 7,893 new cars during the January-December period.

Competitive Landscape

Some of the key players of the luxury car market are Mercedes-Benz, BMW, Volkswagen Group, and Tesla. The market is highly driven by factors like advanced technology, more comfort, growing investment in EV technology, and growing living standards of people around the world. To provide a more luxurious experience to the people, major luxury car manufacturers are investing in other luxury car companies to gain more market share. For instance, in 2020, Mercedes Benz increased its stake in Aston Martin from 5% to 20%. Aston Martin, as its long-term strategy, is planning to increase its revenue to GBP 2 billion and to attain earnings of about GBP 500 million in the next five-year period.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support

Companies Mentioned

Daimler AG (Mercedes
Benz)
Bayerische Motoren Werke AG (BMW)
Volvo Group
Volkswagen Group
Tata Motors Limited
Fiat Chrysler Automobiles
Ford Motor Company
Toyota Motor Corporation
FAW Car Company
Hyundai Motor Group

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