the sales in the luxury sector are experiencing a significant downturn, one could even say they’re falling sharply. It may sound odd, but it’s the middle ground. Brands like Bugatti and Ferrari are thriving by selling their million-dollar vehicles. Kia, on the other hand, is seeing soaring sales figures. However, Bentley, Porsche, and Aston Martin are undeniably feeling the pressure, so to speak. This is not ideal.
Bentley can produce limited-edition models like the Supersports, but it lacks the ability to support extremely low volume sales as Ferrari or Bugatti can. Their profit margins simply don’t allow for it, and this is before we even consider the disastrous situation that Aston Martin is currently facing, or the even graver plight of Maserati. This is all aside from Porsche’s abysmal sales figures, which indicate that it’s facing its worst year since 2009. The situation is worsened by dealer practices.
The challenges facing Bentley seem minor when compared to Porsche’s predicament, yet both are under the Volkswagen Group umbrella. While the Cayenne and Macan SUVs provided Porsche with a lifeline previously, it’s uncertain if this pattern can be replicated. The electric Cayenne and Macan have their own merits, but EV adoption rates in America are currently in a tough spot. A fuel-powered Macan and Cayenne replacement weren’t even part of the initial plans. As we’ve previously noted, manufacturing and developing vehicles takes time, and this endeavor requires billions of dollars.
In the latest episode of The Drivecast, we delve into the unraveling luxury car market, examining why this is happening and what the future holds.
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Complete Transcript
Joel: Byron, would you say either of us fits the demographic for the discussion at hand, whether it concerns a Porsche, an Aston Martin, a Maserati, or a Ferrari?
Byron: Yeah, that might be a stretch. I’d say we’re definitely not the target demographic, right? I mean, I own a Blackwing, but not the high-end version. So, my dream car is probably still something like a 718.
Joel: You know, truth be told, this isn’t common knowledge. I almost bought a 911 once, but it was an ’80s model and I wanted an SC. This was when those were going for, I don’t know, around $20,000 to $25,000. By the way, that wasn’t that long ago—I had more hair then, but it wasn’t ages ago. I mean, I’m not the target for a current 911, and certainly not for an Aston Martin or a Bentley. Actually, I adore Bentleys, but more for the meticulous craftsmanship, the fit, finish, materials, and the carpet than anything else. Whenever I drive a Bentley press car, particularly a convertible, it’s the most awkward situation. At a stoplight, if you’re not in a place like LA, say Portland, Oregon, and someone pulls up next to you in an Explorer and starts gawking at the car, asking, “What’s the MSRP on that?”—I’ve been asked that before, and it literally made my skin crawl. I can’t stand that kind of attention. I preferred it when no one knew my E34 M5 except for true car enthusiasts. So, the allure of owning a Bentley faded pretty quickly. I see Bentaygas being driven around here, and honestly, if I could afford one, I wouldn’t want one because I wouldn’t want people knowing I could afford it; that kind of attention is just not for me.
Byron: Absolutely. And that’s the thing, my car is orange, so I can’t say I’m entirely opposed to eye-catching vehicles. However, I prefer my vehicle to represent itself rather than reflect on my financial situation. I bought the car because I genuinely like it. The price isn’t a deciding factor once I’ve made the purchase, but it is initially.
Joel: I would also posit that a Blackwing is akin to an E34 M5 in that actual enthusiasts recognize its value, yet yes, yours is brightly colored. That being said, I doubt most people would know that a Blackwing is anything different from a standard model—I was about to refer to CT4 or ATS and began confusing the names.
Byron: Well, yes. The thing is that even here in the Detroit bubble where people understand what it is, it’s still a rather niche community. Just yesterday, upon my return from a trip, I landed at DTW, walked to the parking garage, and beside me was a blue CT4-V Blackwing. It’s actually the first time that’s happened since I purchased mine.
Joel: So, we’ve confirmed we don’t fit the demographic. But here we are to discuss a topic you wrote about. Initially, I want to emphasize how we report on tips. You can always connect with us at [email protected]. Byron and I are reachable through the website as well. Ultimately, we rely on tips for our topics. How did we end up diving into this issue, Byron?
Byron: Exactly, the tip we received was significant. As I noted in our article about this, if you wish to get our attention, present something shocking that we are unaware of. This was one such case where someone approached us, asking why we hadn’t written about the luxury market’s state. Naturally, that led us to question the luxury market’s status. So, I began investigating, reached out to a few contacts who had indicated some concerns regarding Porsche’s situation, which has been evolving for a couple of years, I think. Our informant also shared insights from other manufacturers, aiding in piecing the entire situation together. Speaking with him, particularly our sources related to Porsche, we found out quite a bit about the middle sector of the luxury market facing difficulties.
Joel: We’re all aware of situations concerning Aston Martin or Porsche; it’s been well reported across The Drive and other automotive outlets. However, when one starts discussing a potential “collapse of the ultra-luxury market,” it’s a bold claim that grabs attention. That jolts us. The tipster possessed intriguing information concerning this, delving into payments related to vehicles. What insights did they provide, Byron?
Byron: The vital revelations indicated that volumes are indeed declining; numerous manufacturers have dealerships not selling any cars in certain months, which is not a good sign. Customers approach stating they just acquired a vehicle and see no justification in spending more thousands monthly on something marginally different from what they recently overpaid for years prior. These customers could be incredibly wealthy, but they’re not foolish. They prefer to spend on something worthwhile, and clearly, that’s lacking in the sector at present.
Joel: Bentley is part of the Volkswagen Group alongside Porsche, and this entire group is facing issues. While the Supersports you recently drove at Laguna Seca is an exceptional model, it’s also very low volume. The bulk of Bentley’s lineup hasn’t seen many changes in recent years. Sure, new options have been released, but for consumers with monthly payments in the thousands, adding another couple of grand is a tough ask. Wealthy people are not foolish; otherwise, they wouldn’t have their riches. There are countless cautionary tales about lottery winners who squander their fortunes with poor decisions.
Now, let’s discuss a few interesting figures. Bentley reportedly sold 150 cars one summer month, which is not acceptable. Ferrari remained level last year. Lamborghini had a relatively good year; margins fell slightly, yet deliveries were up about one percent, indicating stability. Conversely, Aston Martin is really suffering, and Porsche is in dire straits. Porsche had its worst overall year last year in over 16 years; its lowest point since the 2009 financial crisis. Much blame for this drop is directed at China, where they faced a 26% decrease alone. Bentley’s sales were down by 4.8% over the past year, and the outlook for this year doesn’t seem much brighter. Aston Martin’s revenue dropped by 21% following a 10% decline in sales, with only 5,448 vehicles sold last year. Bugatti doesn’t often report its figures but remains highly profitable with their operations.
On the other hand, Mercedes-Benz is also faring poorly, experiencing one of its toughest periods in years with a 9% sales drop. Their necessary cost-cutting measures and product line streamlining reflect that. Audi, part of the same Volkswagen Group as Porsche and Bentley, faced a 2.9% decline last year. These are companies with notable sales; Mercedes moved 1.8 million cars, while Audi sold 1.62 million. However, I’m aiming to illustrate that there are several tiers within the luxury segment, and many players across this spectrum are feeling the effects.
Also, Ferrari remains a case of them being able to control their production numbers— they suppress sales intentionally. They could generate more sales but encounter different challenges when they do so. Their strategic limitation on production fosters demand, almost artificially, creating a sense of exclusivity.
Byron: Created scarcity.
Joel: Exactly. I want to bring up the issue of depreciation now. When one purchases a Bentley or an Aston Martin, whether it be retail or lease, the depreciation these vehicles undergo is rapid and staggering.
Byron: Especially with vehicles frequently leased. When the lease period concludes, owners may find themselves facing steep increases, often $1,800 or even $2,400 upwards just to retain the same car. That can prove to be a hard sell, leading customers to either explore alternatives or revert to other vehicles they have access to, as these individuals likely own multiple luxury cars.
Particularly with Porsche, we’ve encountered reports over the years from dealers; they can be somewhat pushy to persuade buyers to select cars that aren’t moving well. Specifically, models like the Taycan have been brought up as dealers need to sell them to meet their metrics. They often leverage the appeal of a high-demand car, such as the 911 GT3 RS, to incentivize sales. For instance, they may say, “Secure this Taycan, and I’ll allocate you a chance to order the 911 GT3.” While beneficial for the dealer in achieving two sales, clients have found themselves buying vehicles they didn’t want merely to get their desired purchases. This has convoluted the secondary market, leading to depreciation concerns where the values of the unwanted cars are plummeting, hampered by tactics designed to drive sales.
Joel: The only automaker I’ve noticed that seems to have some unspoken practices operating similarly is Ferrari. Ferrari stands in a class of its own regarding regulations that apply to others. They’re capable of implementing strategies that no manufacturer can replicate. If you’re offering a $290,000 911 GT3 RS while also providing an $80,000 Macan, the wealthy buyer is different than someone buying into Ferrari’s ultra-luxury models. The buyer of a 911 GT3 RS may very well own a LaFerrari or the latest model but likely isn’t daily-driving a Macan. That reality makes it evident to Ferrari that they can demand multiple high-price models for purchasing their specialized cars.
Porsche is attempting to enter that market itself, notably through its bespoke customization division due to the significant profit margins it offers. However, prices for 911s have escalated; I remember when entry-level 911s were around $80,000, and now they surpass $100,000. While a base 911 remains an outstanding vehicle, let’s not downplay that; it’s important to acknowledge how expensive entry into that car has become. Conversely, Corvettes have represented real value; the LT6 engine provides excellent offerings. I know someone might be critical, but comparing a 911 to a Corvette isn’t far-fetched—let’s be real; the performance metrics don’t lie. Ultimately, are you looking for performance or merely chasing a brand identity?
Byron: Exactly.
Joel: Shifting gears for a moment: Maserati sold just 7,900 vehicles last year, and that’s hardly a significant figure, representing a 30% downturn from 2024. We don’t have their most recent figures, but from whispers, there are reports indicating serious issues; 86 dealers exist in the U.S., and rumors suggest that 60 of those dealers sold no cars in the initial 25 days of August. Only four dealers were able to sell more than two cars. Whether these numbers hold any truth, if they’re anywhere close, it’s catastrophic. What kind of dealer can operate without selling cars? That’s how they generate revenue. Sure, they can profit from service and parts, yet they’re primarily not selling Maseratis, which are already low in volume.
Byron: Correct. This issue is not exclusive to the luxury sector. Consumers overall are behaving similarly, whether at a Honda dealer or a Maserati dealer. They arrive with parallel complaints and depart having either spent less or with empty hands. While sales numbers may seem stable for mainstream automakers, premium lines struggle increasingly. Companies like Honda or Hyundai that market their luxury brands separately seem to maintain volume, but the high-end offerings experience a downward shift, reflecting a banner of the same trend.
This leads us to the broader question: what defines a luxury vehicle nowadays? If one can visit an Audi dealership and acquire a mid-range vehicle costing $60,000 or $65,000 that performs every fancy function of their more expensive $165,000 offerings, what’s the lingering appeal of the pricier car? Especially given the stagnation in innovation—much of which is attributed to COVID—automakers poured vast resources into electrification only to have it yanked back from them. This financial outlay could have been allocated to enhance existing products or to develop new ones. Instead, we’re left with industry-wide disruptions as brands scramble to figure out what they can present to attract customers back in the door, but solutions currently aren’t yielding results.
Joel: Before we delve into pricing and all else, I really want to explore the definition of a luxury car. Recently, during a dinner with an automaker’s group of executives, they posed the question: “What constitutes a luxury car, Joel? Can you name some luxury brands?” I mentioned Audi, BMW, and Mercedes, and even extended to include Porsche, as I know it’s sporty but falls into that luxury price range, all the way to Bentley and Rolls-Royce.
The executives exchanged glances and asked, “So Audi and Mercedes also fall under luxury?” I responded, “Of course, that’s a given in the U.S.!”
They countered, “Yet Bentley and Rolls-Royce?” I explained, “That’s a different echelon; we’re discussing ultra-luxury.”
Then came the inquiry, “But Mercedes sells C-Class vehicles, and Audi offers the A3 and Q3. Are those classified as luxury cars?” I said, “Well, they’re small luxury cars.”
Then they probed, “Have you ever been inside one? Do they feel like luxury?” I admitted, “At certain times in history, some of those felt like smaller, compressed versions because Audi and Mercedes played with model sizes for ages.” I added, “It always seemed they were merely downsizing an S-Class.” They were surprised. I clarified, “Okay, perhaps the materials weren’t as refined.”
They remarked, “People utilize C-Classes as taxis in Europe.” I defended my point, saying, “But we’re not situated in Europe.” They pressingly followed up, “So, only a Rolls-Royce or Bentley qualifies as a luxury car?” Their straightforward answer was, “Yes.” I challenged, “And what is an S-Class then?” They claimed, “A premium vehicle.” I contended, “Hold on. An S-Class is a flagship luxury car. I’m well familiar with the W126; don’t dismiss it as just premium.”
This dialogue sparked a consideration about whether vehicles like the Q3, A3, A4, or 3 Series truly qualify as luxury cars. What does a luxury vehicle mean today? I dare our listeners to define one: Feel free to share your thoughts. I recently experienced a Kia Telluride complete with power sliding door handles, taking us on an unrelated tangent, but it performs comparably to an S-Class. It had a massaging seat, branded as Ergo Motion, aimed at preventing stiffness during drives. But frankly, it operates just like a massaging seat in a Navigator or an Escalade; it’s really just marketing terminology for the same function. The Telluride boasted heated and cooled front and second-row seats and heated seats in the third row.
So what really qualifies as luxury? What features are genuinely luxurious nowadays? Some vehicles now feature adaptive LED headlights that pivot with turns. You can find those in a Subaru as well. What is a luxury feature today? Is it the leather, the illumination, or technology? I don’t have the solution, but it’s an intriguing question that helps me comprehend why those executives questioned Audi’s standing as a luxury brand. I stand by my argument that the new Q9 ranks as a luxury vehicle, as does the S-Class. In the U.S., it seems the general public considers Audi and Mercedes, even a Lexus NX, as luxury cars. Yet, auto executives don’t necessarily agree, which is interesting.
Byron: Indeed, it’s fascinating watching mainstream luxury brands like Audi, BMW, and Mercedes strive to reach the high-end sector without overstepping into their sister brands’ territories. Every automaker is attempting to offer something unique, emphasizing individualization and the bespoke experience. It seems to resonate with millennials; we’re the generation that kicked this off, desiring something customized rather than settling for the norm. It’s apparent in Cadillac’s Blackwing as well as in other manufacturers’ initiatives, emphasizing personalization—allowing brands to charge premium prices for essentially the same products.
Joel: Yes, it’s intriguing how GM seems to be fully embracing Cadillac now. It appears they’re finally beginning to revitalize that brand. Interestingly, a year or two back, there were whispers about Audi possibly reviving the Horch brand, intended as their Maybach equivalent. Initially, we expected to see a Horch A8, recently they launched something similar in China for a brief period, and we observed spy shots of the Q9 featuring a vertical grille. The initial assumption was that these would belong to a Horch edition, but it turned out to be the main version.
I regressed for a moment. When I interviewed their CEO, Döllner, during the Q9 backgrounder, I inquired about the Horch brand. They made it clear: “No, we’re not pursuing a Horch division or taking that route; we’re not competing with Maybach or Alpina sub-brands.” At the time, the setting was too broad to delve into specific reasons. Bottom line: they don’t possess much capital currently—they’re genuinely facing issues.
Byron: Their existing product lines are quite dated. They don’t have many new releases either.
Joel: Everything that was slated for new and electrification was ultimately scrapped.
Byron: Precisely.
Joel: Which makes Cadillac’s present strength particularly fascinating, as they’re capitalizing on truck and SUV profitability at GM.
Byron: Escalade, baby.
Joel: The Escalade. But let’s be honest—a $160,000 Escalade is essentially a more upscale Tahoe. Just to clarify, while it’s a luxurious Tahoe, it still is a Tahoe.
Byron: Its existence likely boosts the sales of the $60,000 Tahoe models.
Joel: Last year, I had a $96,000 Suburban, by the way. $96,000 Suburban.
Byron: Absolutely ridiculous.
Joel: Yikes.
Ultimately, the ROI for establishing a Horch division to rival Maybach may be nonexistent given their current cash flow situation. Additionally, we’ve discussed mainstream approaches. Take the Hyundai Palisade Calligraphy, a striking vehicle priced around $61,000 a few weeks before my Telluride experience; that’s an attractive car. We can dwell on a different topic about generational perceptions, but that vehicle isn’t akin to what we recognized as a Hyundai before. It’s impressive. When experiencing these vehicles, one might ponder if opting for a Q7 at an extra $20,000 is justified over the hybrid model. In the coming years, a Genesis GV80 hybrid will launch, which might cost less than a Q7. We’re navigating curious times, which circles us back to the overarching theme: pricing is wildly out of control.
Byron: Oh, undoubtedly.
Joel: Currently, the average new car price sits at a staggering $50,000. That’s extraordinary. In terms of trucks, we’re looking at about $15,000 to $16,000 more, placing them in the mid-$60,000 range for average transactions. I once encountered an F-150 priced near $100,000. I reminisce about my initial experience with a $69,000 F-150; I was taken aback at that time—the prospect of such an expensive truck seemed absurd. When the AT4 debuted, I asked its then-GM CEO about the price ceiling for pickups, and his candid reply struck me: “I don’t know; I’ll inform you when tôi identify it.”
I was left speechless.
Byron: Yep. There you have it.
Joel: They haven’t discovered it yet. You can construct a six-figure Super Duty truck without issue. Significant financial investment can go into a pickup.
Byron: Yes, indeed.
Joel: Notably, these trucks lack the Cadillac and Lincoln branding. A Ford-branded pickup could easily breach the six-figure mark. Consequently, one must ponder: Is that a luxury vehicle? I would contend no; an F-150 embodies luxury.
Byron: They are almost hesitant to label themselves as luxury trucks; they prefer not to invite comparisons, particularly when stakeholders inquire if their product stands as the “Rolls-Royce of half-tons.”
Joel: Of course, emphasizing the hand-stitched leather and authentic wood, crafted meticulously with precision.
Byron: The expenditures remain significant, regardless of the terminology used.
Joel: I would posit that during certain life phases, some affluent individuals might prefer to invest their money into an F-150 or Ram 1500 with high-end interiors. They would blend into the crowd occupied by others who may have standard car loans. The same logic applies to a last-gen Land Cruiser purchased as a statement. “Oh dear, the neighbors acquired a new Highlander,”—without realizing it was an $80,000 Highlander. Many have chosen to invest their wealth into a Ford or a Chevy or a GMC or a Ram these days, keeping their financial strategies discreet. This effectively disguises substantial amounts of money spent.
Byron: Additionally, it offers an avenue to maintain a low profile if desired.
Joel: Upon arriving in a Lamborghini, Maserati, or Bentley, it’s impossible to go unnoticed; the cost is apparent to all.
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