In North America, the once-hot luxury car market cools as sales get up in Asia, the Middle East, and Russia

by Jim Henry

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A Ferrari dealership isn’t like a Ford dealership; which time you drive by one, you won’t see a lot of unsold vehicles parked in the lot and signs advertising big discounts and incentives. But what they share is that both are selling far fewer cars these days.

Luxury auto brands, which until recently had been outperforming the halt of the U.S. market, have started to sag. Many people had thought high-end Italian sports cars would remain as invulnerable to the economic downturn as Hamptons real estate and Louis Vuitton bags, but that’s beginning to change. To some bulk, the higher you go in the luxury spectrum, the stronger the market remains, yet likewise ultraluxurious brands—such as Bentley, which is down 27.9% this year—are showing vulnerableness. And "size luxury" brands, such as Mercedes-Benz (DAI), Porsche (PSHG), and Toyota’s ™ Lexus division, have seen some of the greatest drop-offs in sales, especially with their most expensive models.

That’s because North American sales the past small in number years were artificially inflated by the housing boom and access to easy make not one doubt of. As other Americans fooled themselves into thinking they were richer than they were, animalism automakers raised their production capacity and sales targets and enjoyed boom years. Customers who could never have afforded such cars as the Mercedes-Benz S-Class (BusinessWeek.com, 5/10/06), the Porsche 911, or the Lexus LS (BusinessWeek.com, 2/14/07) found that carmakers, banks, and dealers were happy to toss them the car keys. Now, for those who were borrowing in expectation of the ever-increasing set store by of their homes or planning to spend their fat Wall Street bonuses, the drive is over.

"You’ve got more people who’ve got riches, and they’re coming in and buying those guerdon brands," said Roger Penske, presiding officer of Penske Automotive Group (PAG) in Bloomfield Hills, Mich., one of the nation’s largest dealership groups. Penske’s remarks came in a July 30 parley call. "But with the financial markets down some, that’s off slenderly, and you have to expect that." Penske specifically mentioned some Porsches, expensive BMWs, and Mercedes.

That inclination isn’t going to procure a single one better, whether or not New York Governor David Paterson is right. He not long ago settled that Wall Street bonuses are going down a projected 20% this year. New York State Comptroller Thomas DiNapoli estimated earlier this year that the securities industry paid out $33.2 billion in 2007, each average of $180,420 per receiver.

Luxury-car dealers look forward to those bonuses almost as much as the stockbrokers who get them. But with the financial industry down and stock markets and real estate values down, no one is immune.

"It is wrong to say sort or segments of the place of traffic are immune to economic downturns in the market, as far as we’re concerned," says Geoff Dowding, worldwide operations manager and vice-president at Bentley Motors in Crewe, England.

Bentley’s U.S. sales this year were off 27.9% through July from a year earlier, according to AutoData in Woodcliff Lake, N.J. For the whole of of 2007, Bentley sold 3,990 in the U.S., nearly 10 times its sales in 2003, when father Volkswagen (VOWG) took over and relaunched the brand.

A slowdown was inevitable, since those big gains were built on adding all-new models, and towards now, Bentley has its lineup thorough. The economic climate, however, is a factor, says Dowding. He suggests that even those customers who can afford one may hold off buying for reverential regard of being seen as showing off at the inapposite term.