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Monday, Jun 24, 2024

Pedal to the Metal

George Athan III learned firsthand that sales of cars carrying luxury nameplates were among the first to roar back to life as consumers shook off the effects of the Great Recession — even in the hard-hit Las Vegas region, where he operated Audi dealerships for several years before moving to San Diego.

“There’s a lot of pent-up demand out there in the market,” said Athan, now president and general manager of Audi San Diego, recently acquired by Kuni Enterprises Inc. “You’re seeing people trading in cars now that are 10 years old or have more than 100,000 miles on them.”

Local luxury vehicle dealers say they expect 2012 to be a continuation of a market that saw demand shift into high gear for many types of cars in 2011, with San Diego County’s overall light vehicle registrations rising 12.9 percent over 2010, according to New Car Dealers Association San Diego County.

The county’s rise topped the California and U.S. uptick of 10 percent, and the local dealer trade group is projecting an additional 9.9 percent increase in 2012. The county posted just over 97,000 total new-vehicle registrations in 2011, with 107,000 forecast for 2012.

“Things seemed to have picked up pretty well over the past 18 months,” said Lance Roberts, spokesman for the dealers group. “Hopefully going forward this will be a sustainable recovery, with more of a soft curve instead of the sharp V curve we saw before the downturn.”

Observers say optimism in the luxury segment is based on a continued rise in orders and dealership foot traffic; the revival of leasing programs that nearly went extinct as financing companies steered clear of auto financing after the Wall Street collapse of 2008; and the quest for better fuel efficiency, even among drivers able to withstand rising gas prices.

Numbers from the California New Car Dealers Association show that three luxury monikers were among the 14 brands registering double-digit sales increases in the state during 2011. While not matching Kia’s 52 percent jump or Jeep’s 49 percent rise, BMW registered a 16.8 percent increase, Mercedes-Benz rose 14.4 percent and Audi climbed 13 percent.

Browsers Becoming Buyers

“Things really started to pick up around last November,” said Randy Johnson, sales manager at Mercedes-Benz of Escondido. “A couple of years ago you had people mostly browsing and not buying, but that’s been changing.”

Like other local luxury dealerships, leasing now accounts for nearly 50 percent of new-vehicle transactions at the Escondido lot. “It lets people get into the latest technology, and into more cars more often,” said Johnson. “Some of it is keeping up with the Joneses.”

Ivan Drury, a senior analyst with automotive research firm Edmunds.com, noted that leasing programs often supply the bulk of product for high-end brands’ popular certified-pre-owned sales programs, where luxury buyers can get low-mileage, well-maintained vehicles at monthly payments well below those of new cars.

“It’s a good way to build consumer confidence and loyalty, and it also helps build the brand,” Drury said.

He said San Diego County historically has been good for luxury car sellers, noting that one in every five vehicles sold locally (20 percent) during the past year carried a high-end nameplate, compared with one in every nine for the U.S. as a whole (11 percent).

The county saw 18,206 new luxury vehicles sold in the past year, up 6 percent from 17,100 in 2010, according to Edmunds. By unit count, Drury said local luxury sales were led, in order, by BMW, Mercedes, Lexus, Audi and Infiniti.

He said alternative-fuel-technology vehicles remain a limited niche in the luxury category nationally, since buyers in that segment generally are more concerned about experiential rather than fuel-cost-saving features.

Seeking Fuel Efficiency

However, local dealers say fuel savings and practicality figure prominently in showroom buzz and consumer browsing.

Athan, who with business partners took over the lot formerly known as Miramar Audi in December, said the dealership could realistically see sales rise 30 percent this year, in part because of increasing interest in new sport utility vehicles like the Q5 and Q7, well suited to family-oriented travel.

“We’re seeing demand that is well ahead of supply on some of these vehicles,” Athan said. “You’re probably going to be waiting a few months for orders at this point.”

Audi’s popularity has been rising globally, straining the supply of some models in the U.S., although Athan said the automaker will be shifting more product to U.S. lots in coming months to offset demand weakness in European markets.

Johnson said the Mercedes dealership is seeing strong sales for fuel-efficient diesel models, and the ML line of SUVs has been popular with families. Also, some of the automaker’s offerings have begun to carry new technology such as “Eco Start,” which shuts off and restarts engines during long stops in traffic to save fuel, without the driver being aware of the process.

Out With the Old

At Marvin K. Brown Auto Center Inc. in San Diego, which has sold Cadillac and several other brands since the 1950s, Chairman and CEO Dave Grundstrom said he’s projecting sales at the dealership will rise at least 10 percent to 15 percent in 2012 over 2011.

The past year saw sales rebound significantly as buyers came off the sidelines. “We’re seeing people turn in cars with a lot more miles on the odometer than what used to be the case,” he said.

Some 50 to 60 percent of the dealership’s sales are from luxury brands, and momentum has been building for Cadillac models like the XTS and ATS.

Grundstrom said the dealership, as of mid-February, had taken more than 50 orders for the Karma, an extended-range plug-in hybrid from Fisker Automotive, a good response considering the car’s price tag north of $100,000.

He said inquiries have also been on the rise for relatively lower priced electric and hybrid vehicles being introduced at the lot, from Coda Automotive Inc. and Mitsubishi Motors.


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