Blue-Blood Automotive Brands Show Red Ink, Too

U.S. sales for most luxury brands fell about as much as the rest of the market in recent months, and every luxury brand except Rolls-Royce posted a 2008 sales downturn for the full year.

It’s true that luxury-import brands like BMW and Mercedes-Benz prospered as the rest of the U.S. market slumped, since 2000. But it’s wrong to say that because luxury brands fell in 2008, that the present downturn is different from other recessions.

The Wall Street Journal suggested as much, in a Jan. 6 article on 2008 U.S. auto sales. The fact that luxury brands are down illustrates that “auto makers of all stripes” are hurting, unlike past downturns, the paper said.

Luxury brands are said to be the last-in, and first-out of a recession. But it’s misleading to conclude that luxury brands are recession-proof.

Sales for Mercedes-Benz USA fell 11.2 percent in 2008, to 225,009, according to AutoData Corp. That broke a streak of 14 consecutive years of growth in U.S. sales, the company said. But before that streak began, U.S. sales for Mercedes-Benz fell by more than 40 percent, from 99,314 in 1986, to only 58,868 in 1991, according to the Automotive News Data Center. 

That was a much deeper trough than mainstream domestic brands suffered in those years. BMW followed a similar trajectory, falling from a then-record 96,759 in 1986, to only 53,343 in 1991.

In 2008, the BMW brand fell 15.2 percent to 249,113, from a U.S. record 293,795 in 2007. The 2008 total broke a 16-year streak of ever-higher U.S. sales.

The automotive downturn that bottomed out in 1991 was especially tough on luxury brands. What amounted to a tax hike on luxury cars started on Jan. 1, 1987. Many buyers rushed to acquire luxury cars before the deadline. That created a big spike of sales in late 1986, and pulled ahead sales that probably would have taken place later.

Meanwhile, the stock market crashed in 1987. The effects were felt later, as wealthy households cut back on conspicuous consumption for a while.

The downturn in the late 1980s and early 1990s also brought several independent luxury brands low, and vulnerable to buy-outs. For instance, Ford bought Jaguar, and GM bought Saab. The downturn also drove Peugeot, Alfa Romeo, Maserati and Sterling out of the U.S. market.

If any brands are relatively recession-proof, it’s at the “ultra-luxury” end of the spectrum, like Rolls-Royce. Rolls had a U.S. sales increase of 17.4 percent in 2008, according to AutoData, but that was a total of only 378 cars for the year.

Even such exclusive brands are driven in part by how new the current model is. Rolls-Royce has a relatively new lineup, but Bentley’s lineup is older by comparison. Despite well-heeled customers, Bentley’s U.S. sales fell 32.5 percent in 2008, to 2,693, AutoData said.