Luxury Car Market — Industry Trends and Forecasts

The mainstream luxury car market may appear stagnant, but it has a lot of promise—even at a time of job scarcity and high costs of living. So, by offering a high-value vehicle, seamless customer experience, and delivering on-demand services, you can stand apart from legacy brands and create a mark in the ever-evolving market.

But what is luxury? How do you define it?

Luxury, in terms of vehicles, refers to automobiles that exude sophistication and style with their sleek design, state-of-the-art connectivity, comfortable interiors, and focus on precision engineering. It offers a premium experience that draws people in, which explains why the luxury car market is set to experience growth rates from 8-14% annually through 2031.

In 2017, the key metrics in this segment were up 13%, and it has seen significant sales growth since, further cementing its popularity. That said, the market dynamics are changing, so take a look at our luxury car market analysis to understand better how it will fare in the coming years. 

Luxury Car Market: Overview

The growth of global luxury automobiles relies on the distribution of wealth. This explains why countries brutally impacted by the pandemic or ones that went through wars experienced uneven growth due to high inflation rates and supply chain disruptions.

A 2019 report by McKinsey discusses trends that are reshaping premium mobility. While it’s a comprehensive research piece that sheds light on different touchpoints, we must also consider factors like recession periods.

The reason is that, ultimately, luxury cars are more of a status symbol than a necessity. Hence, they take up a larger market share due to growth in the economy across different geographies.

Luxury Car Market: Analysis

The luxury car market saw a sharp decline in sales and production as the pandemic impacted the spending power of the consumer base, with private vehicle registrations going down by 38.1% in the first half of 2020 in Europe alone.

However, the market quickly recovered once the restrictions were lifted, thanks to the incentives, tax exemptions, and subsidies from the government. With smart-connectivity features and advanced technology in the picture, it’s only uphill from here.

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Luxury car brands have seen significant growth in their EBIT margins between 2016 and 2021. While sedans grabbed the most significant share of the car market at the start of the forecast, consumer preferences are steadily shifting towards SUVs.

So now is a good time to learn about luxury consumer behavior so you can tweak your sales pitch for those with disposable incomes. It would also pay to grab new eyes toward your brand with a digital brand transformation.

That said, these automobiles have safety and security features, like anti-lock braking system, traction control, and curtain airbags that are more expensive than their traditional counterparts.

In addition, they’re sold in low volumes, so when you factor in currency shifts, a rise in import tariffs, and supply chain disruptions, it’s easy to see why luxury car market growth could slow down in the coming years.

Growth

The global luxury car market was estimated to be worth $449.7 billion in 2019. Unfortunately, in 2012, it went down to $134.15 billion due to the pandemic.

However, with the level of comfort, entertainment systems, and automatic safety features the new models offer, the market is set to reach $350.37 billion by 2029. This is partly due to the fast growth of UHNWIs and HNWIs—particularly in Asia and the Middle East.

Compounded annual growth rates (CAGR) for the forecast period (2022-2029) should range between 5 and 12.75 percent if this statistic holds true.

Here’s the thing:

The luxury market will observe an increase in competition with the entry of new brands, although it won’t impact the incumbents. It will only expand the market size of fully or partially electrified vehicles in answer to the shift towards sustainability, so customers will have options across different touchpoints.

It’s worth noting that this new segment we’re diving into, which takes focus away from fuel, is not short of barriers. For example, the lack of charging stations kept top-performing models in the shadows of their ICE counterparts, but that’ll change as car manufacturers and network operators meet consumer demands.

Trends

There is a growing awareness of the manifold benefits and features of premium features like artificial intelligence (AI), machine learning, and retina recognition.

These, alongside a comfortable driving experience, are expected to boost demand in the market. This is a helpful answer to the rise in fuel prices and growing environmental concerns.

The government is establishing stringent emission standards, causing luxury car manufacturers to incline towards producing electric vehicles to cater to the growing environmental consciousness.

Also, thanks to the increase in income, buyers are less price-sensitive now, so expect battery-electric vehicles (BEVs) with autonomous technologies to lead the global market across categories like sport and coupe.

While the initial consensus was that luxury brands would remain on the sidelines until they’ve worked through their legacy issues and mainstream-automobile standards, Mercedes-Benz surpassed its rival BMW AG by navigating the supply chain issues.

However, the time it takes for the legacy and performance brands to make their mark could offer newcomers an opportunity to break even. They can achieve this by introducing new business models focusing on features like smart connectivity and driver-assistance systems.

Factor in personalization, luxury marketing, and luxury brand logos that practically dip in extravagance; your cars will sell themselves to HNWIs during the forecast period to support their long-standing commitment to the market.

Luxury Car Market: Segmentation And How They’re Shaping the Luxury Car Market

The luxury car market segments are based on geography (Asia-Pacific, Europe, North America, and the Rest of the World), propulsion/drive type (IC engines and electric), and vehicle type (hatchbacks, MPVs, sedans, and SUVs).

By Geography

The market sizing of Asia-Pacific totaled $238.1 billion in 2019 alone, with non-traditional markets like China seeing 14% annual growth. It sold around 277,000 vehicles in April 2020, and its market share is set to increase with the rise of HNWIs and UHNWIs in the Asia-Pacific region between 2021-2026.

Global luxury vehicle manufacturers like Audi, BMW AG, Mercedes Benz, and Volvo are driving the growth owing to the prevalence of subsidies. Still, local brands like Hongqi H9 by talent like Giles Taylor, the ex-chief designer of Rolls-Royce, are not too far behind in the race. They offer seamless technological systems and good craftsmanship while feeding into the need for “smartification” of luxury car buyers.

This is also true for India, which secured strong growth in market share in 2022.

Europe, too, begs notable mention as a prominent market—one where customers prioritize performance, comfort, and driving feel and experience—which may have something to do with increased spending power. Hence, there is a rise in features like reclining seats, remote start, mood lighting, and rear seat entertainment, among other top-notch comfort features. 

By Propulsion/Drive Type

IC engines, as seen in major players like Mercedes-Benz and BMW, are dominating the market currently due to a rise in demand among the consumer base. However, this is expected to slow down in the coming years as interest shifts towards electric propulsion as governments and environmental associations enforce emission norms.

It’s picture-perfect for customers, too, not just brands.

Why, you ask?

Well, to ensure people opt for eco-friendly means of transportation, the government is offering incentives and subsidies to EV owners. Brands were quick to bank on that, launching their electrified fleet even in developing markets.

For instance, EQC 400 by Mercedes Benz was launched through its dealer network in Brazil, while Lexus was to open its first stores in the growing market of the largest Mexico cities.

Local companies are also coming through with leading-edge features like autonomous driving, innovations like remote diagnosis, maintenance scheduling, fourth-level automobile driving, and software updates to get good gross margins.

By Vehicle Type

The market is augmented into 3 types: hatchbacks, sedans, and SUVs. The latter two have a better stronghold on the luxury market than hatchbacks ever will.

Owing to high sales and production, sedans occupy the topmost position in the global market. That said, SUVs are experiencing exponential growth due to their perceived safety, convenience, extra space, high-ground clearance, and practicality.

As a result, sales are likely to increase, eating the market for sedans and hatchbacks. This is partly due to the introduction of brand new BEV-integrated SUV models across different categories like coupe, crossover, and sports.

Luxury Car Market in the United States

Customers remember their best experiences; they actively seek them, making them the #1 driver of purchasing decisions alongside the brand image.

Automotive players must keep pace with continually changing customers’ wants by providing enhancements in product standards, advanced comfort, friction-free service, a clear brand identity, and luxurious design. This will help deliver a superlative experience that improves the customer’s standard of living. 

It’s why established luxury vehicles brands like Tesla Inc, Mercedes Benz, and Rolls Royce are key players. They offer exclusivity, top-class performance, and artistry. Pair that with highly personalized sales experience, genius strategies surrounding product launches, and attempts to transition to sustainable energy, and it’s easy to see why they’ve managed to create an indelible mark in a competitive market.

Take Mercedes Benz, for example.

Mercedes-Benz, owned by Daimler, went under a strategic partnership with companies like CATL, Siemens, Stellantis, and TotalEnergies. This led to the development of cutting-edge technology to introduce new models.

It launched the Mercedes-Maybach GLS 600, a top model propelled with a V8 gasoline engine—the only one of its kind to carry the Maybach name. It was a resounding success, selling 12,000 units in China alone (in 2019).

Two years later, the company launched a luxury crossover GLC 5-seater SUV equipped with Mercedes me Connect—an app that could be integrated with navigation systems.  

Luxury Car Market FAQs

What Are The Most Profitable Markets For Luxury Cars?

Asia-Pacific, with its high number of UHNWIs and HNWIs, is the most profitable market for luxury cars. China and India are creating more opportunities in the market, although Europe is not too far behind in the race.

Which Brand Has Sold The Most Luxury Cars Until Now?

Mercedes Benz is widely known as the best-selling luxury car brand in the world, but if we’re talking about the U.S. alone, Tesla will rank top on the charts. With 484,351 registrations in 2022, it beat its competition (BMW) by a whopping 6 figures!

What Is The Forecast For 2030 In The Luxury Car Market?

The luxury car market is set to reach $41.66 billion with a CAGR of 4.03% by 2030. 

Luxury Car Marketing Strategy – Hire A Web Agency

Whether you’re a legacy brand or an incumbent player, you have to leverage the desirability of your product with luxury marketing to elevate your image and create a mark in the minds of your customers. MediaBoom can help you with that.

We can help you build a luxury brand so distinctive that your name rhymes synonymous with premium.

Contact us today to capture profitable growth.