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The pandemic creates a “post-war boom” for luxury automakers

(Bloomberg) – Luxury automakers are known to be reluctant to disclose how many cars they sell or at what profit. Lately, it’s been hard for them not to think a little bit about how well they did in 2020. “Let’s just say we started 2020 with the strongest order bank since 2003 – and we started this January with 50% more orders than last January,” Bentley’s Adrian Hallmark said at a video conference with journalists on March 23. The British company delivered 11,206 vehicles in 2020, an increase of 1.8% year-on-year – and the highest output in its 101-year history. “Our sales are currently around 30% higher than last year, even if you consider that last year was a record,” Hallmark continued. “It would take an even bigger asteroid than the Covid to throw us off course again.” Indeed, it seems that hardly any sales divisions for 2020 are registering with the extremely optimistic CEOs of the world’s most prestigious automobile brands. They are already trying to take advantage of the “lost year” that gave them the strongest position ever in the next decade. At a video conference on March 15, Bugatti’s Stephen Winkelmann was downright optimistic, as he was admittedly “surprised” at how good the 112 was. The one-year-old French brand had survived the pandemic. “Bugatti has done incredibly well,” he said. The brand traditionally does not announce any concrete sales results, but Winkelmann described 2020 as the company’s “third record year in a row”. Even the normally silent Germans couldn’t resist a little riot. Porsche AG boss Oliver Blume called the results from Porsche a “fantastic achievement” at the end of an “extraordinary year” during a reporter round table on March 18th. Sales for the 90-year-old brand reached an all-time high of € 28.7 billion ($ 34 billion) in 2020 and exceeded € 100 million in 2019. Meanwhile, the worldwide annual profit at Lamborghini, which Winkelmann also heads, was higher in 2020 than in any other year. And while sales of most luxury brands declined from 2019 – at Lamborghini by 11%; at Porsche down by 3%; 10% decline at Ferrari – the declines resulted from weeks of production and exhibition stoppages during the coronavirus pandemic, which are well beyond the control of the executive. Bentley, an outlier, was shut down for seven weeks costing a $ 10 million per week loss and was still bouncing back to deliver more vehicles than ever before, Hallmark said, “We’re not seeing any recessive behavior. We are experiencing a post-war boom, ”he said. Recession-proof While stimulus checks are used to expose millions of people to economic losses, the rich have minted money like never before. It is a rebound from Covid in K shape favoring luxury goods, including cars. Back in July 2020, Technavio analysts predicted that the US luxury car market would grow 6.7 million units from 2020 to 2024, according to reports Statista forecast that US sales in this segment would reach US $ 6.9 billion this year alone. Dollar will reach. It is helping the pandemic make the entire auto market healthier thanks to streamlined buying processes, reduced layoffs, and executives being forced to become flexible (and more practical) about future strategies. “History suggests that demand for super-luxury sports cars will remain robust despite a global Covid-19-related recession,” said Michael Dean, head of automotive analysis at Bloomberg Intelligence, in a March 16 analysis. Results such as Ferrari’s 27% share price increase in 2020 and Lamborghini’s already full order book for the first nine months of 2021 are evidence of this strength. Lamborghini has done so well last year that close observers like Dean and others have suggested that parent company Volkswagen AG could position it for an IPO alongside favored son Porsche, which Bloom recently described as an “interesting” option. The emphasis on the “Limited Special Series” models, which are highly profitable at a multi-million dollar price tag, mimics the strategy set by Ferrari. The 81-year-old Italian brand went public in 2015 with great success. Even Aston Martin, which saw a disappointing IPO in 2018, followed by a disruptive change in management, appears to be poised for a brighter future. A £ 1.3 billion ($ 1.79 billion) refinancing in December and the recent alliance with Mercedes coupled with the release of the DBX SUV have pushed the company to generate positive free cash flow through 2023 said Dean. “Aston Martin is no longer on the critical list,” he wrote in March. A positive pipeline of limited editions like Valkyrie and Valhalla will remain key to improving Aston’s margin performance in 2021. He said, “Few brands are able to sell high-margin supercars priced above $ 1 million. This club includes Aston Martin, Ferrari, Lamborghini and Porsche. The contribution of a single Valkyrie supercar, priced at £ 2.4million, is equivalent to sales of 19 Vantage V8s, the disappointing 2019 sales of which were a major reason behind the drop in volumes. “Rolls-Royce may be an exception to the luxury car bonanza, which delivered around 3,750 automobiles in 2020, which is 26% more than last year. The decline was partly due to unfortunate timing, said Martin Fritsches, president and CEO of Rolls-Royce Motor Cars Americas, in an email promoting the transition from the first-generation Ghost (discontinued in 2019) to the second-generation sedan Generation blamed for the majority “We were preparing for the new Ghost in the middle of Covid shutdowns, but saw continued strong demand for new Rolls-Royces and ended the year with the highest number of future orders for the brand,” said Fritsches. “Commissions orders run well into the third quarter today.” “Well, why not?” One factor that fueled this success during what many perceived to be a global collapse was the wild growth in China. Bentley sales in China doubled in 2020, according to Hallmark. China will be Lamborghini’s second largest market by the end of 2021, Winkelmann said. The general market concentration (Aston Martin as a partner of Mercedes or the collaboration between Porsche and Rimac) can only help. Worldwide “a significant growth in tangible luxury offerings for vehicles, the shift in consumer preferences from sedans to SUVs and the increase in the disposable income of consumers have driven the demand for luxury cars,” wrote Mordor Intelligence in its annual report since the Covid-19 pandemic for hard assets – even the classic car market grew during blackouts with auction houses and websites specializing in collector’s cars like the McLaren Senna and Bugatti Chiron Pur Sport. Suppliers of such elite engineers, curious enough to ask their customers why they buy such expensive cars during a pandemic, have received a relatively simple and unexpectedly identical explanation – except for the wording. Let’s call it the Covid-19-Carpe-Diem effect: “I asked my customers why,” said Winkelmann. “They said to me, ‘We had more time to think about our future and what would happen next. We decided where to put our money and – well, why not?’ Hallmark said every person who bought the $ 2 million Bentley Bacalar told him something similar: “After all of this, life will go back to normal and I’d rather be in the car than not in that car. Hallmark forwarded.” “So they said, ‘Why not?” For more articles like this, visit bloomberg.com. Sign up now to stay up to date with the most trusted business news source. © 2021 Bloomberg LP

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