Here’s a little known fact: recession boosts luxury sales. Why? Mostly because the affluent class is looking for investments in which they can park their money during recession. As stocks dip or fluctuate endlessly and the residential real estate market is cooling off, the rich are turning to luxury assets like art, yachts, jets, and luxury objects. French luxury design house, Hermès, the company known for its Birkin bags that cost over $10,000, has outperformed market expectations this year. In July 2022, Fortune reported that Hermès’ “shares soared as much as 8.5 percent after it said its recurring operating margin reached a historical high of 42 percent.”
“This set of results confirms that Hermes is likely going to be the most resilient luxury goods player in a recession,” Luca Solca, analyst at Sanford C. Bernstein, wrote in a note.
But other companies also outperformed in 2022 besides Hermès. In order to understand that wealthy buyers continue to desire and buy expensive goods despite the stagflation, one only needs to look at the luxury segment of the automotive industry. So, if you’re wondering why luxury car manufacturers had a stellar performance in 2022, continue reading to find out.
Rolls-Royce, Polestar And Lamborghini Beat Records
Italian luxury car manufacturer, Lamborghini, had a very good 2022. The car manufacturer delivered globally 9,233 vehicles, up 10 percent from 2021. Looking at the macro-regions, Asia performed really well, with Lamborghini sales being up 14 percent, followed by America, where sales surged more than 10 percent in 2022. When it comes to the U.S. market, Lamborghini delivered 2,721 units, up 10 percent from 2021. However, Lamborghini wasn't the only luxury automaker that escaped the effects of the deteriorating economic climate. Meanwhile, Porsche delivered 309,884 vehicles globally in 2022, which represents a 3 percent increase over 2021. The German automaker delivered 79,260 vehicles in North America, equal the amount from the previous year, despite supply chain difficulties.
Rolls-Royce also had a very fruitful and sucessful 2022. The British luxury automaker sold 6,021 vehicles in 2022, up from 5,586 in 2021. “Rolls-Royce's sales were led by the Americas, with the U.S. remaining its top market with about 35 percent of sales,” says Automotive News Europe. At the same time, Volkswagen-owned car brand, Bentley closed 2022 with 15,174 cars sold globally. This represents a 4 percent increase over 2021. Polestar, a high-end EV manufacturer, broke all records in 2022. The EV company delivered 21,000 vehicles in Q4 2022, which represents an all-time record. Let’s not forget that Polestar delivered 9,215 units in Q3 2022 and 21,200 units in the first six months of the year. According to Inside EVs, preliminary data shows that global sales for 2022 reached 51,500 units, which represents an 80 percent increase over 2021. As for Tesla, Elon Musk’s company also had a very productive and successful 2022 despite controversies, the Twitter files, Tesla stock plunging, and scandals. Tesla delivered 1.3 million vehicles in 2022. This represents an increase of 40 percent over 2021. Moreover, the EV company manufactured nearly 1.4 million vehicles, which represents an increase of 47 percent from the previous year. Lucid Group also manufactured 7,180 vehicles in 2022, surpassing the guidance range. Without a doubt, luxury EV manufacturers also over performed in the last year.
On the negative side, Mercedes-Benz delivered only 2,043,900 vehicles in 2022, down 1 percent from 2021. However, despite a minor decline in global sales, the top-end market outperformed, which is good news. According to a Mercedes-Benz press release, the top-end category soared in the fourth quarter, growing by 14 percent to 83,800 units. For instance, sales of AMG grew by 28 percent, Mercedes-Maybach sales increased 25 percent, and sales for the G-Class surged by 15 percent in the fourth quarter of 2022.
This Is Why 2022 Was A Great Year For Luxury Car Manufacturers
Because of inflation, growing fuel costs, and higher maintenance and repair costs, middle-class American buyers have chosen to invest in high-quality, luxury vehicles that will last longer and will have a lower ownership cost over the long-term. The affluent class, meanwhile, saw a surge in wealth during the Covid-19 pandemic years; thus, the affluent class sought out ways to spend the funds that it saved.
"The recovery has been very beneficial to high-end consumers," Tyson Jominy, vice president of data and analytics at J.D. Power, told Yahoo Finance. "Without exotic vacations to go on ... consumers are spending on a lot of durable goods. They're buying a lot of handbags, they're buying a lot of timepieces and sneakers. And of course, they're buying luxury cars as well."
Sources: Lamborghini, Mercedes-Benz, Porsche, Fortune, Automotive News Europe, Yahoo Finance, CNN