SUV demand is killing off-lease luxurious sedans



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    Luxurious automakers benefiting from red-hot demand for profitable SUVs and crossovers are coping with a behind-the-scenes headache due to simply how swiftly shopper demand has shifted away from their sedans.

    The glut of automobiles being returned after their leases expire disproportionately impacts premium manufacturers resembling Mercedes-Benz, BMW, Lexus and Audi, as a result of they rely extra on leasing than mainstream manufacturers. Gross sales for luxurious producers’ automobile fashions have dropped dramatically the previous couple of years, leaving them in a bind with each an excessive amount of provide and falling demand.

    “It isn’t essentially the overwhelming quantity of automobiles, it is the combination of these flood of automobiles,” Scott Keogh, president of Audi of America, mentioned in an interview final week at Bloomberg’s New York headquarters. “You are throwing all these vehicles into a pair years after it has evaporated and jumped into SUVs.”

    Luxurious automakers reported contemporary figures this week displaying simply how pronounced the choice for sport utility automobiles has develop into. Demand surged final month for fashions just like the Audi Q5, Mercedes GLE and Lexus GX, and slumped for sedans together with the Mercedes S-Class, Audi A4 and Lexus GS.

    Mercedes prolonged its gross sales lead for the yr, with the German model’s complete deliveries rising 1 %, excluding van fashions or Good small vehicles. With a 9.6 % gross sales acquire in October, Audi continued to slender its hole with Lexus, which reported a 7.7 % drop. BMW — which delayed reporting gross sales 24 hours following an IT subject — noticed October deliveries fall three.four %.

    The excess of luxurious coupes and sedans returning after leases poses apparent challenges to the used-car market. Considerably extra passenger vehicles had been leased a couple of years in the past than there’s urge for food for now — SUVs and crossovers have surged to 56 % of luxurious gross sales this yr via September, in contrast with simply 42 % three years in the past, based on car-shopping web site Edmunds.

    Till demand for automobile fashions stabilizes, the automobiles returning to the pre-owned market are going to be out of step with what shoppers need. And if provide and demand stay out of whack, it’s going to depress costs of coupes and sedans and have an effect on the new-car market. When automobiles aren’t retaining worth nicely, it makes leasing extra expensive, pricing shoppers out of the market or forcing producers to supply richer incentives.

    Due to the hot-selling Q5 and Q7, Audi’s common incentive spending per SUV has barely budged this yr, at $1,994 via October, the bottom among the many 4 top-selling luxurious manufacturers, based on Autodata Corp. However reductions on Audi automobile fashions have risen by about $391 per car to $four,796.

    Mercedes is spending $6,755 on incentives per automobile offered via the primary 10 months of the yr, up about $242, whereas Lexus is up $266 to $5,426. Solely BMW has diminished spending on passenger-car reductions, dropping its promotions by about $1,533 to $5,747 per car via October, information launched Thursday present.

    America’s SUV thirst hits luxurious manufacturers behind the scenes” initially appeared in Automotive Information on 11/2/2017

    By Gabrielle Coppola, Automotive Information


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