Don't Worry, Super Rich People Are Still Buying Cars

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Back to new-cars Published 6 months ago Written By Lyle Daly
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It's not a great time to hold stock in almost any car brand, as sales have hit a major slump this year.

You can't say that slump is because of a lack of effort, either, as this year has seen those brands spend the most on promotions and discounts since 2009. It would be a great time for people to buy new cars, but most aren't biting. The only exception has been luxury cars, where some brands have seen sales growth. Why is there such a disparity between sales in mass market car brands and luxury brands?

It comes down to the difference between people's wants and needs. Most people buy cars to fulfill a need for transportation. This year, not as many people have needed new cars, in no small part because cars become more reliable as technology advances. More reliable cars last longer, so drivers don't need to buy new vehicles as often. However, luxury car buyers don't choose a luxury car simply because they have a need for transportation, they choose those types of cars as status symbols. Mass market cars and luxury cars both perform equally in terms of driver satisfaction ratings, so it's not a matter of luxury cars offering a more satisfying experience. The demand for luxury cars isn't based on what people need but what they want, so it can grow while demand for standard cars falls.

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Luxury Brands

Brands such as Lincoln, Cadillac, Lexus and Mercedes are selling well, according to the latest data.

So, how have individual car brand stocks fared in 2016? Most have fallen at least a small amount, and a few have suffered significant drops. Among American automakers, GM is down 6 percent, while Ford is down 12 percent. Hyundai and Toyota have both done well in comparison, only dropping 2 percent. Honda is down 4 percent, while Nissan and Volkswagen are both down 7 percent. It gets much worse for BMW, Daimler and Fiat Chrysler, which are down 17, 18 and 27 percent, respectively. If you're wondering how electric cars are doing, Tesla is also having a tough time, as it's down 15 percent.

However, the numbers get much different when you look at the luxury car side. While Fiat Chrysler has taken a huge loss, its recent spin-off, Ferrari, has seen a slight improvement in its stock. An Indian car company, Tata Motors, is up 40 percent this year, and most of its sales come from its luxury brands, Jaguar and Land Rover. Even brands that have taken a hit this year overall are still seeing improving sales for their luxury brands. Volkswagen may be down, but its Audi brand is up, and has been improving its sales for a whopping 68 straight months. Lincoln, Cadillac, Lexus and Mercedes are also doing well sales-wise. Whether or not the rich are getting richer, they're still buying nicer and nicer cars, and automakers are undoubtedly thankful for that.

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