Market for Super-Luxury Cars Booming Very Profitably
But some of the richest parts of the automotive market are seeing even bigger growth. Thanks to a big swelling in the ranks of the world's rich people, sales of super-luxury cars are booming.
Sales Booming for Some of the Most Exclusive Auto Brands
Some of the hottest-growing auto brands out there are also some of the most expensive. Sales at Bentley Motors grew 9 percent last year, to over 11,000. Rival Rolls-Royce posted a 12 percent gain, its fifth successive year of record sales. Lamborghini sales were up 19 percent. And Maserati sales surged a whopping 136 percent, thanks to the popularity of its new Ghibli sedan.
Those kinds of gains are expected to continue. Trade publication Automotive News recently reported that sales in the ultra-luxury segment are expected to grow by nearly 40 percent over the next five years, as more wealthy customers step up to buy these flashy rides.
This is a big deal for the companies that own these exotic brands. While the total sales numbers are small -- Ford (F) sells more pickups in a month than any of these brands sell cars in a full year -- the profits can be significant.
Maserati and sister brand Ferrari accounted for less than 1 percent of parent Fiat Chrysler Automobiles' (FCAU) global sales in 2014, but their combined pre-tax profits of about $750 million represented over 20 percent of FCA's total pre-tax income of $3.6 billion.
Even Small Sales Totals Can Mean Huge Profits
Volkswagen Group (VLKAY), which owns Bentley and Lamborghini along with the larger-selling Audi and Porsche brands, has shown the world how profitable luxury-car brands can be. Through the first nine months of 2014, sales of the four brands totaled just 16 percent of VW's total passenger-car sales -- but they generated over 80 percent of its passenger-car operating profits.
This surge in super-luxury sales hasn't escaped the notice of "ordinary" luxury brands. After Mercedes-Benz saw sales of its top-of-the-line S-Class surge 82 percent last year, it launched a super-big and super-opulent version of the S-Class, called the Mercedes-Maybach Pullman. The starting price? Over $500,000. If that's too much, it has also given the regular S-Class the "Maybach" treatment: The Mercedes-Maybach S600 can be yours for a mere $231,000.
BMW (BAMXF) is also likely to get in on the super-luxury act. Last year, the German brand showed a concept car, a big sedan that is thought to preview a future 9 Series, and sales of its $136,000 i8 -- a hybrid supercar -- have greatly exceeded its expectations.
But BMW already has a super-luxury presence: It owns Rolls-Royce. Mercedes' new "Maybach" models are an effort to compete more directly with the likes of Rolls-Royce and Bentley.
There are more super-luxury cars being unveiled at this month's auto show in Geneva, Switzerland. Audi is showing off its Lamborghini-derived R8 sports car, overhauled for 2015 -- with a new all-electric option that is sure to command a hefty price tag. Tiny-but-exclusive British supercar maker Aston Martin has hinted at a big debut this week as well. And Rolls-Royce, Bentley, and Lamborghini are all expected to introduce SUVs in coming years.
Luxury Innovations Will Reach the Mass Market in Time
The surge in sales of super-luxury cars (and SUVs) may not seem to have much to do with the mainstream vehicles that most of us buy and drive. But often, cars like Bentleys and Ferraris are test beds for new technologies and construction practices that make their way to the automotive mainstream in time.
Why? Cost and sales volume. Exotic materials like carbon fiber are still too expensive for the mass market. But the prices of super-luxury models can help cover the cost -- while giving the automaker valuable experience that can later be brought back to its existing models.
Last year, Ford CEO Mark Fields said that the production techniques his company is using to build its aluminum-bodied F-150 pickups were learned from producing aluminum-bodied Aston Martins and Jaguars, back when Ford owned those brands.
With technology more important to new cars than ever, we can expect even more of it to migrate from the super-luxury brands to the mainstream over the next few years.
Motley Fool contributor John Rosevear owns shares of Ford. The Motley Fool recommends and owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.