Analysis of the Luxury Car Market

Luxury cars, defined as those valued at over $150,000, account for a small portion of vehicles sold but loom large in drivers’ imaginations. The most famous brands have instantly recognizable, iconic designs that set future trends; they also provide superior performance that commands a significant price premium. The strong appeal of these vehicles can significantly boost a company’s valuation and enhance its ability to offer other luxury products and experiences. Moreover, the luxury segment appears to hold a greater profitability potential for industry players in a global automotive market with limited volume growth expectations.

We surveyed and interviewed more than 150 people around the world who had made or were considering a purchase of a luxury car to learn more about this influential market. The respondents represented a wide range of wealth segments, but the vast majority had annual incomes between $200,000 and $1 million. Our focus was on their needs and motivations throughout the entire purchase and ownership life cycle. What factors prompt customers to select a luxury car and how loyal are they to brands? And what aspects of the luxury-car ownership experience are most important or fall short of expectations? Given the recent rise of electric vehicles (EVs), we also examined the nuances of this submarket to determine whether buyer preferences and habits differed. Overall, we covered more than 70 critical questions, and some of the major findings are synthesized in this article.

A diverse and eclectic customer base

Luxury-car buyers share a love for leading-edge vehicles, but their reasons for purchasing a high-end brand can vary. In our survey, we identified four distinct buyer personas:

• collectors/connoisseurs
• innovation seekers
• performance enthusiasts
• personal-status buyers

The pursuit of perfection and the importance of heritage

When we asked survey respondents what they sought in luxury goods, they most frequently mentioned the concept of perfection. This term connotes a lofty, flawless state of existence, but most respondents said it referred to the high quality of a product’s physical characteristics and its durability. A luxury item’s “heritage”—its distinctive and timeless brand perception—came in close second to perfection, highlighting the critical importance of preserving a brand’s history and designing products that can stand the test of time for generations.

The importance of customer segmentation

A highly detailed customer segmentation is critical to understand the market. Traditionally, car manufacturers primarily relied on socio-demographic data, such as age, gender, income, to understand customer preferences. We also considered personal preferences, purchase motivations, and preferred features to build four customer personas and depict the results of our survey. Brands that systematically capture and emphasize these preferences in their customer interactions are more likely to connect with their target buyers.

The pure joy of driving—while retaining value

When making a luxury purchase, survey respondents tended to focus on the experiences that ownership could provide—for instance, opportunities to travel or engage in social events. The status associated with owning a luxury item was of secondary importance. A significant portion of respondents mentioned investment potential and collection as key purchase drivers.

Omnichannel communication is not optional

Luxury-car buyers gather information about vehicles from multiple sources, including online platforms, in-person events, and digital media. To maximize sales, luxury OEMs must monitor and curate their presence across independent channels and touchpoints. These efforts are particularly important during the consideration phase of the purchase journey, when customers are evaluating brands and models.

Luxury brands cannot rest on their laurels

Luxury OEMs with a strong reputation can leverage their heritage to attract buyers, but they cannot be complacent. In such a dynamic, competitive environment, newcomers with a solid proposition can progressively win market share from players that do not satisfy customer expectations.

Chinese luxury brands may find a global niche

Many luxury-car buyers historically gravitated toward European brands because of their long and distinguished reputations. For Chinese OEMs, many of which are now seeking global market share, the odds may be particularly low because of customer perceptions. As with brand switching, a customer’s persona can influence attitudes.

Exploring the electric-vehicle option

EVs are drawing a great deal of attention in the current automotive arena. How does their appeal extend to the luxury segment? In our survey, about 20 percent of respondents declared that they would consider buying a luxury battery electric vehicle (BEV) in the near term, and roughly the same percentage would consider a hybrid. Openness toward luxury EVs is highest in Asia.

Lower residual values are the main problem for luxury EVs

Respondents who are delaying or refusing to buy a luxury EV cited many different reasons for their decision. The top reason was related to the unclear residual value of used EVs. OEMs must take deliberate steps to address this concern.

The appeal of luxury EVs varies across vehicle body types

An electric powertrain has a very distinct set of characteristics and features. We tried to understand which EV types might be most appealing to luxury-car buyers to determine whether certain vehicles might generate more interest.

Exacting standards and high expectations for maintenance

Our survey reveals a clear pain point in the luxury-car ownership experience: discontentment with current maintenance services. Luxury-car providers could improve the customer experience by accelerating technology usage to anticipate and avoid failures.

A stress-free experience is paramount

Luxury buyers want a hassle-free experience when maintaining their vehicles. Many buyers do not want to deal with registration and bureaucratic issues. A significant number of luxury-car buyers would opt for stress-free maintenance services if they were available close to their residence.

A love of driving will keep the market strong

The luxury-car market has maintained its momentum. Our survey reflects the market’s strength, with respondents expecting to buy and enjoy luxury cars more in the future. These findings bode well for the future, and the insights from our survey can help OEMs and others develop a strong luxury playbook and find the best opportunities in this thriving market.

FAQ

1. What is the definition of luxury cars in this study?

2. How do customer personas influence the luxury car market?

3. Why are Chinese luxury brands facing challenges in the global market?

4. What are the main concerns for luxury EV buyers?

5. How can luxury-car providers improve the maintenance experience for customers?

Conclusion

The luxury car market is a dynamic and evolving space with unique challenges and opportunities. By understanding customer preferences, market trends, and the impact of new technologies like EVs, luxury OEMs can position themselves for success in this competitive landscape. It is essential for brands to prioritize customer satisfaction, innovate in product offerings, and adapt to changing consumer behaviors. With a focus on excellence, heritage, and customer-centric strategies, luxury car manufacturers can thrive in an ever-changing automotive industry.