While the market for luxury cars is shrinking in the traditional markets in the West, it is growing apace in emerging markets. Africa’s love for the prestige luxury car has been growing as the number of wealthy individuals in Africa increases. The continent is rapidly becoming one of the most important global markets for the quality (and expensive) end of the market.
As has been the case for all luxury items, the global market for luxury cars has so far proven robust against the slings and arrows of the global economic downturn. However, the very first signs of cracks beginning to appear have caused the world’s leading motor manufacturers to revise down their projections for further growth in the foreseeable future.
The increasingly uncertain economic outlook for southern Europe and a slowing down of economic growth in China have made for what Dieter Zetsche, chief executive of Daimler, euphemistically referred to as a ‘competitive environment’.
He admitted recently that Mercedes-Benz profits for this year would fall while fellow German luxury car maker, Porsche, announced a reduction in output for next year and the necessity for austerity measures to cut costs. The luxury car market is far from in crisis, however, with demand from emerging markets taking up much of the shortfall.
South Africa has for many years provided the continent’s highest demand for luxury cars. As a proportion of the population, the luxury car market there is among the largest in the world.
The importance of South Africa to the market is reflected in the number of manufacturers who have launched premium models there recently, 10 in all, and the increase in the numbers of South Africans willing and able to pay for the extra quality.
Toyota is the largest car manufacturer in the world and holds the number one spot in South Africa for all segments. Indeed, 2011 saw the company finish top for the 32nd consecutive year. This despite the disruption to the supply chain caused by the recent tsunami and reputation damaging product recalls. The company’s luxury brand, Lexus, was first introduced to South Africa in 1993 and the brand has been pushed hard in the last few years, helped by a revamp of the country’s 12 dealerships more in keeping with the brand’s image.
There are 13 Lexus models available now, including hybrid versions, and Toyota are clearly banking on the range to help them maintain their leadership in the market.
Infiniti, the luxury brand belong to Japanese manufacturer, Nissan, was first introduced into the South African market 15 years ago but failed to be a success. Since then, the brand name has been rebuilt, not least of all by powering the German Grand Prix driver, Sebastian Vettel, to two Formula One world championships. In a bid to establish the brand in South Africa it will create ten dealerships for the brand by the end of 2013, employing some 300 people. Sales are not expected to be stellar at first but the company is concerned only with establishing the brand over the long term.
The Infiniti FX is one model that Nissan is pinning its hopes on. The 4×4 luxury sports utility vehicle (SUV) first appeared 10 years ago. The challenge its designers took on was to give it the bulk of a 4×4 but the aerodynamic lines of a much smaller sports performer.
The 4×4 luxury (SUV) is in high demand in Africa. While many owner would be reluctant to take such expensive cars off road, the state of Africa’s roads makes it often necessary. The Infiniti will have to go up against Porsche’s Cayenne. George Wills, the head of Porsche for the Middle East and Africa, said “The African continent, and in particular Nigeria, is of growing importance to us at Porsche.”
Unlike in austerity-hit regions like Europe, where ostentatious displays of wealth are considered poor form, the growing number of millionaires in Nigeria are not so coy. A fact not lost on the world’s peddlers of luxury items, who are acutely aware that Lagos’s Victoria Island boasts one of the highest concentrations of millionaires in the world.
Porsche recently opened a showroom in Lagos from which it hopes to sell, eventually, 300 units a year. At an average price of $133,000 each, the burgeoning elite of millionaires in the country can quite easily afford to add the European status symbol to their fleets. Porsche also plans to open a showroom in Abuja where roads are better and more suited to the low-slung 911 model. And as part of its brand building and a clear sign the company holds the Nigerian market in high regard, they are also planning to build a racetrack and owners club for Porsche drivers to get together and put their high-powered machines through their paces as nature intended.
The company has also opened a dealership in Luanda, Angola. Having put civil war behind it, the West African country is now benefiting from its vast natural resources, in particular oil and diamonds. Poverty is still a crushing problem there but extremely wealthy individuals are keen to spend their money. The 4×4 Cayenne is proving to be so popular that models spend no more than 24 hours on the show floor before being sold.
Customised for Africa
The unique challenge of building cars for Africa’s often poor quality and crowded roads has been met by the luxury 4×4 brand, Range Rover, who did not introduce their compact SUV, the Evoque, to Nigeria until it had been customised to suit the market. In this case, the car’s engine needed to be tuned to be compatible with the quality of fuel available there.
Range Rovers, with their conservative image, have traditionally been favoured by older customers. The British company hopes to attract a much younger, dynamic customer with the Evoque, with the majority of purchases being made by first-time buyers of the marque. Dr Cosmas Maduka, president of Coscharis Group, the authorised dealer for Range Rover in Nigeria said at the launch of the Evoque: “Our intent is to attract young buyers to complement our already established older customers. In other words, the Range Rover Evoque is designed to start appealing to customers who would never have considered the Range Rover brand before.”
The hiring of Nigerian actress, Genevieve Nneji, who was presented with an Evoque at the high-profile launch, is all part of the push towards a younger market.
The Evoque is a sleek, sporty-looking model that is smaller than other Range Rovers, suitable for city driving, but still copes well off road, a quality increasingly important for cars to sell well in Africa.
Also with ambitions in the African market is relative newcomer, Jeep. Unlike the compact SUVs that other manufacturers have brought to the market, Jeep’s Grand Cherokee SRT8, introduced to South Africa, Nigeria and other African markets, is an unapologetic brute of a car. It will have to compete in the Hyper SUV market with the Mercedes ML63 AMG and the BMW X5M, though it has the advantage in that it is the cheapest of them all. The African love for SUVs is certainly going to be well catered for over the next few years.
Another company looking to take a larger slice of the market in South Africa is the German manufacturer Audi, which is owned by Volkswagen. Figures for 2011 show that Audi had just under 20% market share in the premium, luxury class. Audi will head into 2013 with 28 dealerships, up from 22. This will in part be achieved by converting existing Volkswagen centres but also by the building of new premises.
The R8 GT Spyder went on sale in South Africa earlier this year as did Audi’s stab at the SUV market with the Q3. Also made available to car buyers were the S6, S7, S8 and A8 models with a possible hybrid on its way next year. In a highly competitive sector, Audi are hoping to gain an edge with Audi Connect, turning the vehicle into a Wi-Fi hub.
Mercedes v BMW
Mercedes and BMW continually vie with each other for number one status in the premium, luxury car market. In South Africa at least, Mercedes, with a raft of new models brought to the market in the second half of 2011 have overtaken their Bavarian rivals to assume leadership: 2012 has seen Mercedes push their C Class models hard and also introduce the M Class, B Class and new SL models too. The M Class, like the Infiniti, Cayenne and Range Rover is an SUV and in keeping with the competition, a sleek and agile town car that can cope with pot-holed roads and the sort of rough terrain it can be expected to encounter.
In the modern world, luxury and performance need not come at the expense of environmentally friendly technologies. Indeed, car manufacturers fall over each other in a bid to show off their green credentials.
Last May in South Africa, BMW launched the ActiveHybrid 5, the first hybrid-engined model from them. It was followed by the recent introduction of the ActiveHybrid 7 series, which itself will be followed by the smaller 3 series, also boasting the green, hybrid technology.
With more hybrid cars in the pipeline, BMW clearly sees a future for environmentally kinder luxury cars, and will hope that despite the accompanying price tag, the gambit will see them compete with Mercedes in the lucrative market.
And it is not only as consumers that Africa is making its mark in the luxury market. BMW South Africa recently secured an export licence to ship 3 series models made at the Rosslyn plant to China. The plant already exports units to the US and to other African countries. The new deal is a great vote of confidence for the factory and for the South African car industry as a whole. It is hoped that the plant will soon produce 90,000 units a year. Not everywhere in Africa, however, is seeing the luxury car sector doing so well. In 2011, government cutbacks in Kenya saw a drop in orders for luxury cars. The depreciating currency also contributed toward the unaffordability of brands.
Gloomy industry outlooks for 2012 appear, though, to have been unfounded. A recovery in the economy has massaged consumer confidence and sales have so far been up on the same period last year. This was also due to a shift in marketing strategies which went after wealthy, private individuals in the absence of government orders.
There is still a fear, though, that high fuel prices will check the sector’s recovery. BMW has been the star performer in Kenya so far this year, bucking the trend with an increase in sales over the same period last year. Mercedes had been the market leader in Kenya but its sales dropped dramatically, which has been the case across the board for the sector as a whole. Mercedes dealer, DT Dobie, claims demand was high but a faltering supply was responsible for the poor figures.
Jaguar has for many decades been established as a world leading brand in luxury motoring. The British car industry has had to be bailed out by foreign investors and the Jaguar now owned by India’s Tata, is no exception.
Now that the business is being taken care of the company can concentrate on doing what it has always done best: produce beautiful and exciting cars. Obviously not one of the popular SUV models, the new two-seater Jaguar F-type, low-slung, lightweight and fast borrows heavily on the company’s heritage and will compete head on with the Mercedes SLK and BMW Z4.
The new model is not available yet and should be rolling into African showrooms sometime next year. That’s a long way off, but it serves as an indication that the market looks to continue to be diverse even if dominated by the bigger SUVs.
The premium, luxury car market in Africa is an extremely competitive, not to mention crowded, one with new markets opening up and economies expand at a time when those in more traditional markets shrink or stagnate. Manufacturers are now pinning a great deal on these emerging markets, clearly recognising their importance to their future prosperity.
For the growing number of rich entrepreneurs, especially in oil-rich countries, the choice is dizzying. For everyone else, there is always hope.