Private Jet Travel Shows Year-Over-Year Growth
More good news for luxury marketers : Private jet travel is on a clear upswing meaning more wealthy
consumers will be potential customers. ARGUS TRAQPak data is serial-number
specific aircraft arrival and departure information on all IFR flights in the US
(including Alaska and Hawaii). The table below reflects business aircraft
activity data for September 1-30, 2009 vs. September 1-30, 2008.
The September results show business aircraft
activity at its highest level since October 2008. TRAQPak data indicates that
September private aircraft activity increased 2.7% from August 2009.
By Doug Gollan
Elite Traveler
- Photographs by Toby McFarlan Pond, styling by Noemi Bonazzi
The economic slowdown has slammed the brakes on the fortunes of high-end car makers around the globe. BMW, the world’s largest luxury-maker, which posted a 19.5 percent drop in first-half unit sales, is leaving the prestigious Formula One motor-racing series this year. Porsche is racked with insider battles—including the recent departure of its CEO and CFO—as its merger with Volkswagen nears completion, helped along by a cash injection from the Middle East. Audi, a unit of Volkswagen, reported first-half profit down 25 percent from the year before. Results are also lackluster for other high-profile brands like Rolls-Royce, Jaguar and Saab (which General Motors is aiming to sell by the end of the year). And against the backdrop of a government bailout of the U.S. auto industry, and increasing pressure to produce smaller, more fuel-efficient cars, GM said it is selling its hulking Hummer brand to a company in China. Ford is also selling its Volvo brand. A leading bidder? Geely Group, one of China’s largest independent auto makers.
While the rest of the world stalls, China is rapidly becoming the most important market for high-end auto makers. Luxury-car sales grew 7 percent in China in the first half of 2009 at a time when the rest of the planet was shunning luxury purchases. Overall car sales have been climbing strongly, up nearly 20 percent over the same period, making the country one of the industry’s few bright spots—and turning it into the largest vehicle market in the world so far this year.
As the Chinese economy has blossomed, those at the top of the country’s economic pyramid have had ever more money to shop, particularly for one of the most visual totems of class status. Just three decades ago, a Flying Pigeon bicycle was the aspirational good for up-and-coming Chinese. Now, the global high-end auto market’s “center of gravity is moving eastward” to China, says Dieter Zetsche, chairman of Daimler, which sells Mercedes and Maybach cars. “Chinese consumers are redefining what luxury means for them, whether we are talking about automobiles, fashion or leisure activities.”
The Changed State of Luxury
A sign of the times: Rolls-Royce Motor Cars chose the Shanghai auto show in April to announce the eagerly awaited name of its new, smaller and more dynamic sedan, the Ghost, which had previously been known only by the code name RR04. Rolls-Royce’s decision was a “tick in the box for the importance of the China market,” says Richard Carter, a spokesman for the company, which is now a unit of BMW. Among the other new cars making their global debuts in Shanghai this year: the Mercedes S-65 AMG, one of its most expensive high-performance models, and a new Porsche sedan—the first four-door sedan that the company has ever produced—the Panamera.
China is the No. 1 market in the world for Mercedes’ high-end flagship, the S-Class. Mercedes sales in China are off the charts this year—up by 50 percent in the first six months of the year, compared with the same period in 2008. “It’s just a question of time before China will be a luxury-car market on a par with the U.S.,” says Jochen Goller, vice president of marketing for BMW in China. Ferrari sold more than 200 cars in China last year. For Audi, China is the second-biggest market in the world, after Germany. “In the long-term, I believe China will be the biggest Audi market in the world,” says Dietmar Voggenreiter, president of Audi’s China operations.
To help satisfy the market, Mercedes, BMW and Audi now all manufacture high-end sedans with Chinese joint-venture partners at factories in China. Daimler has built an advanced design center in Beijing to help the company stay abreast of design trends and consumer preferences in China, while research and development staff work on special equipment, such as sophisticated entertainment and navigation systems. “You have to adapt yourself to the market, to the culture and to the expectations of your customers,” says Ulrich Walker, Daimler’s Beijing-based chairman and CEO for Northeast Asia.
- Maserati
- Maserati GranTurismo S Automatic
Luxury-car makers are also moving to aggressively expand networks of dealers and service centers, pushing out from China’s more affluent East Coast metropolises and into smaller cities in more remote parts of the country. Even Rolls-Royce is moving into the hinterland. Its dealership in Chengdu, capital of southwestern China’s Sichuan province, sold more than 10 cars last year—roughly equal to the number sold by Rolls-Royce in some small countries. A highway connecting downtown Chengdu to the airport is lined with high-end car dealerships—from Porsche and Ferrari to Mercedes and Audi. One man who runs a family mining business north of Chengdu was visiting the Hummer showroom there recently, looking at an H2. He said he was thinking of buying one to keep his Mercedes S-Class sedan from getting dinged up on visits to the mine. Government and military elites are driven around in luxury makes. The Audi A8 is a favorite among Beijing big shots. And BMW SUVs roamed the roads of Sichuan after last year’s earthquake, when senior army officers showed up to supervise relief efforts.
‘It’s just a question of time before China
will be a luxury-car market on par with the U.S.,’
says the VP of marketing for BMW in China
Chinese luxury-car buyers share the preoccupation with quality and prestige common to wealthy consumers elsewhere in the world. But there are also differences. After the leveling of the Communist Revolution and the decades of economic stagnation that followed, China’s affluent are, by definition, nearly all nouveaux riches. McKinsey & Co. estimates that about half of wealthy people in China (which McKinsey counts as those with annual income of at least $37,000) today didn’t qualify as wealthy even four years ago. And they often don’t have as much experience with luxury brands. China’s luxury-car buyers are also far younger than their counterparts in North America or Europe. The average buyer of a Mercedes S-Class sedan in China is under 40, Walker says, while in the U.S. or Europe, the average customer is over 50. Most luxury-car owners in China still ride in the back of their cars, which are driven for them by chauffeurs. So they prefer stretched out, longer wheel-base models with more elaborate backseat entertainment options, such as flat-screen TVs and DVD players and other amenities, such as refrigerators. Since GM’s Buick line has a more upscale image in China than in the U.S., Buicks sold there have more luxurious interiors.
Foreign luxury marks don’t face much competition from domestic makers, although some, such as Geely Group and Chery Automobile, have aspirations to build luxury cars in the years ahead. Geely showed a concept car at April’s Shanghai auto show reminiscent of a Rolls-Royce, but with just a single seat in the rear for the car’s presumably very important passenger. Where domestic companies are stirring up competition is in producing smaller cars for buyers who are focused on fuel economy (BYD, a local company that has received a large investment from a U.S. company controlled by investor Warren Buffett, is racing ahead with battery technology for electric cars). In turn, this has encouraged foreign manufacturers to offer hybrids and other gas-sipping options in China.
Rolls-Royce says that Chinese customers also tend to favor some of its flashier options, such as illuminated hood ornaments, which use light-emitting diodes to draw attention to the “Spirit of Ecstasy” statuette above the front grille. Rolls-Royce’s Carter says that more than 80 percent of cars sold in China are custom-built, a higher proportion than in any other market, with customers asking for humidors and other special additions. Partitions separating backseat passengers from the driver are also popular. “A lot of business is done in the back of Phantoms,” Carter says.
Gordon Fairclough is a senior correspondent for The Wall Street Journal in Shanghai, he has previously been based in Seoul, New York and Bangkok.
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