Why premium car buyers won’t switch brands
Johannesburg – Many consumers might not be able to afford their luxury car of choice but they haven’t abandoned their brand of choice nor moved out of the luxury car segment. Instead, they’re remaining brand loyal – but buying down.
The trend is not unique to the motor industry; Covid-19 has had a massive impact on consumer spending, with consumption down across all industries. Thrifty motorists are opting for the best deal (irrespective of brand).
According to consulting firm McKinsey & Company, even in countries that have partially reopened, consumer optimism remains muted and spending intent is below pre-crisis levels. There has been a shift to mindful shopping, including some trading down for value.
More than 60% of global consumers have changed their shopping behaviour, many of them for convenience and value. In many cases, this has meant deserting a brand.
In South Africa, it is fascinating to see that while they have less money to spend, motorists aren’t shunning luxury brands. Instead, they’re buying a cheaper model from their chosen luxury car supplier.
Volvo’s statistics confirm the trend. Traditionally, the XC60 has been the top seller. This was confirmed yet again in the first six months of this year, with total global sales of the XC60 at 78 761 (2019: 97 203), followed by the XC40 with 68 359 (2019: 61 864) and the XC90 with 37 918 (2019: 47 818).
However, in contrast with diminishing global automotive volumes, XC40 sales grew in the first six months of the year. Things look similar in South Africa. Sales of the XC40 are eclipsing the XC60. In fact, XC40 sales have grown by 5% this year, compared with last year. The XC40 has outperformed the XC60, selling 5% more last month. Both models were supported last month with a sales offer of a fixed interest rate of 7.25%. The offer continues until the end of next month.
Greg Maruszewski, the managing director of Volvo Car South Africa, says there are various reasons for the trend.
“First, Volvo is a brand about people and the planet. This promise appears to be resonating with consumers who are now more interested in supporting businesses and brands that care,” he says.
This sentiment is borne out by McKinsey & Company, which notes that consumers have a heightened awareness of how businesses interact with stakeholders, communities and society more broadly.
Maruszewski says it can be attributed to affordability and accessibility.
“Interest rates are at an all-time low. Couple this with the fact that the full exchange rate impact has not been priced in yet – and these luxury cars represent a compelling proposition.
“Finally, astute motorists realise that the standard features of a luxury car, specifically a Volvo, mean that consumers are buying a piece of ‘safety’. Even the XC40 comes with City Safety as standard. This is especially important when everything around us is considered ‘unsafe’ (due to the spreading virus),” he says.
McKinsey & Company concurs. “In most countries, more than 70% of survey respondents don’t yet feel comfortable resuming their ‘normal’ out-of-home activities. For more than three-quarters of consumers who adjust their behaviours due to the health crisis, the easing of government restrictions won’t be enough. Instead, they’ll wait for guidance from medical authorities, reassurance that safety measures are in place, and the development of a Covid-19 vaccine and/or treatments,” it reports.
A luxury car providing exemplary safety features may well just provide some of the reassurance they’re after.
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