As the rich get richer, luxury car sales are booming
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As the rich get richer, luxury car sales are booming

It’s great news for luxury car companies, as an increasing number of high net worth individuals are spending their cash on Ferraris and Lamborghinis. Over the past five years, the number of people in the top bracket of wealth worldwide has risen drastically – there are 21% more people who are worth $30 million or more than there were in 2012, according to Wealth-X. And within that “ultra high net worth” grouping, it is the richest who have profited the most: the richest 100 people on the planet have seen their net worth increase by 39%. Automated driving and electrification might be driving the auto industry in general – but these deep-pocketed patrons are buying traditional sports cars.

auto prem1710

The extent to which luxury automakers are outperforming is incredible. Over the same five-year period in which the world’s five largest ultra premium carmakers have grown by 51%, the global auto market has increased by just 23%. Companies like Ferrari might be upping their production to appease investors – but the market is having no trouble gobbling up their cars, which is great news for the brand’s vaunted exclusivity.

Ferrari’s share price has appreciated by almost 100% year to date

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SOURCE: Yahoo Finance

Kyle Stock, writing at Bloomberg Pursuits, breaks down the financials underlying the trend in an easy to understand manner: “To a billionaire, buying a $200,000 car—say a 2017 Ferrari California—is mathematically equivalent to the average American household splurging on a $19 martini. It’s a brief intoxication with, at most, a fleeting moment of regret the next morning.”

The last five years haven’t been a flash in the pan – according to researchers at HIS Markit, annual sales of ultra-premium vehicles are set to increase by 19% in the next five years. As Ferrari and its peers race to get larger vehicles and more supercars to market, it appears the demand for them is growing even faster.

Disclosure

Dominion holds Ferrari in its Global Trends Luxury Fund.


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