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US auto industry back on track but luxury cars keep richest in the fast lane
Monday, January 21, 2013

When the Detroit auto show opens to the public Saturday, hundreds of thousands of car enthusiasts will be treated to one of the most upbeat shows in years. US car sales are rising once more, and even trucks, which suffered the biggest hit in the recession, are back in vogue. But there's no doubt who are the real winners of this year's show: America's 1%.

Even before the show officially opened, the rich were getting a sneak peak. Last Saturday at The Gallery, a private event held in a convention hall of the MGM Grand in Detroit, luxury lovers got a sneak peak at the latest cars from Bentley, Ferrari, Lamborghini, Maserati, Rolls-Royce and other manufacturers of expensive motors a week before hoi polloi. Tickets were $500 apiece.

On the show floor for last week's press preview, the staff of those very same manufacturers had the biggest smiles. Last year was a great year to be a luxury car manufacturer, and this year looks even better. Dr Dieter Zetsche, Daimler's lavishly moustachioed boss, told reporters he can't make enough S-Class Mercedes to keep up with demand. Last year was the final year for the current S-Class luxury sedans.

"We sold volumes that we hardly got in the first and second years they went on sale," said Zetsche. Sales are booming in the US, as well as in China, Russia, India and other developing markets. Newly imposed tax hikes in the US are unlikely to dampen demand, he said. "Their ability to buy a Mercedes with these tax increases will not be limited," said Zetsche.

In Europe, the luxury renaissance is even more marked. European car sales plummeted 16% last December, the biggest fall in two years. Carmakers have shut five factories across Europe and announced 30,000 job cuts since July. All the mass market car firms are suffering in Europe.

Chrysler and Fiat's boss Sergio Marchionne said last week that the volume of sales in Italy last year had fallen to levels last seen in 1979. "They have lost 33 years' worth of volume growth," he said. But again the luxury market is booming. BMW, the world's largest manufacturer of luxury cars, overtook Fiat in European sales in 2012. BMW's US sales surged 39% in December.

Over at Bentley, last week a scrum of reporters gathered to watch Dr Wolfgang Schreiber unveil the GT Speed Convertible: top speed 202mph, 0-60mph in 4.1sec and all yours for a base price of $227,120 at Manhattan Motorcars.

"Ladies and gentlemen, the new GT Speed Convertible offers an unrivalled combination of luxury, performance and everyday usability," said Schreiber.

That "everyday usability" is clearly very appealing to a certain set of buyers. Bentley's US sales were up 23% last year with 2,315 cars delivered. Almost as many Bentleys were sold in China last year, where sales were also up 23%. Even in Europe sales were up 12%. In the UK, Bentley's mother country and home of the double dip recession, Bentley's sales were up 7% to 1,104 cars. How's that for an austerity drive?

Surrounded by beautiful models, and fenced off from the press by a velvet rope, Maserati unveiled the new Quattroporte at the show. The latest four-door beauty can do 191mph at top speed and costs about $130,000. This is the sixth iteration since Maserati unveiled the original Quattroporte in 1963.

Back then, buyers included the Aga Khan and the King of Spain. The Quattroporte went ever so slightly more mainstream in the 1980s with the Quattroporte III, "the businessman's Maserati". Sales between 1979 and 1989 were a little over 2,000 units. But the man on the stand says there are so many aging baby boomers with Maserati money these days that it's hard for the company to keep up with demand. By the end of 2015 Maserati expects to be making 50,000 units a year across its portfolio of cars. (Don't expect an entry-level model.)

The news is similarly swell over at Ferrari. Last year, Ferrari announced it had delivered 3,664 cars to dealers in the first half of 2012 and revenues were up over 11%. Chief executive Amedeo Felisa was predicting a record year. In 2011, Ferrari sold 7,195 cars, also a record, up 9.5% when compared with 2010.

Detroit is a strange place to witness the luxury car renaissance. The city is recovering slowly from the devastation of the car industry's meltdown and the recession. According to the US Census Bureau median household income in the city was $27,262 in 2011 (the national average was $52,762). Incomes have been falling in Detroit since 2007 and the poverty rate is nearly three times the national rate, at 36.2% (the national rate was 14.3%).

The US car industry is on the mend. In America, it's clear that middle class buyers, and not just the rich, are returning to the car showrooms too. But the luxury market's performance shows once again that when it comes to the economic recovery, the rich are in the fast lane and the poor have been left on the hard shoulder.

Dominic Rushe in Detroit

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