Published October 18, 2008
Sales of premium cars and sports models hit the brakes
By SAMUEL EE

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WHEN you are wealthy and worried about the current economic mess, you're more than likely to immediately stop buying more jewellery, wine futures and yes, that new car too.
Sales of high-end cars have plunged since the start of this month, with the lowest point being last weekend when some distributors of upmarket Continental cars reported zero bookings over the normally busy Saturday and Sunday period.
'After a week of non-stop news about bank bailouts and hundred-billion-dollar rescue plans, last weekend's order book was zero,' said an executive with a premium dealership. He explained that prospective buyers usually shop around for a car during the week, before coming in over the weekend to put down a deposit.
He said the last time he encountered zero weekend sales was during the Sars epidemic.
The executive was not alone. At least two other European franchises also did not manage to record any sales over last weekend. All those interviewed spoke on condition that both they and the brands they represent are not named.
At one high-end sports car dealership, this month's orders have so far plunged by 50 per cent, according to a source.
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'Generally, it's the cars which are in the $250,000 to $300,000 range that get hit first because they are mainly bought by people who got a big bonus or a promotion, what some would call the marginal owners,' he said.
The sports models in his showroom cost between a quarter and three-quarters of a million dollars.
He said sales of the more expensive models have also slowed down but not by as much.
'Those who buy $300,000 to $500,000 cars can lose 50 per cent of their stock portfolio but generally, they are still cash-rich,' said the source. 'So thank God there haven't been any cancellations.'
But he added that most well-heeled customers such as these may not want to buy anything for now.
'Maybe they are preoccupied with waiting for an opportunity to make more money with whatever assets they have left,' he speculated.
A manager of a premium marque agrees.
'We had a lot of showroom traffic last week but no one was signing on the dotted line. That means the product is still attractive, our advertising and marketing are still effective, but people are not willing to commit to a purchase yet. It's like the property market - they still have cash but are waiting to pick up a good bargain,' he said.
Another factor is tightening credit, added the manager.
'In a very weak market, most finance companies become more cautious with loans. They may not reject an application outright, but they will reduce the loan quantum from 80 or 90 per cent to 50 to 60 per cent if there is the slightest question about your credit standing,' he said.
Before the current credit crunch, local sports car sales had been on an uptrend. Last year, luxury sports cars - defined as those costing $200,000 or more - jumped 97 per cent from the previous year. In 2007, 659 units were sold by authorised distributors, that is, non-parallel importers - up 97 per cent from 334 units in 2006.
Driving sales in this luxury band were mainly models in the $250,000 to $350,000 price bracket, such as the Porsche Cayman, BMW 6 Series and M3, and Mercedes-Benz CLK-Class.
Together, the 659 units made up less than one per cent of the 81,493 passenger cars sold by authorised distributors in 2007 but they were more profitable than other volume models.
Still, the jury is out on how badly the high-end car market will be hit this year. One observer said expensive models such as Bentley, Lamborghini, Ferrari and some Porsche models - all of which start from above $700,000 each - are pre-ordered three to four months ahead of time.
He said: 'You won't see demand tapering off yet because there will still be deliveries. So up to December, it won't be an issue. But going forward, there is bound to be some reduction. If we're lucky, it will be 20 per cent down. If we're not, it could be 60 to 70 per cent. It's anybody's guess.'