The COVID-19 pandemic has a profound effect on the luxury car market directly in the short term as the sales and production have witnessed a decline in 2020. Furthermore, the COVID-19 pandemic has greatly affected the spending power of every individual. After the restrictions were lifted the market gradually started gaining its lost momentum.

A significant rise in tangible luxury offerings in vehicles, shifting consumer preferences from sedans to SUVs, and increasing disposable incomes of consumers have been propelling the demand for luxury cars around the world. However, there are a few factors, such as an increase in import tariffs, which are expected to hinder the growth of the luxury car market. For instance; the US President-elect will increase the import tariffs on German luxury cars. The BMW and other German luxury car manufacturers might have to face a 35% import duty for cars not built in the United States.

As luxury cars are provide high level of comfort and safety features creating opportunities for the market. Also the growing trend of electric luxury vehicle across the regions fueling the demand of luxury car market. Major luxury car manufacturers launching electric variants of their vehicles due to growing environmental concerns and increasing fuel prices, which is also likely to accelerate the growth of the luxury car market over the forecast period.

Some of the major players in the market are Mercedes-Benz, BMW, Lexus, Audi, Volvo, Land Rover and Jaguar and Tesla. The other players in the market include, Ferrari, Lamborghini, and Porsche amongst others.

Key Market Trends

IC Engines Expected to Witness Slow Growth Rate

The IC engine is currently leading the market, however it is anticipated that the demand for IC engine vehicles will slow down over the forecast period. At present, major players, such as Mercedes-Benz, BMW, and Audi covers a significant percentage of share in the drive type market segmentation in the global luxury car market.

With the growing environmental concerns, owing to rising exhaust emissions, the governments, and environmental associations across the world are tightening the emission norms. As a result, the demand for sustainable and environment-friendly transportation, such as EVs, is increasing, with governments offering higher incentives and subsidies to the owners of these vehicles.

Asia-Pacific Expected to Lead the Market

Currently, China has the highest growth potential among all developing countries in the luxury car market. The premium carmakers, such as Audi, Mercedes-Benz, BMW, Lexus, and Volvo have always maintained positive growth in the Chinese luxury car market. According to the China Automobile Dealers Association, the luxury car dealers in the country sold 277,000 vehicles in April 2020, an 11.1% increase over April 2019. The luxury car sales accounted for 18.7% of the market in April, representing a 3.6% rise over April 2019 and a 0.4% increase over the market share in March.

During the COVID-19 peak when major European carmakers faced interruption in the supply chain which created an opportunity for the local companies to introduce their luxury models. For instance, the 2020 Hongqi H9 was by Rolls-Royce ex-designer Giles Taylor and other stylists Dinh Yanfeng. In China, Hongqi cars are only available for high-ranking government officials. China is also one the biggest market for the Mercedes-Mayback in 2019 Mercedes-Benz, sold around 12,000 luxury Maybachs in the country.

Competitive Landscape

Some of the key players of the luxury car market are Mercedes-Benz, BMW, Volkswagen Group, and Tesla. The market is highly driven by factors like advanced technology, more comfort, growing investment in EVs technology, and growing living standards of people around the world.

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