The global luxury car market is valued at around USD 410 billion and is projected to grow to about USD 566 billion in 2026 with a CAGR of approximately 5% during the forecast period (2021-2026).

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.

- For instance, China registered the highest number of new EV registrations in 2020.
- However, North America is expected to lead the luxury EV sales, owing to higher disposable incomes and the availability of EV infrastructure in the region.
- The automakers are launching EVs even in developing market. for instance, in August 2020, Mercedes-Benz announced the start of sales of its first electric vehicle EQC 400 in Brazil at its dealer network.

The growing demand for and focus on style, power, and advanced telematics, are expected to continue to propel the demand for luxury EVs.

- Additionally, luxury car component manufacturers are focusing on the development of next-generation smart mobility technologies, such as autonomous driving, personal voice assistance, and retina recognition, which are also expected to boost the sales of luxury EVs

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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.

India is also one of the growing markets in Asia-Pacific, but owing to COVID-19 the market witnessed its lowest figure. For instance, according to the Federation of Automobile Dealers Associations (FADA), the data of new vehicle registration for July 2020 reveals that the overall share of luxury car players in the total passenger vehicle market has contracted to 0.50% in the month, compared to 1.11% for the same month last year. July 2020 sales figures of the 10 luxury carmakers in India showed that demand dropped by 59%.

Mercedes and BMW dominated the luxury sedan segment of the Indian market. As in first three months of 2020 Mercedes, sold 2,386 units, followed by BMW India 2,365 units. And after decline in second quarter owing to pandemic the market gradully started gaining its momentum in last quarter. Morover in year 2020 Mercedes-Benz India sold over 7,893 new cars in the January-December period.

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. To provide a more luxurious experience to the people, major luxury car manufacturers are making investments in other luxury car companies to gain more market share. For instance; In 2020, Mercedes Benz increased its stake in Aston Martin from 5% to 20%. Aston Martin under its long-term strategy is planning to increase its revenues to GBP 2 billion and attain earnings of about GBP 500 million in the next five years period.

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