It lacks the scale of Detroit or the glamour of Paris, but the New York Auto Show is establishing itself as a fixture on the car industry’s calendar. Especially if you’re selling upmarket motors.
New York is the eastern corner of what industry executives call America’s smile a pattern that stretches west to California and south to Miami in which high-end car makers harvest most of their sales.
Despite the efforts of General Motors (NYSE: GM - news) to reinvent the Cadillac and Lincoln as the select benchmark for American drivers, it is to Europe they still look for style on the roads. BMW (Xetra: 519000 - news) narrowly edged out
Mercedez-Benz last year to claim the crown as the biggest-selling, luxury car maker in the US, with sales of 281,460.
In that part of the industry built on tapping into people’s desire to show off their wealth, the American crown still dazzles the most. That is why British exclusive car makers Jaguar Land Rover and Bentley will be at the New York show when it opens to the public next week.
“The importance of the US is beyond the numbers,” says Kevin Rose, head of sales at Bentley, whose models include the Flying Spur and the Continental (Stuttgart: 879538 - news) . “It’s a benchmark for luxury because its customers are so demanding. If you’re not succeeding as a luxury brand in the US, you’re unlikely to elsewhere.”
While Bentley competes in the highest end of the market you will not drive away in one without writing a cheque for at least $170,000 (£112,000) both it and JLR are drawing confidence from the broader recovery in car sales across the US.
After car sales collapsed from more than 17m annually before the financial crisis hit, to 10.5m as recession engulfed the US in 2009, they have been climbing steadily since. They reached 14.4m in 2012 and will rise to 15.3m this year, automotive research firm Polk forecasts.
Although the economy’s recovery has been lacklustre by historical standards, it has one characteristic helping anyone selling luxury: the wealthiest have got wealthier. The earnings of the richest 1pc of Americans climbed just over 5pc in 2011, according to the US Census Bureau, just as 80pc of earners saw incomes slide. “No one needs a premium car,” said Andy Goss, who runs Jaguar Land Rover’s operations in the US. “It’s a want.”
One that the British car makers tapped into effectively last year. Bentley’s North American sales climbed 23pc, while JLR’s rose 11pc to 55,675. The increasing demand has so far extended into the first quarter of the year, with Jaguar Land Rover posting an 18pc annual increase in sales in February. “This is a very hot market,” says Goss.
But analysts and executives are quick to point out that America is also the most competitive place in the world to sell cars. The success of Bentley and JLR is dwarfed by rival European car makers including BMW, Mercedez-Benz and Audi (Other OTC: AUDVF - news) . “The US has become increasingly important to the Germans because sales in Europe are dreadful,” notes Michelle Krebe, an analyst at auto research firm Edmunds.
The competition means that, as with the smartphone market, select car makers need to ensure a steady flow of new models to fuel sales. JLR used a couple of days last week at the New York show which are reserved for the world’s media to launch a new version of the Range Rover Sport and the latest Jaguar XJR Sedan. Bentley has unveiled a new Flying Spur and a version of its Continental.
Goss says that Jaguar Land Rover’s push into America has accelerated since it was taken over by India’s Tata Motors, which bought the car maker from Ford (NYSE: F - news) for $2.3bn in early 2008 as the US economy began to falter. Bentley has also been under foreign ownership since 1998, when Volkswagen (Other OTC: VLKAY - news) paid Vickers $917m to snatch it away from rival bidder BMW.
“There is something inherently British about the brand and there is great warmth towards it,” argues Bentley’s Rose. Despite the importance of that Britishness, the car makers say it is not something they need to market aggressively as US customers already understand it. It is a claim, however, that is somewhat belied by JLR’s decision to pick James Bond star Daniel Craig to test drive the new Land Rover Sport at the car show.
What is clear, is that Americans’ taste for British luxury is helping to support jobs in the UK. Bentleys sold in the US are made at its factory in Crewe, while Jaguars and Land Rovers are built in Halewood, Castle Bromwich and Solihull.
In contrast to the German car makers who have invested billions of dollars in US manufacturing facilities, neither JLR or Bentley have plans to do so. “It would be difficult to get the scale there against the size of the investment we would need to make,” Rose explains.
For now at least, Bentley and JLR are focused on their battle to persuade America’s wealthiest to take a bet on a British car.