J.D. Power Data and Analytics Vice President Tyson Jominy joins the Live show to discuss the demand for high-end vehicles and luxury durable goods.
– While the broader auto industry faced significant headwinds amid the pandemic, the luxury car market has apparently managed to thrive in the midst of it all. Joining us now to break it all down is Yahoo Finance’s Pras Subramanian, alongside Tyson Jominy, Vice President of Data and Analytics at JD Power. And Tyson, we just showed that chart that showed, really, the massive uproar that we’ve seen in purchases of vehicles over $80k, over $100,000. What’s the trend that JD Power is seeing in terms of these big price tag vehicles in this recovery? TYSON JOMINY: Yeah, and thanks for having me on, guys. I mean, certainly, the recovery has been very beneficial to high end consumers. Without exotic vacations to go on or entertainment options like Dave and Busters to go to, consumers are spending on a lot of durable goods. They’re buying a lot of handbags. They’re buying a lot of timepieces and sneakers. And of course, they’re buying luxury cars as well. And we’ve almost sold out of luxury cars. I mean, we could be doing a lot better. But as you said, I mean, we’re seeing sales triple above $100,000. PRAS SUBRAMANIAN: Hey, Tyson, Pras here, so looking at that product mix, right, that $80,000 car and $100,000 plus cars, you guys have seen in the first quarter here with preliminary data, you’re seeing that the sales mix jumped 100% for the $80,000 plus cars and almost 50% for the $100,000 plus cars. Beyond the wealth effect issues, what do you think is going on here exactly? Why are those higher priced cars so much more in demand and sort of outselling the cheaper cars? TYSON JOMINY: Yeah, I mean, well, you said it. I mean, they’re certainly outselling cheaper cars, first of all. I mean, when we go back to Q1 of 2020, right before the pandemic, sales of vehicles under $20,000 were outselling sales of $100,000 cars 20 to 1. Well, this quarter, it’s inverted, and sales of $100,000 cars are now outselling the low end cars 3 to 1. So it’s been a complete inversion. And now sales over $100,000 are running away with it. And so again, I mean, we see a lot of consumers– certainly the wealth effect is there. But there’s a lot of great cars, great features. We’re getting new vehicles up in that space. I mean, certainly the new 911, the new Escalade have certainly been driving demand to that end of the market. And consumers, they have a lot of cash to spend. And those luxury cars are a great way to get away. We’re not flying anywhere, so we want to travel in style. PRAS SUBRAMANIAN: And Tyson, you also noted that from a volume point of view, we’re seeing the $80,000 plus, $100,000 plus cars sort of take off through the last year and a half, two years. But in actually the first quarter, we saw a slight dip in those sales. What’s going on there exactly? TYSON JOMINY: Yeah, I mean, really right now, sales and demand are uncoupled in the US new vehicle industry. If we had more vehicles to sell, we would be selling more. But the real challenge is, by definition, luxury products are very volume constrained. I mean, that’s what makes them luxury. And so if we had more vehicles to sell, we would be doing better. But we can’t even really replace just the normal demand pace, let alone this increased level of demand we’re seeing. So right now, sales would be doing much better if we had more vehicles to sell, particularly that $80,000 and above price point. – Tyson, I want to get into the data question here, because I’m a little bit of a data nerd myself. But let’s say, for example, you’re looking at a Nissan. Now those might not be luxury vehicles, but when you look at a GTR, that would be considered perhaps by some to be a luxury vehicle. So how do you kind of bucket that out in the data here? And then secondly, there might be cases where because of dealer markups and inflation, cars that may have been on that line, let’s say $70k, are now suddenly $85k cars. So how do you kind of parse that out to make sure you’re truly looking at just luxury vehicles in this? TYSON JOMINY: Yeah, and we’ve looked at it both ways. I mean, whether you classify it by the nameplate, you know, Mercedes, of course, being a true luxury brand, but as you mentioned, vehicles like GTR are very much a luxury vehicle from a mainstream brand. But no matter which way we looked at it, we were seeing some pretty fantastic growth. Really, it starts about $40k we start seeing that space move. But the higher up the price point we went the greater, the gains we were seeing from pre-pandemic levels. So almost any way you cut it, once you get above $50, $60, and $80k, we really start seeing sales take off, whether it’s from a traditional luxury player, or whether it’s a luxury vehicle from a mainstream nameplate like you mentioned. But we’re seeing it. That growth is kind of coming everywhere, because consumers that have that disposable income really took to new vehicles pretty well. And it started pretty much with the pandemic. And it’s only gotten stronger, actually, even as we’ve seen the supply chain crisis really hit the auto industry now for the past year. PRAS SUBRAMANIAN: Hey, Tyson, so do you think that as we look forward through 2022, that this trend will just sort of continue and maybe even exacerbate, this skew between high priced cars and low priced cars? And kind of a short second part here, is that going to get worse as we see more EVs, more expensive EVs roll out into the market too? TYSON JOMINY: Yeah. I mean, we don’t see it slowing down any time, really through the end of ’23. So we’re talking about another 18 months or so of these kind of conditions persisting. We will continue to see these higher end vehicles doing well. And as you mentioned, EVs are coming into the auto industry from the top down, more or less. EVs tend to be more expensive than average. And so as those vehicles are coming in, we are starting to see consumer shift very rapidly towards EVs. And so demand in there is high, not to mention, of course, all the geopolitical risk and items that are impacting the auto industry right now, such as fuel prices are tending to drive a lot of consumers’ interest in EVs right now. – All right, well, a lot going on in that space. We will see if some of these supply chain issues change the picture for these luxury vehicles. But Tyson Jominy, Vice President of Data and Analytics at JD Power, alongside our very own Pras Subramanian. Thanks so much for bringing us that conversation.