Volvo and Land Rover’s luxury-leading gains are looking vulnerable

A Volvo. (Bloomberg pic)

NEW YORK: Smaller players have been making the biggest gains in the US luxury auto market this year — a trend that could run out of gas if President Donald Trump decides to tax imported cars.

Volvo Car Group, which reported a 40% sales gain in the first half, has relied exclusively on imports to sell cars in the US Yes, the Chinese-owned Swedish brand invested US$1.1 billion in a US manufacturing plant, but it just opened last month and the first model the plant will produce — the new S60 sedan — made up only about 8% of the company’s US sales so far year. The next three biggest gainers, according to researcher Kelley Blue Book — Land Rover, Alfa Romeo and Audi — make no vehicles in the US

The president has ordered an investigation into whether auto imports pose a threat to national security, using the same trade law that led to tariffs on steel and aluminum. He is said to be contemplating a 25% tax on all imports of cars and parts, and in tweets and speeches, he assails the number of German luxury cars he sees on US streets. Industry executives, analysts and dealers — already facing the prospect of a second year of declining sales — have come out in force to lobby against a penalty on foreign-made cars, warning that higher costs would raise prices and that fewer models would be available.

“European manufacturers will start pruning the lines, or they’ll send things they know they can get the cost back on by charging a customer base that can handle it,” said Michelle Krebs, an analyst with car-shopping website Autotrader.

Volvo’s sales soared 35% in June, propelled by the top-selling XC90 sport-utility, made in Sweden, and XC60 SUV, which is made in both Sweden and China. Volvo managed to increase its US market share through May by 0.15%, the biggest gain of any luxury automaker, to 0.54%, according to Cox Automotive’s KBB.

Hakan Samuelsson, the Chief Executive Officer of Volvo, said last month that he would be forced to cut some cars from his US lineup if the auto tariffs come to pass.

Customers “would have less models to chose from and they would cost more,” he said at the opening of Volvo’s first US assembly plant, outside Charleston, South Carolina.

Land Rover had its best ever June last month, selling 6,982 units, a 21% jump from 2017, thanks to its Range Rover Sport. Alfa Romeo, with its Stelvio crossover, more than doubled sales to 2,249.

While growing nicely, those brands continue to lag behind the leaders. BMW brand sales rose 1.5% in June to 29,407, helping it narrow Mercedes-Benz’s luxury lead this year to 5,462. The South Carolina-made X5 SUV fell 5.1% from a year ago, while the new X3 compact crossover jumped 50%. Sales are up 2.9% in the first half of 2018.

Daimler AG’s Mercedes-Benz brand deliveries tumbled 9.7% last month, the biggest drop of 2018, as sinking sales of most models overwhelmed a 77% jump in GLC crossovers, which are imported from Germany. Sales for the brand, which operates a factory in Alabama and has held the luxury sales crown for the past two years, are down 1.9% through June.

Volkswagen AG’s Audi lost steam for a second straight month, eking out a 0.3% increase to 19,471, after growing 0.6% in May. The Q5 SUV, made in Mexico, and the German-built A4 sedan drove sales, which are up 4.8% this year. Toyota Motor Corp.’s Lexus slipped for a fourth straight month, falling 2.6% to 23,750 in June. Lexus deliveries are up 0.9% year-to-date.