The World’s New Rich Want Luxury

Chinese demand is slowing, but the world’s new rich still want luxury.

Rolls-Royce’s Wraith coupe has landed it in Kazakhstan.

Thanks to an abundance of oil and metals riches, the former Soviet republic has a big enough wealthy class to cause Rolls-Royce, Bentley and Maserati to open show rooms and service facilities in Almaty, Kazakhstan’s biggest city.

Where more people in the central Asian nation have ordered Bentley’s new SUV (sport utility vehicle) than in Russia.

With growth in China’s luxury market slowing, Kazakhstan and Azerbaijan are open makers of the world’s most expensive cars. Demand for upscale vehicles in frontier markets is forecast to grow more than 9% a year through Y 2020, compared with about 2% in North America and Europe, according estimates.

When a company sells only a few cars each day, as Rolls-Royce and Bentley do, a few rich people able to afford them can make all the difference, 4 of the 6 dealerships Rolls-Royce opened last year are in emerging markets: Azerbaijan, Cambodia, Mexico and Kazakhstan.

“We do see demand” in non-traditional markets, said Peter Schwarzenbauer, the BMW AG management board member responsible for Rolls-Royce. “That is why we’re going there.”

With memories of communism fading, the country’s well-to-do are keen to display their affluence, he said over coffee.

Kazakhs used to show off with fine horses, now with fine cars.

Of course, Kazakhstan and Azerbaijan will not replace China, where luxury car demand is forecast to grow 6% annually over the next 5 years. It is the world’s biggest car market. The $230,000 Maybach version the Mercedes S-Class sedan is selling at a pace of 500 cars a month.

Even so, “there’s also demand for our top-of-the-line models in smaller emerging markets like Vietnam or Kazakhstan,” said Ola Kaellenius, the Mercedes sales chief. “In this price range, even small sales volumes matter.”

Unlike ultra luxury buyers in more established markets, Kazakh customers do not usually customize their vehicles. Sales are more likely to be impulse purchases at events like a luxury expo this Spring in Almaty.

There are now about 250 Bentleys on Kazakh roads, including some 60 new vehicles sold since the British marque’s Almaty dealership opened in Y 2011, said Vladimir Toropov, who directs sales for Bentley and Maserati.

Deliveries will probably double once Bentley’s new Bentayga SUV is available, Toropov said, adding that his average Kazakh customer already owns 5 cars.

Stay tuned…

HeffX-LTN

Paul Ebeling

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