Burberry’s flagship store in London. Since it took over its own distribution network in China, it has shuttered half of its stores in that country.
Although September U.S. car sales were down compared to year-ago figures, this cooling may have had extraneous factors that have little to do with product per se. Like the timing of Labor Day, which had an effect on what is otherwise a time when lots of people go out for that Back-to-School ride. And like what was then the possible (and then actual) government shutdown, which would put a whole lot of people (e.g., government employees) in a position where they’d best not get another loan.
A 27-month streak of increased sales came to an end. But no one should lose sight of the fact that at this point, sales are up about 8% for the year, which is nothing to sniff at.
The question, of course, is whether car sales have cooled. Probably not. According to market research firm R.L. Polk, the average age of a car on the road today is 11.4 years. Without question, cars are built better and better, year after year, and longevity isn’t as much of an issue as it was when there was the notion of “planned obsolescence,” which really meant that the plan was that the thing would fall apart at some point, though no one was sure quite when.
The point is, the American consumer is not all that keen on having things that are out of fashion, and say what you will about cars from that period, more than a few are a bit, well, fashion-backward, to put it mildly.
There is still opportunity for growth.
Still, for many car makers, especially purveyors of luxury products, there is an abiding fascination with the Chinese auto market. The Chinese people, at least those who can afford it, are highly fashion sensitive, as well, and the Western brands have considerable appeal, across the board.
For example, Mercedes-Benz reported that for the third quarter of 2013, its global sales were up 18%. Its growth in the Chinese market was up 26.3% for the quarter, and that one in six Mercedes sold on the globe in the third quarter was sold in China.
But there was a small but perhaps telling piece run by Reuters on October 7, not about cars but about trench coats. The CEO of British fashion company Burberry, Angela Ahrendts, told the French newspaper Les Echos that this year the Chinese economy would have its slowest growth in 23 years and, “This Chinese slowdown is maybe not a temporary accident but a new normal.”
Which is not to say that the Chinese market for luxury goods—cars or coats—is going to dry up, but that it is evidently slowing down.
Apparently Ahrendts is looking at other countries for what had been Chinese-like growth opportunities.
Labor Day scheduling and shutdown government offices notwithstanding, the U.S. market continues to have strength and appeal.
Incidentally: The biggest market for Mercedes-Benz cars? The U.S.