The Lebanese luxury car market may include the lavish brands Aston Martin, Bentley, Lamborghini, and Maserati, but traditionally it was the German manufacturers Audi, BMW, Mercedes and Porsche that made the sales. However, all that might be changing.
When the latest and greatest vehicles are unveiled on the market, the Lebanese take notice. “The latest model is usually the bestseller,” said Najib Debs, brand manager at Mercedes-Benz. For the high-end and luxury market, German brands still reign supreme. BMW, Mercedes and Porsche hold their positions at the top of the list in their class and origin, and top-selling luxury models such as the Audi R8 find a market here – just in small numbers. But there are also some new trends in the land of the cedars.
“Luxury cars — in the $60-200,000 bracket — in Lebanon do not reflect the purchasing power but rather the way of life,” said Nabil Bazerji, managing director of G.A. Bazerji & Sons, agents for Maserati, Lancia and Suzuki.
Lebanese have traditionally been a very brand conscious market, going for the latest models and spending was never proportionate to income. “It’s a Mediterranean thing,” explains Bazerji. “This is the greatest change in the market today: Lebanese are now more cost conscious and the buzz words many dealers hear are concerns about ‘low consumption.’”
The Association of Car Importers in Lebanon recently conducted a survey on luxury vehicles and found that they have lost a chunk of their overall market share over the past couple years, down from 15.6% in 2005 to 12% so far this year, according to Samir Homsy, chairman of the association. In many European markets, luxury brands take a higher market share of around 25%. In the Gulf this is even larger. Homsy attributes Lebanon’s lower market share to the high taxes that can total close to 60% of the invoice price of the vehicle, which do not exist in the Gulf or other markets. In the region, the heavy vehicle tax is only comparable to countries like Syria, Jordan and Egypt.
Uncertainty in the market
However, the total number of registered cars held relatively steady compared to last year. Expectations for 2007 were mixed as the series of bombings in May and June, traditionally the month where the season of summer sales begins, kept figures low. Further constraining sales was the assassination of MP Antoine Ghanem in September and the uncertainty about the presidential elections.
“We usually witness a two week drop when there is an incident,” said Debs, “which resulted in an irregular sales season.” Another characteristic surfacing is a “wait and see” attitude. For Charles Tarazi, managing director of the Porsche Center, “what used to take 15 minutes, is now taking 20 phone calls.”
The major trend that has emerged in the last two years is that buyers have downshifted their tastes to smaller engines and choose the less expensive models. While brand names still carry a lot of weight, consumers become more discerning when it comes to price, consumption and maintenance packages offered.
Mercedes has felt this down-shift and is noticing that customers are now thinking smaller is better. “We used to sell 50/50 between six-cylinders and eight-cylinders on the S-class, but now people have shifted towards six-cylinders. On smaller cars it also used to also be 50/50 between six- and four-cylinders, and now most are opting for four cylinders,” Najib Debs related. In the SUV segment, only V-6 are requested. “V-8s are not selling,” he said, adding, “People want smaller engines to decrease the price and lower fuel consumption.”
Keeping their market share
While numbers remain down across the board, many find that their market share has been relatively unaffected. Porsche has been able to maintain its market share of 40% for sports cars and its SUV, the Cayenne, hovers around 17% in that class. Jaguar, however, has seen its sales cut in half down from a height of 200 cars in 2005, although it has maintained its market share, largely due, say agents Saad and Trad to the lengthy warranty it offers.
With T. Gargour & Fils’ takeover of Chrysler, Jeep and Dodge dealership last year, aggressive marketing has taken some of the market share of the European-dominated market, according to Cesar Aoun, Chrysler Car Group manager. The declining dollar and fuel-efficient models have helped combat the stereotype of American cars having large, gas-guzzling engines and low resale values (Gargour has guaranteed the trade-in value of its vehicles).
Another company taking on the traditional European luxury marques is the slightly more affordable but equally prestigious Volkswagen. Their trademark high-powered, small engines make them a great alternative for those wanting to shift to more economic models, yet stay with European cars. Lebanese representative dealer Kattaneh is opening a new showroom devoted solely to Volkswagen in a bid to focus the brand.
“People want smaller engines to decrease the price and lower fuel consumption”
Currently, the Lebanese automotive sales do not exceed 15,000 vehicles a year, of which 1,500-1,800 could be considered luxury cars, i.e. ranging from $60-200,000. According to Bazerji, for a country of its size, Lebanon should be selling around 30,000 cars and in the most optimal of circumstances even 70-80,000.
Besides high taxes, the market of imported used cars is also cutting into new car sales with around 30,000 imported used models being sold every year. More and more, used cars are being imported from the US due to the favorable exchange rate giving the buyer a chance to purchase an upper-level car in place of a new lower-level car for the same price. As Bazerji points out, “People who cannot afford the latest BMW 7-series as a new model for $150,000 can purchase it imported-used for $60-70,000.”
