A few hours ago Lamborghini released its latest and probably final version of the V10 Huracán as it approaches the hybridisation of its full line-up. The Huracán Tecnica. According to the Cor Tauri strategy, announced by CEO Stephan Winkelmann, and discussed here Lamborghini Reaches for the Stars with Stephan Winkelmann: Direzione Cor Tauri, over the next two years the company will renew its entire line-up and then move forward to release the fourth model which should finally introduce the full electrification at Lamborghini.
In the OEM’s history, the Huracán has been an extremely successful model, even more than the game-changing Gallardo before it. Also, thanks to the new updated releases it has proven to be resilient as well in its almost 10-year lifecycle. But then the Urus has come.
*Source: Lamborghini media
In the lower segment, however, the 2-seater sports car is somewhat losing relevance. Why is it happening? Can it still be the strategic answer for struggling automakers? And is this trend going to reflect on the top-end of the market as well?
Over the last few years, the “go-to model” to ramp up sales figures has been the SUV, and it is still the hottest segment at any level of the automotive industry. For a clearer view of the impact of SUV models on the luxury performance automotive market here are a few related pieces:
Lotus’s first SUV Eletre and China’s strategy for Europe
Aston Martin Strategy: Project Horizon and Future Vision
Ferrari Purosangue: Business Strategy with Product Diversification
Looking back 25 to 15 years ago, that role was up to the “entry-level” sports car. But since then, things have changed. One example now is Porsche’s 718 family with Cayman and Boxster.
It is well-known how during the 90s’ Porsche was practically saved from bankruptcy by the introduction of the Boxster. However, lately, the segment has stagnated for a few years.
Porsche 718 Boxster/Cayman deliveries by Year (2005-2021)
Apart from the clear effect of the 2008 financial crisis, the Cayman/Boxster range has been steady and has actually shown a slight downward trend since 2017 (considering also the virus outbreak impact).
The factors determining this dynamic are various.
1. The Pandemic
As just mentioned, the pandemic is definitely a factor affecting the sales of sports cars in lower sections of the market. A report from Forbes shows how these two years with Covid-19 have unequally impacted different consumers in the US. Luxury vehicles sales from $70,000 upwards have increased. Below that, up until a $40,000 price threshold, they have just remained stable, while between $40,000 and less than $20,000, the sales drop has been gradually more severe as the prices get lower.
*Source: Forbes
Also, while sports cars like the 718 are already in the premium pricing bracket, they represent the entry-level option. So while the super-wealthy are likely to opt for the top-of-the-line 911, younger customers or less wealthy ones will probably be more conscious about spending on a vehicle that does not provide everyday practicality. Porsche itself, in fact, claims that the average 718 buyer in China, its largest market, is 31 years old.
Car Industry Analysis confirms the trend reporting that over 2020 C and D sports segments in Europe suffered a -70% and -33% registrations respectively.
2. Chip Shortage
The lack of semiconductors supply following the lockdowns and the gradually recovering demand caused more sales delays and higher prices that even rippled into the pre-owned market. These factors have probably discouraged potential buyers from purchasing a sports car. So, the resources have likely been focused on everyday usable vehicles not just by consumers, but also by OEMs to reduce delays on cars more in demand.
3. Generational changes
Last but not least is the general change in preferences. SUVs today are generally preferred because of their practicality, and in many cases, they have just become more representative of the current lifestyle. Also thanks to technical development, automakers are able to produce sportier and more dynamic SUVs that offer a driving experience closer than ever to that of a sports car.
According to Road & Track in modern society, compared to the 1990s, financial conditions, and especially the housing market and even rent affordability are forcing millennials and genZs away from sports cars and car ownership in general.
Forbes too, along with financial reasons for younger generations, suggests a substantial underlying change in how they perceive driving as just a necessity to move from one place to another, and the ownership experience as a burden and a potential cause for concern. Not only that but it is suggested also that this combination of variables could be what eventually will drive the majority of people toward self-driving cars (when the technology becomes available). This would effectively negate the main value proposition of any sports car.
Going Forward
Going back to Porsche’s example, even though entry-level sports cars back in the day have done for OEMs what SUVs are doing today, it is difficult to imagine how the same situation could repeat itself. Especially considering that whatever market is present has been probably already captured.
This is where electrification could offer a new path. First of all in terms of appeal to younger generations. EVs are the most modern option and definitely closer to the way millennials and genZs are used to interacting daily. Secondly, environmental consciousness is also likely to play an important role in this potential development.
Unsurprisingly, as of now, there are no real full-electric affordable sporty options. Earlier last year though, Porsche showcased its vision for the future of this segment.
*Source: Porsche Media
Presented in the shape of a race car, the Mission R has been said to potentially represent the future direction for the next generation 718. Also, it will be the most technologically advanced model that Porsche will produce in the near future. Offering performance, and technology but with (relative) affordability in mind. This paradigm shift could be key to revitalising the interest in small 2-seater sports cars.
The luxury market
Certain trends seen in higher volume sections of the market have transferred to the top-end luxury one. Entry-level, more affordable options for customers to gain easier access to aspirational brands have been successful in the past. Both Ferrari California, and Lamborghini Gallardo have proven that.
The Huracán has done even better and has been a consistent seller so far, reaching what President & CEO Automobili Lamborghini America LLC Andrea Baldi said to be the physical production capability limit of around 2,500 units per year.
Lamborghini Gallardo/Huracán deliveries by Year (2005-2021)
*Huracán sales began in 2014, summing up with the last 265 Gallardo units.
With over 18,000 units delivered it is the best-selling Lamborghini ever, even though Urus will exceed this figure soon. The SUVs’ popularity, in fact, has taken the luxury market by storm as well.
However, even if luxury OEMs are boldly diversifying, extending their reach to attract different audiences, it seems highly unlikely that sports cars in this market will suffer the same fate as those from volume car manufacturers.
The main reason is that apart from luxury and exclusivity, the driving experience and car capabilities are not just part of the vehicle, but they are part of the brand. This is already a stronger value proposition. Plus, branding is much more important for luxury firms.
Secondly, luxury brands maintain exclusivity and resale value by limiting the production numbers. Even more so with the current trend of developing successive more focused limited runs, like we have seen earlier this year with the Aston Martin Vantage V12.
In the current market, the traditional 2-seater small sports car is not going back to what it was, and OEMs might decide to discontinue certain models (like Mercedes did with its SLC). While this loss of appeal could be part of the reason why we do not yet have an affordable fully-electric option on the market, some should arrive in the coming years. A different approach, like the one shown by Porsche to better communicate with younger generations, could prove to be the missing piece needed to revitalise this segment.
At the same time, low-volume manufacturers are gradually moving forward too, but thanks to the characteristics of the luxury market, its exclusivity, and the very own DNA of the majority of these brands, they are unlikely to see the same decline suffered by volume automakers.
