Shifting Gears: What Luxury Car Buyers Are Saying
How does the reality of owning a luxury car stack up against the dream? A recent McKinsey survey delves into the priorities, experiences, and future expectations of luxury car buyers. These vehicles, defined as those valued at over $150,000, represent a small segment of overall car sales, yet they loom large in the aspirations of many drivers. Their appeal is undeniable, but what do buyers truly seek?
The most recognizable luxury brands boast iconic designs that set industry trends. They also deliver superior performance, which comes at a significant price premium. The strong allure of these cars can significantly enhance a company’s valuation and boost its ability to offer other luxury products and experiences. Furthermore, the luxury segment appears to hold significant profitability potential, especially in a global automotive market where volume growth is limited.
To understand this influential market, McKinsey surveyed and interviewed over 150 individuals worldwide who had either purchased or were considering the purchase of a luxury vehicle. This research, conducted from October to December 2024, included respondents from Asia, Europe, the Middle East, and North and South America. The participants represented a diverse range of wealth segments, although most reported annual incomes between $200,000 and $1 million. The study focused on their needs and motivations throughout the entire purchase and ownership lifecycle.
Key questions included: What factors drive customers to choose a luxury car, and how loyal are they to certain brands? What aspects of the luxury car ownership experience are most important, or perhaps, fall short of expectations? Given the recent surge in electric vehicles (EVs), the study also examined the nuances of this submarket to determine if buyer preferences and habits differ.
One of the primary takeaways from this comprehensive survey is that while luxury car buyers value the driving experience and derive significant enjoyment from it, they also expect their vehicles to retain, or even increase, in value. This expectation stems from the fact that other high-end goods often appreciate over time, making buyers see this as an inherent characteristic of any luxury product. However, sustaining the residual value of modern luxury cars can be challenging due to the rapid advancement of vehicle technology. To maintain their appeal, all luxury car original equipment manufacturers (OEMs) must address this challenge and develop strategies to enhance residual value.
Cars of Distinction and Discerning Buyers
Luxury car buyers share a common appreciation for cutting-edge vehicles, yet their specific reasons for purchasing a high-end brand can vary. The survey identified four distinct buyer personas:
- Collectors/connoisseurs
- Innovation seekers
- Performance enthusiasts
- Personal-status buyers
Each group exhibits different vehicle needs and motivations, which influence every aspect of the purchase and ownership journey. This includes the amount of time spent researching cars, the advisors consulted when selecting a vehicle, the number of hours spent driving, and the likelihood of switching brands.
When respondents were asked what they sought in luxury goods, the concept of “perfection” was most frequently mentioned. This word evokes a state of being, but most respondents said it referred to the high quality of a product’s physical characteristics and its durability. Close behind perfection, was a luxury item’s “heritage” – its distinctive and timeless brand perception. This highlights the critical importance of preserving a brand’s history and designing products that can stand the test of time. Companies looking to attract customers with a passion for vintage luxury items should prioritize their brand image.
Exclusivity, emotion, and personalization, including the ability to customize features, also ranked high in the survey. Sustainability has also grown in importance and was the sixth-most-important attribute.
A detailed customer segmentation is crucial for understanding the market. Traditionally, car manufacturers have relied mainly on socio-demographic data, such as age, gender, and income, to understand customer preferences. This survey also considered personal preferences, purchase motivations, and desired features to build the four customer personas and illustrate the survey’s findings. Taking innovation seekers as an example, these individuals listed vehicle design, connectivity, and sustainability as their top three priorities, while personal-status buyers focused on brand exclusivity, design, and performance.
The Purchase Journey and Beyond
When making a luxury purchase, survey respondents tended to focus on the experiences that ownership could provide—for instance, possibilities to travel or participate in social events. For most, the status associated with owning a luxury item was of lesser importance. A full 86 percent of survey respondents cited the enjoyment of driving as their primary purchase motivation, far surpassing the desire to showcase their car as a status symbol, which was cited by 36 percent.
Moreover, a significant portion of respondents mentioned investment potential (32 percent) and collecting (16 percent) as key purchase drivers. Respondents under the age of 45 were more likely than older respondents to mention these factors.
Luxury car buyers collect information from various sources, including online platforms, in-person events (e.g., car club meetings), and digital media. In the survey, 40 percent of respondents researched general information about luxury cars once a week or more. This indicates that OEMs have numerous opportunities to connect with customers. Car manufacturer websites, magazines, and publications accounted for only 12.5 percent of all customer interactions related to luxury cars. These channels are often used to collect technical or commercial information after a customer has made a purchase decision. To maximize sales, luxury OEMs must monitor and curate their presence across independent channels and touchpoints, such as YouTube and social media sites focusing on luxury cars. These efforts are particularly important during the consideration phase, when customers are evaluating brands and models.
Only 37 percent of luxury car buyers are brand loyalists who indicated they would likely make a repeat purchase. Conversely, 35 percent said they would consider switching brands, and 28 percent said they were likely or very likely to switch. In this dynamic, competitive environment, new entrants with a solid proposition can gain market share from players that fail to meet customer expectations.
Customers fitting the innovation-seeker persona are most likely to explore new brands, whereas those in the collector/connoisseur persona are least likely to switch. Chinese OEMs may find a global niche. While luxury car buyers have traditionally favored European brands due to their long and distinguished reputations, newer brands, lacking the same legacy, credibility, and distribution channels, will need to work harder to attract customers. For Chinese OEMs, many of whom now seek global market share, the odds may be especially challenging, as 71 percent of survey respondents said they were unlikely or very unlikely to consider a Chinese vehicle for their next luxury purchase.
The Electric Vehicle Option
EVs are attracting significant attention in the automotive industry. But how does their appeal extend to the luxury segment? The answer depends on a variety of factors. In the survey, approximately 20 percent of respondents said they would consider buying a luxury battery electric vehicle (BEV) in the near term, with roughly the same percentage open to a hybrid.
Openness toward luxury EVs is highest in Asia (about 50 percent for BEVs and hybrids combined), compared to 36 percent for the Europe, Middle East, and Africa (EMEA) region and 33 percent for the Americas. A significant portion of respondents indicated they expected to buy at least one more vehicle fitted with an internal combustion engine (ICE), and 19 percent stated they would never buy a luxury EV. The unclear residual value of used EVs is the primary concern. Some luxury EVs rapidly lose value, often because battery and electronic component technologies evolve so swiftly. This fact may deter buyers because it is incompatible with the typical promise of a luxury good to retain, if not increase, its value.
OEMs must take deliberate steps to address this concern. They could attempt to optimize residual value when designing cars, extend battery life cycles, reduce the costs of servicing batteries, and assist customers with trading in their used EVs. These actions will be critical to ensure that luxury EVs increase their penetration beyond the innovation-seeker segment, particularly across North America and Europe.
An electric powertrain has a very distinctive set of characteristics and features, with high torque and power, delivered quietly and with minimal vibrations. However, many car enthusiasts appreciate an internal combustion engine’s sound and driving experience. As a result, the study sought to determine which EV types might be most appealing to luxury car buyers and whether specific vehicles might generate more interest. Twenty-five percent of respondents stated they were very excited to own large luxury SUVs (also called “super” SUVs), compared to 24 percent for sports cars and 18 percent for luxury sedans.
The preferred EV type varied significantly across regions and customer personas, showing once again how essential a detailed understanding of target markets is for luxury EVs.
A Smooth Ownership Experience
One clear pain point in the luxury car ownership experience is discontentment with current maintenance services. Although maintenance is a key factor in brand selection and loyalty, a significant number of survey respondents expressed dissatisfaction with the quality of luxury car service.
About 45 percent of survey respondents were not fully satisfied with their current maintenance experience; this percentage was even higher for EV owners, which could affect their brand perception and their willingness to repurchase an EV in the short term. Car manufacturers and dealers may be able to improve the customer experience by accelerating technology usage. They could analyze data from connected cars to anticipate and avoid failures or leverage digital platforms to book service appointments. Luxury car providers could also embed artificial intelligence into customer relationship management systems to detect and monitor negative service events. A brand acting swiftly to address negative customer experiences can turn them into opportunities to build trust.
Luxury buyers want a hassle-free experience when maintaining their vehicles, preparing their cars for long drives, or transporting them to racetracks or driving destinations. Many buyers do not want to deal with registration and other bureaucratic issues. A significant number of luxury car buyers complained that they struggle to find a solution that will allow them to have a stress-free ownership experience, and 49 percent said they would opt for full garage maintenance and management services if they were available near their residence. Connoisseurs and collectors were most likely to select that option (71 percent), followed by status buyers (58 percent). This preference is universal, regardless of region, and a growing number of businesses now support luxury car buyers in enjoying their motoring passion by providing stress-free maintenance options.
The luxury car market has maintained its momentum. Despite recent economic turmoil and geopolitical uncertainty, these cars retain their allure as aspirational products and continue to inspire strong emotions. The survey reflects the market’s strength, with 49 percent of respondents saying they expect to buy luxury vehicles more frequently in the future, and only 4 percent anticipate reducing the frequency of purchase.
Even more interesting, 64 percent of respondents said they expect to drive and enjoy luxury cars more than they do today. These findings bode well for the future, and the insights from this survey can help OEMs and others develop a strong luxury playbook and identify the best opportunities in this thriving market.
Authors
-
Michele Bertoncello Partner, Milan Email
-
Patrick Hertzke Partner, London Email
-
Simon Middleton Partner, London LinkedIn Email
The authors wish to thank Alexander Conway, Chiara Raichi, Daniele Rosso, Felix Rupalla, Francesco Melchiori, Laura Ford, Stefano Bergami, and Thomas Morel for their contributions to this article.
This article was edited by Eileen Hannigan, a senior editor in the Boston office.
