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Sales of Rolls-Royce, Bentley and BMW are rising as cheaper brands lag behind

BERLIN - An increase in luxury car sales and the shift from scarce semiconductors to the most profitable vehicles helped many carmakers make robust profits last year, even as sales of ordinary vehicles lagged behind and supply chain disruptions paralyzed car production.

Faced with the double blow of the pandemic and the lack of chips and other components, most automakers had to cut production during the year. Due to a generally robust demand, many chose to move the available resources towards their most expensive - and most profitable - vehicles in an attempt to protect their margins.

Other types of manufacturers have prioritized large ticket products for similar reasons, making it harder for consumers to find cheaper alternatives. Car manufacturers have also benefited from a bump in the demand for the more expensive models.

The most luxurious brands like Rolls-Royce, Bentley, Porsche and BMW have reported record sales. With international travel stalled during the pandemic, and many flashy spending opportunities closed to them, a young generation of luxury car consumers went on a shopping spree last year.

"We're hardly affected by the chip shortage," Alain Favey, sales manager at Bentley Motors Ltd., which is owned by German carmaker Volkswagen AG, told The Wall Street Journal.

“The process in the VW Group is very centralized. One of the elements to decide on allocation is the profitability margin. From that perspective, we are prioritized, so we managed to get all the chips we needed, ”said Mr. Favey.

Bentley sold 14,659 cars last year, a 31% increase from the year before and a record for the company. Porsche, also owned by VW, sold 301,915 cars, an increase of 11% worldwide. Both brands had growth in the US, Europe and China.

By comparison, VW's namesake, its largest business measured in unit sales, struggled all year to keep its factories in operation due to chip shortages. The main factory in Wolfsburg worked under capacity and had to scrap shifts all year round.

As a result, sales hit a 8.1% drop to 4.9 million vehicles worldwide. Sales in China, the brand's largest single market, fell 14.8%.

VW's mixed performance reflects that of other mass market manufacturers: While conventional sedans, hatchbacks and station wagons languished, sports cars and new electric vehicles made big gains.

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In the US, BMW sales grew by 21% as the best-selling luxury brand for the third year in a row, selling 336,644 vehicles. Toyota Motor Corp.'s Lexus came in second, selling 304,476 cars, or 11% more than the year before.

Tesla Inc. was able to circumvent some of the effects of the chip shortage, and a full year of sales of its latest Model Y SUV helped increase global deliveries by 87%. In the US, Tesla outperformed Mercedes-Benz, which reported sales in the US of 276,102 vehicles in 2021. Tesla does not divide its sales by region, but Ward's Intelligence, a consulting firm, estimates that Tesla sold about 299,000 vehicles in the US last year.

Rolls-Royce, owned by Bayerische Motoren Werke AG, whose bespoke super-luxury cars have starting prices of more than $ 300,000, sold record 5,586 cars last year, an increase of 49% over the previous year.

Martin Fritsches, president of Rolls-Royce Motor Cars Americas, told the Journal that buyers of super-luxury cars like Rolls-Royce are younger today. The average age of a customer is around 43 years old, which means many of their customers are in their 30s.

In part, Mr Fritsche said, Rolls-Royce's wealthy customers have been protected from the hardships many felt during the pandemic. They benefited more from the economic recovery, the cryptocurrency boom and soaring stock prices. And many of the buyers are first-time owners of Rolls, he said, including young entrepreneurs who became rich in the stock market and cryptocurrencies.

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Bentley sold 14,659 cars last year, a 31% increase from the year before and a record for the company.

Photo: ali Haider / Shutterstock

New electric cars were another driving force for growth. BMW, which outperformed many of its chip-squeeze competitors, sold 2.5 million vehicles last year, an increase of 8.4%. Of the total sales, the company sold 103,855 fully electric vehicles.

"Our goal for 2022 is to more than double the sales of fully electric vehicles," Pieter Nota, BMW's sales manager, told Journal. He said BMW was well supplied with chips throughout 2021, and through new direct relationships with chip manufacturers, he expected to get through 2022.

Mr. Nota said the effects of the chip shortage are likely to continue to be felt in the first half of this year, but added that BMW's efforts to alleviate the crisis through orders and direct relationships with chip suppliers should help ease the impact again this year.

Porsche said its electric sporty sedan, the Taycan, sold the company's iconic 911 sports car last year, marking a symbolic shift as even Porsche customers begin to embrace electric cars.

IHS Markit, a global industrial consultant, predicts that sales of new light vehicles will increase by 3.7% this year to 82.4 million vehicles, up from 2.9% in 2021, when growth was limited by supply chain disruptions. It expects sales of new light vehicles in the United States to increase by about 2.6% this year to 15.5 million vehicles.

General Motors plans to phase out almost all of its gas and diesel vehicles by 2035. Leading this transition is the first fully electric Cadillac. WSJ's Mike Colias visited a GM test site for a tour and an exclusive interview with GM President Mark L. Reuss. Photo illustration: Alexander Hotz

With the onset of the pandemic and widespread factory closures in 2020, car production fell about 16% from 2019 to 74.6 million vehicles, according to Wards Intelligence and LMC Automotive, consulting firms. They said the automotive industry took some of this back last year, with global production rising about 2% to 76.2 million vehicles. They predict that global production will increase by 13% to 85.8 million vehicles this year, still below pre-pandemic levels.

Despite record sales, Mr. Fritsches that Rolls-Royce will remain a small, intimate luxury brand that focuses on creating experiences for its customers. To appeal to younger customers, Rolls-Royce connects owners through an app called Whispers, which you can only access if you actually own a Rolls-Royce.

"Our customers are looking for the bespoke experience," said Mr. Fritsches. "I can guarantee you that volume is not and will never be a focus topic for us."

Write to William Boston at william.boston@wsj.com

Copyright © 2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

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