What’s Going On Here?Rolls-Royce Motor Cars announced on Monday that it cruised to a record number of sales last year. What Does This Mean?2022 was a tough year, but there was consolation in the fact that we all faced some struggles. Some of us panicked about rent, others stressed about mortgage rates, and the uber-rich faced stark decisions like whether to choose a “Dark Emerald” Rolls-Royce or one in a charming shade called “Iguazu Blue”. See, despite the war putting a halt to Russian orders and Covid sapping demand in China, the UK-based carmaker could rely on gung-ho US demand to help it sell just over 6,000 vehicles last year – the highest annual figure in its 119-year history. And these weren't just any old Rolls-Royces: no, these beauties were decked out with all the trimmings, from boot-mounted racing drone holders to custom paint jobs – pushing the average price past $500,000 for the first time. That might be why the firm’s expecting to deliver a record profit when it reports results in the coming weeks. Why Should I Care?The bigger picture: Eminent emirates.
The Middle East was leading the charge on those fancy Rolls-Royce customizations – and that could tell us something about the future of luxury. After all, Barclays analysts predict the region will become one of the fastest growing luxury markets in 2023, and with high oil prices propping up its economies and tourism growing, that’s not too hard to believe.
Zooming out: Unlucky for some.
Rolls-Royce's record sales are the exception, not the rule. Data out earlier this month showed that US new vehicle sales hit their lowest point since 2011 last year (tweet this). And things could get even worse: inventory levels have been climbing, so if demand doesn’t grow, we could end up in a "demand destruction" scenario where supply outstrips demand. And that's a bad deal for carmakers: either they slash their prices (and profit), or they wind up with a fleet of unsold cars. | 