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Slowing economy no concern for Zagame
High-end luxury retailer Zagame says market downturn part of ‘normal up and down’
1 Apr 2019
ZAGAME Automotive Group (ZAG) chief executive Michael Winkler has revealed that the leading super-luxury motor vehicle retailer is performing “surprisingly strong” across the brands it represents at the top end of the market, despite the current slowdown which he described as simply part of the “normal up and down” nature of the business.
In an interview with GoAuto last week, Mr Winkler said strong pre-orders for super-luxury models have so far helped ZAG weather the slowing market and uncertain economic conditions, however the effects have been felt with the more mainstream brands in its stable.
“A strong economy is important, I think, to all vehicle segments,” he said. “Having said that, I think we’re still doing surprisingly strong in the upper super-luxury segment, and you have to remember that in that segment a lot of the cars – most of the cars, actually – are on pre-order basis.
“So what we’re delivering now and even within the next six-month period are really just deliveries for orders in the period leading up to the end of the last calendar year.
“So you don’t see those fluctuations as quickly materialising as you see in the more mainstream segments.”
Going forward beyond the current six-month delivery period, Mr Winkler said the company – which represents Ferrari, Lamborghini, McLaren, Pagani, Rolls-Royce, Bentley and Aston Martin, among others – has still had “very strong” recent enquiry for its top-class products, and apart from a typical slowdown over the Christmas period, interest at this end of the market has remained steady.
He acknowledged that mainstream brands under ZAG’s umbrella – including Alfa Romeo, Audi and Fiat – have experienced the effects of the slowing market, but said that with 40 years of experience in the industry, he saw the downturn as part of the natural peaks and troughs of the business.
“We do have a couple of premium brands in the medium segment, and if you’ve seen the VFACTS numbers there is a downturn in those particular … I’m talking about the premium luxury segment with Audi, Alfa and Fiat and so on, but that affects us,” he said.
“So we’re following that, but I’d say it’s a normal up and down at this point in time. I wouldn’t subscribe to some voices who are suggesting that there is a permanent strong downturn that we’re experiencing at this point in time. I don’t think at all.
“I’ve been in this business a long time – almost 40 years – and you see these slight up and downs all the time. Frankly, I’m not too concerned about it.”
Tightening lending practices among the banks and other factors have made it more difficult for buyers to secure loans to purchase cars, and Mr Winkler said ZAG has seen the effects of this, even in the super-luxury space where the majority of customers are able to purchase a vehicle outright.
For many wealthy buyers, the decision to finance comes from a standpoint of managing assets, and the recent crackdown on loan criteria has forced a rethink on how to purchase vehicles.
“Customers absolutely have had more trouble now (gaining approval for loans), in the wake of the (banking) royal commission,” he said.
“What is particularly interesting in the super-luxury area is that those tend to be customers who are looking at loans for the purpose of not being able to get into the brand or being able to afford the brand, but for them it’s much more of an issue of managing their assets.
“Quite often people who finance Ferraris or Lamborghinis or McLarens without exception are the sort of people who are choosing to finance because they have better things to do with their cash.
“And rather than what you would expect at the lower end of the market, where people take loans to be able to afford a car in the first place – that’s very much a difference.”
He said there have been instances with customers who possess over $30 million in assets, but due to low levels of cashflow it has been difficult for them to secure a loan.
According to Mr Winkler, around 40 to 60 per cent of Zagame customers finance their vehicles, and that apart from the final quarter of 2018, this has not had a particularly negative influence on the business.
“I suppose through the last quarter of last year there was a bit of a hiccup in that market because some people said, ‘Okay, it’s that difficult for me to be able to finance in that market, or I have to rearrange my affairs in order to buy a super-luxury car, I might just put it off a little bit’, which we did see in the last quarter of last year in terms of interest levels,” he said.
“But that has now normalised, and everybody’s got used to a different set of rules, if you will, and let’s just get on with it.”
The company has recently expanded into Adelaide with a new dealership for Lamborghini, Bentley and McLaren, and has just opened a bespoke repair, modification and restoration facility at its parts and storage site in Tullamarine, near Melbourne airport.
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