Five Trends Shaping Tomorrow's Luxury-Car Market and How to Ask Good Questions: 5 Ways to Discover the Truth

Five Trends Shaping Tomorrow's Luxury-Car Market and How to Ask Good Questions: 5 Ways to Discover the Truth

The luxury-car market is experiencing significant growth, unlike the mainstream market, which is stagnating. This growth can be attributed to the increasing number of ultra-high-net-worth individuals (UHNWI) and high-net-worth individuals (HNWI) who are investing in luxury vehicles. The luxury segments are expected to gain market share with growth rates ranging from 8 to 14 percent annually through 2031.

In terms of price segments, the $80,000 to $149,000 range is seeing rising competitive intensity due to new attackers entering the market. The $150,000 to $500,000 segment is expected to grow uniformly between nine and ten percentage points a year, while the $500,000 and above segment is experiencing strong momentum with the entry of multiple new players globally.

One of the driving factors behind the growth in the luxury-car market is the shift towards electrification. Both established luxury brands and new attackers are producing electric vehicles (EVs) to remain competitive. However, incumbents face challenges due to their legacy combustion-engine issues, while EV specialists have a core EV position to build upon.

In addition to electrification, luxury-car buyers in China are also seeking "smartification" in their EVs. However, many car OEMs lack the necessary consumer-centered DNA to meet this demand, risking their competitiveness in the market.

Furthermore, affluent consumers today expect continual engagement and personalized experiences when shopping for luxury cars. Luxury OEMs are adapting to this demand by adopting direct-to-consumer (DTC) models, combining direct sales, online interactions, and exclusive own-retail assets. This approach not only enhances the customer experience but also helps maintain price consistency and improves residual values.

Newer luxury OEMs are differentiating themselves from incumbents by focusing on customer experience as their core strategy. McKinsey's analysis reveals that leading EV specialists using a DTC model spend significantly less on the cost of sales compared to incumbent OEMs.

As for asking good questions, it is essential to understand the various types of questions and their purposes. Closed questions, which can be answered with a single word or short phrase, can be useful for obtaining specific information. However, they may limit the conversation and lead to awkwardness.

Open questions, on the other hand, encourage elaborate answers and allow the respondent to take control of the conversation. Story-eliciting questions can uncover valuable information by tapping into our natural inclination for storytelling. Chunking questions help navigate the level of detail in a conversation, either by zooming in or zooming out.

Calibrated questions, developed by former FBI hostage negotiator Chris Voss, start with "how" and are effective in eliciting information and keeping negotiations going. They put pressure on the counterpart to come up with answers and contemplate problems.

The Columbo method, inspired by the famous TV detective, involves creating a relaxed atmosphere by asking casual open questions before dropping a crucial question. This method keeps the respondent engaged and potentially reveals unexpected insights.

Finally, Alexander's question prompts individuals to reassess their assumptions and decisions by asking what new information would make them change their mind. This question promotes analytical humility and encourages critical thinking.

In conclusion, the luxury-car market is experiencing significant growth due to the increasing number of ultra-high-net-worth individuals and high-net-worth individuals. Electrification and the demand for personalized experiences are shaping the future of the luxury-car market. To navigate this market successfully, luxury OEMs should consider adopting a direct-to-consumer approach and focusing on customer experience.

Actionable Advice:

• 1. Embrace electrification: Invest in developing electric vehicles to remain competitive in the luxury-car market.

• 2. Adopt a direct-to-consumer model: Combine direct sales, online interactions, and exclusive own-retail assets to enhance the customer experience and maintain price consistency.

• 3. Ask effective questions: Use a combination of closed and open questions, such as story-eliciting, chunking, calibrated, and the Columbo method, to elicit valuable information and keep conversations engaging.

By understanding the trends shaping the luxury-car market and mastering the art of asking good questions, businesses can position themselves for success in this evolving industry