How a Southern California startup is leading the luxury car market into the digital age – Forbes | Car Plazas

Luxury retailers saw profits jump during the pandemic

Much has been said about the “K-shaped” economic recovery fueled by the COVID-19 pandemic. Disposable income increased for those who benefited from these unique circumstances as common large expenditure items like travel were restricted. Loaded with this new supply of cash, many turned their attention and wallets to luxury goods.

Although the vast majority of luxury brands suffered losses during the peak of the pandemic, a handful of prestigious names have weathered the volatility better than others. According to a Northeastern University report, “Cartier reported a 30% increase in sales in the last three months of 2021 compared to the last quarter of 2020, while the Italian fashion house Prada earned 8% more this year than 2019 before the pandemic.”

Big hitters Louis Vuitton Moet Hennessy and Kering were able to outperform their small and medium-sized competitors thanks to a combination of brand reputation and e-commerce expertise. In June of last year, LVMH went so far as to announce a 5-year strategic partnership with Google
WELL
focused on AI and cloud-based innovation.

Consumers are increasingly comfortable buying a wide range of products online

Crucially, the resilience of luxury brands during the pandemic has been underpinned by increased consumer convenience in purchasing large ticketed items online. According to UNCTAD, global e-commerce sales were nearly $27 trillion before the peak of the pandemic. In recent years, the success of companies like Wayfair has increased
W
(an online furniture retailer) have disproved the notion that certain items are simply not suitable for digital consumption.

“While we have weathered the initial shock of the pandemic, we are seeing consumer confidence returning as many shoppers are now shopping online for the first time,” said Lyst’s Chris Morton.

Spillover effect on the car market

The auto industry has also benefited from this increased consumer confidence in relation to online shopping. Arizona-based Carvana was founded in 2012 with a valuation of over $50 billion and a 42% compound annual growth rate in 2020. Even so, the company controls less than 1% of the fragmented U.S. auto market. The untapped potential is significant: it is estimated that the used car market is larger than that of clothing or consumer electronics.

Many factors play a role behind the low digital growth in the used car market. The operational complexity poses a major challenge, along with the importance of test driving a vehicle. It’s easy to return a sweater that’s the wrong size or color – good luck trying to return a car with a bad paint job. However, that hasn’t stopped buyers from trying it. “There has been a fundamental change in the way the industry views online business,” Motorway executive Tom Leathes was quoted as saying by the Financial Times.

This opportunity for increased digital penetration has not escaped the attention of intrepid entrepreneurs.

A Los Angeles-based startup is poised to capitalize on the growth of the luxury car market and e-commerce

Motoren is a Los Angeles-based e-commerce startup specializing in used luxury and premium vehicles. A military veteran with extensive corporate strategy experience at CarMax
KMX
and Edmunds, co-founder David Chou modernized what has traditionally been a clunky, non-digital experience. With low overheads, data-driven pricing models and a digital-first mentality, Motoren is able to price its curated selection of vehicles competitively and transparently.

engines was able to attract consumers to this model. Less than a year after founding, the pre-seed startup surpassed over $2 million in monthly revenue and continued its rapid growth, recently expanding into a larger facility to accommodate its growing team, inventory and clientele accommodate. Although the majority of their customers purchase or trade in their vehicles remotely, local Southern California drivers can take advantage of their new office and fast, in-person checkout process.

Chou and his co-founder Austin Haldeman see engines not just as an e-commerce platform, but as a community for other car enthusiasts.

“We are car enthusiasts sharing our passion and knowledge of these marvels of modern engineering. We want to make sure we offer a great shopping experience and make sure our customers feel informed about their vehicle and can get the best out of it,” said Haldeman, a former Honda Racing engineer.

What chip shortage?

Adding to the appeal is the success of luxury automakers during the pandemic. Similar to their apparel peers, brands like Rolls Royce, Bentley and BMW have been able to increase sales and circumvent manufacturing challenges caused by the global chip shortage to tap into a younger customer base with savings. Bentley grew sales by a record 31% in 2021. Similarly, Porsche grew 11%, helped by increased demand in the US, Europe and China. Meanwhile, Volkswagen’s brand of the same name saw sales fall by around 8.1%.

“We are hardly affected by the chip shortage,” Alain Favey, Sales Director of Bentley Motors Ltd., was quoted as saying.

An additional tailwind for luxury car manufacturers is the increased demand for electric vehicles. According to The Wall Street Journal, “Porsche said its electric sports sedan, the Taycan, has surpassed the company’s iconic 911 sports car over the past year, marking a symbolic shift as even Porsche customers begin to embrace electric cars.”

Motoren is well positioned to capitalize on the trend of increasing digital and fully remote sales in a niche market. The types of premium cars that engines specialize in selling and buying require in-depth knowledge and specialist services, which Haldeman and its operations team are well equipped to provide.

Whether buying Bentleys or Breguets, one thing seems clear: the future of luxury is digital.

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