Rolls Royce boom shows not all Japanese are worried about spending

Even as the interest among younger consumers to own a car slides in Japan, the demand for luxury cars is booming

Japanese consumers are raiding discount stores for everything from cheap shampoo to furniture. When it comes to automobiles, it's the Rolls-Royces and BMWs that are moving off the dealer lots.

Luxury imported cars costing 10 million yen ($96,500) or more surged 19 per cent in the first nine months to 13,605 units, reaching the highest proportion of imports in a decade. At the other end of the spectrum, deliveries of minicars such as the Nissan Dayz, which starts at about $11,000, have slumped 11 per cent to 1.3 million units.

Premium carmakers including BMW and Rolls-Royce Motor Cars are wagering the gains at the top end will continue by adding dealerships with flashy new showrooms. Luxury sales represent a tiny pocket of strength for Japan's auto industry, which has grappled with a prolonged slide in interest among younger consumers in owning cars. With kei cars accounting for about one in three automobiles sold in the country, weak demand has meant industry sales are on track to shrink for a second straight year.

"There's wealth in the market," Peter Kronschnabl, chief executive officer of BMW's Japan unit, said in an interview. "The typical customers for cars over 10 million is a self-employed person and they are the backbone of the Japanese economy. There's still a decent number of these businesses which are doing well."

BMW, which has nearly tripled sales of its 7-Series sedan in Japan this year, said dealers will spend about euro 400 million($444 million) updating facilities through 2020. The German carmaker opened one of its largest flagship stores in Tokyo this year.

Rolls-Royce has added two new dealerships this year and plans to open one next year, doubling its number of outlets in Japan, according to CEO Torsten Mueller-Oetvoes. Deliveries have jumped 30 percent this year, driven by the new 37 million-yen Dawn coupe.

"We've put the additional dealer partners on stream because we've seen the potential," Mueller-Oetvoes said in an interview in Tokyo. "There's quite some wealth in this country and for that reason we see a lot of potential customers for Rolls-Royce."

Other high-priced brands boosting sales include McLaren, which has doubled registrations this year through September, according to the Japan Automobile Importers Association. Aston Martin sales have gained 14 per cent and Lamborghini's are up 7 per cent.

For Hideo Kumano, chief economist at Dai-ichi Life Research Institute, the trend is baffling and difficult to explain. His best guesses at what might be driving the gains: baby boomers reaching their 70s may be buying a set of wheels they long desired, or newly rich from backing tech startups.