March 5 (Bloomberg) -- Rolls-Royce, Lamborghini and rival luxury carmakers that just five months ago said they’d buck the recession are finding they’re not immune.

The new millionaires of Asia and the Middle East have curbed spending, executives from companies including Rolls and Ferrari said in interviews at the Geneva Motor Show this week, torpedoing a market they’d counted on to spur growth after the banking crisis eroded orders in Europe and the U.S.

“Conventional wisdom has it that premium manufacturers do better in a downturn because people with more money can weather the storm,” said Michael Tyndall, an automotive specialist with Nomura in London. “This time it’s different.”

With demand from traditional buyers tumbling after the financial crisis cost 280,000 banking jobs, carmakers are responding with more modest models. Rolls, whose flagship Phantom starts at 300,000 euros ($380,000), will start making the 200,000-euro RR4 in 2009. Porsche SE, maker of the iconic 911, added the cheaper Boxster and Cayman in recent years and will offer the family-size four-door Panamera from September.

Rolls-Royce, the U.K.-based top-end brand of Germany’s BMW, says demand is falling fastest in the once high-growth locations of China and Dubai. Volkswagen AG’s Italian Lamborghini division said yesterday that China has turned into a tough market after previously supporting sales.

“There was a point where premium carmakers thought the U.S. decline would be partly compensated by the rise of emerging markets,” said Nomura’s Tyndall. “That story has started to unravel.”

Fading Optimism

Lamborghini’s worldwide deliveries rose 1 percent in 2008 to a record 2,430 vehicles, supported by sales in China and other emerging markets. That won’t be the case this year, Stephan Winkelmann, the division’s chief executive officer, said yesterday in an interview at the Geneva show.

“Of course we feel the impact of this crisis,” Winkelmann said. “China is a difficult market; no doubt we’re having problems there.”

The CEO had said on Oct. 2 at the Paris Motor Show that China and the Middle East were showing strong demand and that the expansion of Lamborghini’s dealer network to “new wealth islands” around the world would stave off a decline.

Rolls-Royce has “a certain degree of insulation, but we’re not immune,” chief Tom Purves told Bloomberg Television on March 3. Spokesman Andrew Balls said yesterday that the fall off in China and Dubai is all the more obvious because the two produced such “spectacular” growth in the past.

Purves had said at the Paris show that Rolls was in a “much better position than most everybody in the industry,” with a six- to nine-month order book, and that luxury cars would fare better than others in the slump.

Smaller Model

Rolls-Royce, a unit of Bayerische Motoren Werke AG, is presenting a prototype of the smaller, “less formal” RR4 luxury sedan in Geneva to target a larger customer base. The car is slated for production later this year or early in 2010 and will cost from 200,000 euros to 250,000 euros. Bracknell, England-based Rolls sold 1,212 cars last year, up 20 percent.

Luxury U.K. automaker Bentley Motors, a stable mate of Lamborghini in the VW group, also said that sales to China and the Middle East are suffering.

“There is a dip in emerging markets, no doubt about it,” spokesman James Rosenstein said today by telephone. “At the beginning people thought the luxury sector wouldn’t be affected, but it has been, just like everybody else. There’s a feeling of ‘wait and see.’ I think it’s mainly an issue of confidence.”

Biofuel Beast

Rosenstein said it’s vital to continue offering new models to stimulate sales, even in a recession. The Crewe, England- based company chose the Geneva show to unveil the new Continental Supersports, a 621 horsepower, 204 mile-per-hour machine which runs on biofuel as well as gasoline.

Stuttgart, Germany-based Porsche said March 2 that fiscal first-half deliveries plunged 27 percent to 34,266. The company reckons sales should be buoyed by recently-introduced updates of the Boxster and Cayman, together with a diesel-powered Cayenne SUV that goes on sale this year and the new Panamera, its first four-door sports car, priced at 94,575 euros.

Consumer spending is falling worldwide as plunging stock markets and the recession erase wealth. U.K. bankers expect the cash part of their bonuses to be restricted within a year, according to an EfinancialCareers.com survey published Feb. 27.

The British government will slash bonuses at Royal Bank of Scotland Group Plc by more than 90 percent and scrap them for many executives. Societe Generale’s investment-banking unit cut bonuses by 40 percent on average in 2008 and Deutsche Bank AG will reduce payments for securities-unit workers by 60 percent.

Sliding Sales

European car sales plunged 27 percent in January to the lowest in at least two decades, while U.S. deliveries of cars and light trucks in February slid to the lowest annualized rate since 1981. China’s economy expanded 6.8 percent in the fourth quarter of 2008, the slowest in 7 years, and the authorities have modified spending plans to revive growth.

“We thought the crisis would be contained to the U.S. and Europe but it’s gone global,” Amedeo Felisa, chief executive officer of Fiat SpA’s Ferrari sports-car division, said at a news conference at the Geneva show on March 3. “On China, we’ll have to see how the stimulus package works out.”

Felisa said in Paris that East Asia would account for one- quarter of deliveries this year, matching the U.S. for the first time, spurred by surging sales at outlets such as Macao, the company’s busiest in Asian and ranked fourth in the world.

U.S. Slump

Luxury sales in the U.S. extended declines last month, with deliveries falling 38 percent at Munich-based BMW and 24 percent at Daimler AG’s Mercedes-Benz unit. Porsche’s sales fell 11 percent, easing from a 36 percent drop in January, after the new model introductions.

Ferrari sold 2 percent more cars last year, or 6,587 vehicles, as growth in Russia and China offset declines in mature markets. The division estimates that sales will fall “slightly” in the U.S. in 2009.

“We’re monitoring the market week by week,” Harald Wester, CEO of Fiat’s Maserati unit, said March 3, adding that a forecast for this year is “impossible” at the moment. Maserati sales rose 19 percent last year to 825 million euros.

“The loss of profitability in the industry is not limited to a few,” Ulrich Bez, head of U.K. carmaker Aston Martin Lagonda Ltd., said March 3 in a Geneva news conference. Sales are still growing in China, he said, adding that the company is also opening dealerships in eastern Europe.

Jaguar, one of the two British luxury-vehicle makers bought by Mumbai-based Tata Motors Ltd. last year, said it fared better than competitors in 2008, with an 8 percent increase in sales. “We’ve carried that momentum into 2009,” Jaguar CEO Mike O’Driscoll said at a press conference on March 3.

To contact the reporters on this story: Marco Bertacche in Geneva via mbertacche@bloomberg.net; Laurence Frost in Geneva via lfrost4@bloomberg.net.

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