Among the people I know, there's more people living paycheck to paycheck and getting annual phone upgrades than people with FU money doing upgrades. That said, the percentage of FU money upgraders is higher than the percentage of paycheck-to-paycheck upgraders.
Google/Samsung/Apple/etc may be making more total money from the not-well-off than the well-off, at least thinking about people I know.
There is no reason to release flagship phones each year.
So every maker has to have the best they have on sale at all times.
The car release cycle is pretty much exactly what flagship phones do too. They get a major redesign every few years with incremental improvements in between.
The biggest reason is obvious: if you didn't your competitors would and they'd eat your lunch. Modern mobile devices are only 15 yrs old, they're where PCs were in 1995. I'm already seeing people who used to upgrade every two years switch to 3, and before you know it that will climb to 4, 5, etc. as the tech matures. In 1997 your PC was obsolete after two years, now they're fine a decade later, and phones will get there too.