Home Supercar News Audi Report: German Luxury Car Dominance on the Verge of Falling

Report: German Luxury Car Dominance on the Verge of Falling

Credit: FolioDrive.com

Credit: FolioDrive.com

The German Big Three of Audi, BMW and Mercedes-Benz currently occupy 60 percent of the global luxury car market, but a new report from Reuters indicates the long-standing kings of the segment may soon face stiffer competition from outside brands and begin to lose market share.

Automotive analysts say Jaguar and Land Rover, Tesla and the DS models from PSA Peugeot-Citroen will steal 30 per cent of the global premium car market between 2014-2018, up from their current combined share of 12.5 per cent. Part of the reason the Germans will begin to see a decline in sales is due to Mercedes’ and Audi’s desire to beat BMW in the sales race. The desire for more sales has forced all three brands to move down market, lowering the status of the brands in the eyes of the consumer.

“The German premiums have sacrificed some of their exclusivity by entering smaller, volume segments like compacts,” automotive consultant Bernd Hoennighausen told Reuters. “They’ve pushed volume with fleet discounts of around 20 percent.”

“This may open the door to newer players like Jaguar, who are starting to offer fleet-relevant products,” he added.

Another problem with the Germans’ three-way sales race is it’s forcing the three brands to offer steep discounts on already inexpensive cars built to meet new, more strict carbon-dioxide emissions requirements.

“No other group of manufacturers has increased incentives more than the Germans,” said Arndt Ellinghorst, an auto analyst with ISI Group. “Steep discounts and attractive financing show how non-exclusive premium cars have become. The race to sell more vehicles will eventually damage brand equity and profitability”.

Other brands also contributing to increased competition for the Germans are Fiat-owned Maserati and Alfa Romeo, Infiniti, Volvo and China’s Geely brand. These automakers with less market share may soon start to be seen as more desirable in the eyes of consumers as buyers of premium-branded cars usually want some degree of exclusivity with their vehicle.

All three German premium brands are expected to have an executive shuffle at the top within the next two years, so analysts believe any decisions in regards to ending the volume strategy will be saved for the new management.

“It may be easier for those in charge today to continue to ride the volume train, leaving the more difficult and political task of improving pricing to new management teams,” said Ellinghorst.

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