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Market trends: Does premium mean German?

The German domination of the premium part of the market –Audi, BMW, Mercedes-Benz and Porsche – seems to be stronger than ever. Can they ever be attacked in Europe?

A quick look at the table shows that the growth in sales of the German brands since 2000 is larger than the total 2006 sales of Jaguar, Lexus, Saab and Volvo.

Of course, not all the German brands have performed equally. In terms of market share, Audi has enjoyed the best performance as it has finally emerged from the shadow of BMW.

Indeed, BMW seems irritated by the rise of Audi; Uwe Ellinghaus, marketing director of BMW (UK) Ltd said last year: “Audi customers are closer in age to BMW owners but why should anybody buy a good copy if the genuine product is available?”

BMW has grown the most in volume terms. It has also benefited from a total focus on premium cars, unlike its arch-rival Mercedes-Benz.

Mercedes is currently recovering from a spell a few years ago when it seemed determined to stop being a premium brand at all. Mercedes is now on the up, but perception always lags reality by a few years.

However, Mercedes looks like a success story compared to some non-German competitors. Jaguar is now completely dependent on the 2008 S-type replacement, the XF. If that fails, there will be nothing left to save.

Saab has metamorphosed from a premium brand to the premium end of the Vauxhall range. It needs radical new products.

Even the one brand that seemed to be shaping up well, Volvo, has had a hard time in 2006. The company is now pinning its hopes on the C30, which it hopes will be a gateway to a new segment.

The premium lower medium sector is probably the best part of the UK market to be launching a new product. The C30 could be another breakthrough car. However, it has a lot of ground to make up – Volvo is well down in market share terms.

That just leaves Lexus, which has had a record year thanks to the new IS. In percentage terms, Lexus will be the fastest growing premium brand, but that needs to be put into perspective.

In 2006, sales grew by around 50%, or approximately 5,000 units. BMW and Audi have been growing by more than 5,000 units every year this decade. In unit terms, Lexus is now further behind than it was in 2000.

In the US, Lexus has scared the Germans silly, but no-one is reaching for the panic button in Europe.

Premium brand sales

The German brands consist of Audi, BMW, Mercedes and Porsche, while the non-German brands are Jaguar, Lexus, Saab and Volvo. To gain sales, rivals need to offer something better – and that is easier said than done.

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