IHS Automotive forecasts that combined global passenger car sales volumes of the big three German OEMs will rise between now and the end of the decade by 75.8 percent on the back of new model launches and ongoing growth, particularly in the BRIC economies (Brazil, Russia, India and China).

Outlook and implications

Premium carmakers are undergoing a period of significant range expansion as they look to enter brand-new vehicle segments to accelerate growth between now and the end of the decade. Premium automotive brands have consistently expanded their offerings over the last two decades into new areas where they were previously not represented, such as sport utility vehicles (SUVs) and compact cars. When this process first began some commentators feared that the premium brands risked devaluing their brand values and undermining their exclusivity. However, as premium OEMs have gradually moved into new segments over this period, this has proved far from the case and there is ongoing robust global demand for vehicle types that are not necessarily associated with premium vehicle brands, especially in emerging markets where brand values are less established.

If one simply takes the German big three premium car brands – BMW, Mercedes-Benz, and Audi – the combined annual global passenger car sales of these companies is set to rise from 3.49 million units to 6.12 million units by the end of this decade. This would equate to an increase in the combined share of the overall global passenger car market during the period from around 5 percent to 7 percent. The premium carmakers are moving further into the traditional segmentation territory of mid-market brands, while also benefiting from the hugely accelerated growth they have managed to generate in China. In the last decade the emerging middle-class in China has developed into an increasingly sophisticated consumer class who are extremely aware of brand connotations and who increasingly want to display their status and success. Audi, BMW and Mercedes-Benz have been well placed to benefit from this phenomenon, as increasingly are the smaller premium players such as JLR and Porsche. This is especially the case if they are entering new segments at a generally lower price point, which makes their products more accessible to a new demographic of global consumers. In Europe the premium OEMs have increasingly entered the segments of mainstream rivals. This has meant a smaller share of the pie for mid-market brands and the higher price points that the premium brands can charge mean they are able to maintain decent margins on smaller vehicles. There is no sign that this trend will reverse, especially with models such as the BMW 2-Series Active Tourer introducing the premium brands into segments that 10 or 20 years ago would have been unthinkable. However, there are some signs that the brand elasticity of some premium, or semi-premium, brands is not infinite, with BMW seemingly mulling the idea of simplifying the Mini range as a result of the comparative lack of success and confusing positioning of models such as the Paceman.

Source: IHS Automotive