Audi, BMW and Mercedes-Benz are succeeding where others struggle - why?

Last year, 2.03 million cars were sold in the UK and the German big three — Audi, BMW and Mercedes — took a healthy 17 per cent of the market. What’s more, those 342,000 cars were virtually all sold at premium prices and with a healthy profit margin.

The rise and rise of premium brands has been one of the biggest stories in the UK new car market. While volumes and margins have been crumbling for the mass-market brands, the premium badges have made steady strides over the past two decades.

BMW, the best established of the three back in 1992, has more than trebled its volumes, from 40,000 units per year to 127,000 units. Mercedes has added about 69,000 units, a four-fold rise on its 1992 sales.

Audi, by contrast, has increased its volumes nearly nine-fold. The UK sales of the Volkswagen Group’s star performer have jumped from just 14,000 units in 1992 to 123,000 last year.

There’s no doubt that the UK has become a much more brand-orientated consumer market since the turn of the century. BMW sales grew steadily from 40,000 in 1992 to 67,600 in 2000, but by 2001, its sales had jumped to 81,000 in a single year.

This event is particularly fascinating because BMW had broken up and sold off the Rover Group in 2000, a seismic event in UK politics that dominated newspaper front pages for weeks. BMW was so worried by the potential backlash from UK buyers that it engaged market researchers to monitor the impact on its brand. Clearly, the company need not have bothered.

BMW’s and Audi’s figures also show the effect of the economic growth in the early 2000s, which was powered by an economy boosted by low interest rates and a housing boom. Between 2001 and 2008, Audi’s sales leapt from 43,600 to 100,845 units, while BMW’s jumped from 67,676 in 2000 to 121,575 in 2007.

What’s really remarkable is the resilience of the demand for Audi and BMW. Even in the middle of the credit crunch, BMW sales only dropped to 98,683 units (higher than in 2003), and then sprang sharply back into triple digits. 

Audi’s performance was almost identical. It dipped from 100,845 (only a single sale lower than in 2007) to 91,172 units in 2009, which was still higher than in 2006. Audi was only a fraction short of three figures by the end of 2010.

All of this not only illustrates how premium brands managed to ride out a serious recession, but it also shows that a policy of massively diversifying the range of available models pays dividends when trying to retain existing customers

Mercedes, however, has not quite achieved the same runaway success. It sold a healthy 64,000 cars in 2000 but peaked at 82,000 units between 2004 and 2007, and its sales are still below the levels it achieved in 2003.

It’s tempting to blame the sometimes serious reliability problems suffered around the turn of the century (think M-class and the W211 E-class) and an image that lacked the youthful spirit of BMW and Audi. The new A-class, the aggressively restyled E-class and (next) C-class are directly aimed at fixing Mercedes’ image problems.

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28

8 July 2013

Your forgetting your favourite brand, Holloway, DAS Auto. And Vauxhalls are rebadged Opels, Half the Ford of Europe is in Germany. MINI, Bentley, Rollsroyce etc. On the plus side the new Berlin Airport is a disaster. Its so complex the've fried their teutonic brains, and delayed opening by over a year now.

www.KOOOLcr.com

 

8 July 2013

What, another pointless post just to promote your own site?   Are there no depths you won't sink to?

8 July 2013

That's why. And credulous customers. No forgetting lots and lots of rather undercritical reviews.

8 July 2013

Flatus senex wrote:

That's why. And credulous customers. No forgetting lots and lots of rather undercritical reviews.

Yep. They are the masters at marketing.

They got a hold of the print media, open a motoring magazine and, at the front half of the mag, every 2nd advert is for BMW/Audi/Merc/VW.

What motoring publication is going to risk it's biggest advertisers? Therefore every model is gauranteed a good review, and every PR wire is rehashed as 'news'.

They're canny with company car / lease hire pricing. Due to high demand, the resale value is higher than other manufacturer's models, therefore the monthly payment is lower, which increases demand. Ford can't shift Mondeos when it is cheaper to lease an A4.

And this demand, it is a bit like the primary school SUV mutually assured troop carriers. Someone in suburbia gets a leased german car, suddenly everyone wants a german car to keep up with the Joneses, which increases demand.

They built up a reputation for reliability, back when VW were building low maintenance air cooled models, BMW were just out of their bubble car era and Mercedes were built to last. Peugeots from this era were also rugged and well built, but they didn't manage to cash in on this perception. These days, reliability, warranty and owners surveys place German brands mid table. However, as the controlled motoring publications don't dwell on this (no-one mentioned that the E36 had barely a better NCAP rating than the Rover 100 either...) the public don't know and are blissfully ignorant.

As we have seen with BMW's treatment of Rover group (run it down, even it's best chance at resurrection with the 75 was shot down by BMW's negative launch speech, launch SUVs based on Land Rovers, sell it on, keep the popular MINI as a cashcow), Sauber and the WRC team (the talented Kris Meeke left without a drive) they are so ruthless at business dealings that they make an episode of The Apprentice look like Rainbow.

8 July 2013

sirwiggum wrote:

 These days, reliability, warranty and owners surveys place German brands mid table. However, as the controlled motoring publications don't dwell on this (no-one mentioned that the E36 had barely a better NCAP rating than the Rover 100 either...) the public don't know and are blissfully ignorant.

With one of these surveys I did not know whether to cry or laugh! A certain magazine (not Autocar) published a user satisfaction survey which had the inestimable advantage of being prepared by a consumer research organisation independent of journalistic input. In one category the winner (which is a vehicle routinely "damned with faint praise" by the publication concerned) together with another non-German car, was streets ahead of anything else in the group. The vehicle favoured by the magazine was about ten or eleven places behind. Reading the magazine's comment on how good the winner was  produced a deal of cynical laughter.

I am very cautious about surveys of this kind but if they are to be carried out let them be prepared outside the motoring fraternity.

8 July 2013

agressive marketing in "Certain" publications, and flooding the market with fleets sales, it will all end in tears, just like it did for Ford and Vauxhall when they were the reps favourite vehicles. Oversupply eventually ruins residuals, reliability and build quality,  second hand customer faith get turned to less popular maques because they dont want to be seen as sheep, and the abundance of second hand vehicles on the market makes ones without exactly the right spec at the cheapest price impossible to sell.

289

8 July 2013

...good point well made Citytiger, but at the moment these three are riding the back of British purchasers seemingly unending appetitite for premium branded goods.....and after all if you are a company car driver or get a car allowance as part of your package, the leasing deals are actually cheaper than those of the volume players thanks to the high resale values predominantly. Are you really going to drive a Ford or Vauxhall just to make a point....dont think so.

 Seems there is just as much demand for these three brands on the used car market too.That could change longer term as you said...but for now its ker-ching time.

Great article again Hilton.....ignore those prats who are trying to make this a nationality issue

8 July 2013

European Fords are the best in their class thanks to British engineers.

Something that German car magazines will never admit.

8 July 2013

Years ago people were put off by high servicing/repair costs on premium models, now the mainstream manufactuers are just as expensive. Plus i reakon there isnt such a jump in list prices as there was, decent Mondeos and Insignias are in the £20k bracket, for abit extra you can get your self something from 'the big three'

8 July 2013

It's all about cheap leasing deals for fleets. I had a chat recently with a fleet manager who'd taken all his reps out of Mondeos and put them into E-class Mercedes because it was cheaper.

It means a second-hand market flooded with crap, grey (they're always grey) German cars.

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