A massive expansion of sport utility vehicle and crossover offerings will be the foundation of premium-brand sales growth between now and the end of the decade.
IHS Automotive perspective | |
Significance | The world's leading automotive premium brands are looking to achieve significant growth between now and the end of the decade with the launch of new models, which will see the likes of BMW, Audi, Mercedes-Benz, Jaguar Land Rover, Porsche, and Maserati enter new segments. |
Implications | A huge area of activity for the premium brands over the coming years will be in the expansion of their sport utility vehicle and crossover model lines, including many brands, such as Jaguar and Maserati, that will be entering these segments for the first time. |
Outlook | 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% on the back of new model launches and ongoing growth, particularly in the BRIC economies (Brazil, Russia, India, and China). |
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.
BMW
BMW has already unveiled plans to extend its brand coverage downwards in segmentation terms with the launch at the recent Geneva Motor Show of the first front-wheel-drive BMW model in the form of the 2-Series Active Tourer multi-purpose vehicle (MPV; see Switzerland: 5 March 2014: Geneva Motor Show 2014: BMW shows 2-Series Active Tourer). The model is likely to be the first of a number of front-wheel-drive BMWs and will be based on the firm's new UK1 platform. The firm will also expand its crossover range in 2104 with the launch of the new X4, while it also last week announced that it would further expand annual production at its Spartanburg plant in the United States to 450,000 units by 2016, to accommodate production of a large SUV in the form of the X7, which will be a natural rival to the Range Rover and Mercedes-Benz GL-Class. The company is also displaying the new 9-Series concept at next week's Beijing Motor Show (China). The concept's design is closely related to the Pininfarina Gran Lusso Coupé concept that was shown at last year's Villa d'Este Concours d'Elegance in Lake Como (Italy). The 9-Series concept may form the basis of a new large, ultra-luxurious sedan that could rival the forthcoming high-end versions of the S-Class that will replace the Maybach model.
Mercedes-Benz
Meanwhile, at this week's Daimler annual general meeting (AGM), CEO Dieter Zetsche spoke about the prospect of boosting the company's profitability by cutting costs and massively expanding the Mercedes-Benz passenger car brand. Zetsche spoke of introducing 12 new models by 2020 that have no direct predecessors. The company has also set a very bold goal of overtaking Audi and BMW to regain its position as the world's biggest-selling premium vehicle group. Among the new vehicles already confirmed is the fifth model to be based on the firm's new MFA front-drive modular architecture, the CLA-Class Shooting Break. This will be launched next year and will supplement the GLA-Class crossover that is just being launched in the European market (see World: 21 January 2014: Mercedes has high hopes for GLA – report). As mentioned above, the company is also planning to vastly expand its range-topping S-Class range, with high-end versions to replace the Maybach brand. The company has also shown a number of important concepts previewing production models. The company is showing its Concept Coupé SUV model, which previews the BMW X6-rivalling MLC-Class, which is a coupé/crossover SUV due for launch next year. It will also bring out a smaller SUV/crossover model in the form of the GLC-Class, which is due for launch in 2016, according to IHS Automotive's forecast. The company is also readying a Porsche 911 rival in the form of the SLC sports car.
Audi
Audi is planning to expand its "Q" range of crossover/SUV models. The company has announced plans to launch a new entry-level subcompact SUV-B model that will be built under the Q1 nameplate. Production of the new model will begin in 2016 at the company's main Ingolstadt plant and the Q1 will be a key component of Audi's long-term growth strategy, which targets 2 million sales by 2020, by which time Audi is planning to offer 60 separate models, up from the current offering of 49. As well as the Q1, Audi is also launching the Q4 and Q6 models, production of which will begin in 2016 and 2017, respectively. These models will have more of a crossover, sedan/coupé bodystyle along the lines of the forthcoming BMW X4 and BMW X6 and will be natural rivals to these vehicles. The Q1 will be one of the first entrants from a premium OEM in the increasingly popular SUV-B category, which saw multiple new entrants from European mid-market manufacturers in 2013, including the Renault Captur and Peugeot 2008. The Q1 will provide an upscale and aspirational alternative to these vehicles and is likely to take sales from mid-market brand offerings. The Q1 could also act as a catalyst for BMW to enter the market with something smaller than the Mini Countryman and BMW X1, while Mercedes-Benz may also be tempted to create a sub-C-segment model under its own brand for the first time.
Others
Among other premium carmakers looking to expand their model ranges into areas where they have hitherto not been represented are Porsche, Maserati, and Jaguar Land Rover (JLR). Porsche's game-changing model, in terms of sales growth, is the new Macan SUV, which is currently being rolled out across global markets. This will help the Porsche brand comfortably record sales of more than 200,000 units for the first time in 2014. Maserati is also set to launch a new SUV in 2017, which will help double the brand's sales volumes, while JLR is also looking to significantly expand its model offerings with a focus on the Jaguar brand. This will see the company launch a new BMW 3-Series-rivalling sedan known as the XE, and the first ever crossover/SUV model for the Jaguar brand. JLR is hoping that these new models will help boost its annual sales to 750,000 units by the end of the decade, up from 425,000 units last year.
Outlook and implications
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% to 7%. The premium carmakers are moving further into the traditional segmentation territory of mid-market brands, while also benefitting 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.