14 April 2010

The Premuim Sector Shift Of Power

When one has thought about premium brands of cars, Mercedes and BMW came to mind. In North America, Lexus maybe also. But for the world at large, those two brands were the big players. However, backed by the VW Group, Audi has been steadily closing the gap.

Now in the first quarter of 2010, Audi is making its move to be number one premium brand. For the first time ever, Audi passed Mercedes Benz and did it comfortably. Merc sold 248,500, Audi 264,100, while BMW sold 265,800, a mere 1,700 lead. Had it not been for the new niche BMW has just entered with the X1 (X1 sales 19,700), it would have been relegated to second and Audi top by some margin.

Mercedes realised its needs help to reduce costs and keep up in the race for sales a while back. It tried an unsuccessful union with Chrysler, and now it is tentatively getting into an alliance with Renault-Nissan. BMW some years ago bought the Rover Group for the same reason and quickly turned profitable Rover into a loss maker. It retreated with the MINI brand and has done well with that since*. However, unless it can find an ally to share the cost of operating in a cash hungry business, I would suspect it has no hope of fending off Audi.

The benefits to Audi of sharing so much within the VW Group makes its becoming the sales leader of the premium sector a fait accompli. BMW will no doubt have other ideas on that one. BMW may get closer with France's PSA, but that won't be enough, in my opinion, to stop the VW owned brand brushing it aside.

The bottom line: Audi will become the top premium brand sooner or later.

*Sales figures quoted in this article for BMW exclude the MINI brand.

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