audi bmw and mercedes-benz vying for sales supremacy

AUDI, BMW AND MERCEDES-BENZ: VYING FOR SALES SUPREMACY

March 2012

INTRODUCTION

PREMIUM BRANDS, PREMIUM INCOMES

THREE GERMAN BRANDS

FOUR MARKETS

OUTLOOK REVIEW

© Euromonitor International PASSPORT 3 AUTOMOTIVE: AUDI, BMW AND MERCEDES-BENZ: VYING FOR SALES SUPREMACY

Disclaimer

Much of the information in this

briefing is of a statistical nature and,

while every attempt has been made

to ensure accuracy and reliability,

Euromonitor International cannot be

held responsible for omissions or

errors.

Figures in tables and analyses are

calculated from unrounded data and

may not sum. Analyses found in the

briefings may not totally reflect the

companies' opinions, reader

discretion is advised.

Audi, BMW and Mercedes-

Benz are all vying to dominate

the premium car market.

Success hinges on the four key

markets of China, Germany, the

UK and the US, which account

for more than 60% of the trio’s

combined sales. The close

relationship between affluent

households and the

performance of these three

leading premium players

suggests the outlook is good for

future sales volumes.

Scope

INTRODUCTION

This report compares the demand for passenger cars from the Audi, BMW and

Mercedes-Benz premium brands, and considers potential future sales.

All data refers to passenger cars. For consistency, sales of the Mercedes-Benz

Vans division are excluded as neither Audi nor BMW offer commercial

vehicles.

2011

Global Passenger Car Sales

1.30m units

(+19.2%)

1.38m units

(+12.8%)

1.28m units

(+8.6%)

http://www.euromonitor.com/



Key findings

INTRODUCTION

4 million sales in 2011 Combined. the leading premium automotive brands, Audi, BMW and Mercedes-

Benz, bounced back from recession in 2010 and delivered a record of almost 4

million units in 2011

4 key markets – 60% of

sales

Sales in the 4 key markets - China, Germany, the UK and the US – accounted for

60% of the combined sales volume of Audi, BMW and Mercedes-Benz in 2011

Audi overtakes

Mercedes

Audi increased sales in all four key markets more than BMW and Mercedes, and

outsold the Mercedes-Benz Cars division for the first time ever in 2011

UK out of the medals The UK has been relegated to being the 4th largest market for Audi, BMW and

Mercedes-Benz passenger cars since 2010. That said, the three brands posted

10% sales growth in the UK in 2011 - despite the hike in VAT from 17.5% to 20%

China going for gold Germany remained the largest market for the premium German trio combined in

2011, but China became Audi's largest market in 2011 and will be the #1 sales

country for the BMW brand and Mercedes-Benz Cars division by 2014 at the latest

Premium brands,

premium incomes

Combined car sales of the Audi, BMW and Mercedes-Benz brands equate to at

least 10% of the number of households with an annual disposable income over

US$100,000 in China, Germany and the UK but just 2% in the US

1 million sales in the US The US market for Audi, BMW and Mercedes-Benz cars (and SUVs) will easily

exceed 1 million units by 2020

Global sales in 2020 Based on the rise in wealthy households globally, the 3 German premium brands

will sell over 5 million units in 2015 and over 8 million units in 2020, but with an

upside scenario of over 11 million units in 2020



INTRODUCTION


THREE GERMAN BRANDS

FOUR MARKETS

OUTLOOK REVIEW


The world's leading premium car brands (Audi, BMW and Mercedes-Benz) naturally depend on affluent

households for their sales. In fact, global demand most closely follows the growth pattern of households

with an annual disposable income (ADI) of over US$200,000 in Purchasing Power Parity (PPP) terms.

Audi, BMW and Mercedes sales suffered as a result of the financial crisis, and clearly benefited far less

than mainstream players from industry stimulus packages around the world. However, demand recovered

to exceed pre-crisis levels in 2010, and a new record of nearly 4 million units delivered was seen in 2011.

Economic fragility, weak consumer confidence and tighter lending conditions continue to dampen new car

sales, especially in Europe, but the positive medium- and long-term outlook for wealthy households

suggests that there is potential for strong sales of Germany's leading premium brands.

The historic link


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World: Audi, BMW and Mercedes-Benz Passenger Car Sales, and Households by Income 2002-2011

Audi, BMW, M-B sales

ADI> US$100,000

ADI> US$125,000

ADI> US$150,000

ADI> US$200,000




Deliveries of passenger cars bearing Audi, BMW or Mercedes badges equated to 14.5% of the number of

homes with an ADI greater than US$200K in 2011. This was a significant rise on 2009, when the sales ratio

dipped to just 12.5%, due to the economic turmoil and, moreover, was almost back to the pre-crisis ratio of

over 15%.

Globally, households with an ADI of over US$200K are forecast to number 37 million and 56 million in 2015

and 2020, respectively.

Based upon the 14.5% ratio achieved in 2011, the global market for the leading German premium brands

would be 5.4 million units in 2015 and 8.2 million in 2020.

However, sales could be higher if economic stability translates into a return of pre-crisis ratios in the US

and key European markets.

The outlook


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World: Audi, BMW and Mercedes-Benz Car Sales, 2005-2011, and Affluent Households 2005-2020

Audi, BMW, M-B sales ADI> US$150,000 ADI> US$200,000



INTRODUCTION


THREE GERMAN BRANDS

FOUR MARKETS

OUTLOOK REVIEW


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) World: Audi, BMW and Mercedes-Benz Passenger Car Sales

2002-2011

Audi BMW Mercedes-Benz

The BMW brand has outsold the Mercedes-Benz Cars division since 2005, assisted by the addition of the

1-Series to its portfolio in 2004. Both brands suffered similar declines during the financial crisis, although

the launch of the new E-Class range helped Mercedes recover quicker in 2010. BMW fought back in 2011

though, buoyed by demand for the replacements of the 5-Series and X3 models.

Nevertheless, Audi continues to be the rising star, due largely to its stronger presence in China and lesser

exposure to the slow US market than its rivals. Consequently, Audi increased its sales in 2008 and global

demand only fell by 5.4% in 2009.

Moreover, deliveries for

Audi overtook the

Mercedes-Benz Cars

division for the first time

ever in 2011, aided not

only by higher volume

growth in China than

Mercedes but also at

home in Germany, as a

result of strong demand

for the Q5 SUV and the

first full year of sales of

the A1 small car.

Global sales performance

THREE GERMAN BRANDS




Audi sales in China have exceeded both the UK and the US since 2007, and it became

Audi's biggest market – ahead of Germany – in 2011. Phenomenal growth in China is

thus underpinning the ongoing global march of the brand.

Audi deliveries to the UK and the US were at their highest ever levels in 2011, and sales

in Germany are essentially back to pre-crisis levels – unlike the total car market in the

country.

The US market still

remains Audi's Achilles'

heel (both BMW and

Mercedes sell twice as

many cars there) but

the brand only lost

10,000 units of sales

between 2007 and

2009, and has enjoyed

double-digit growth

since, returning sales

back above UK levels

for the first time since

2006.

Audi: Sales in key markets

THREE GERMAN BRANDS

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Audi: Sales in China, Germany, UK and US 2005-2011

China Germany UK US




As a result of the dramatic crisis-induced decline in demand in the US, Germany has

returned to being the largest market for the BMW brand since 2008.

Despite the UK recovering to pre-crisis levels in 2011, because of healthy growth in

business and fleet sales, China relegated this market to being BMW's fourth largest in

2010 (even though the scrappage incentive was still in effect).

Demand for premium

cars continues to rise in

both the US and

Germany in 2012, and

the sales boom in

China also shows no

sign of abating. China is

therefore vying to

become the largest

market for the BMW

brand – some years

earlier than expected

prior to the global

recession.

THREE GERMAN BRANDS

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BMW Brand: Sales in China, Germany, UK and US 2005-2011

China Germany UK US

BMW: Sales in key markets




Unlike BMW and Audi, demand for Mercedes-Benz brand cars in Germany was still

some 20% off the pre-crisis pace in 2011. Nevertheless, Germany remains the largest

market for the company.

However, the persistent crisis in the Euro-zone continues to trouble, Germany and the

short-term outlook for premium vehicle demand is therefore far healthier in the US and

China. In fact, all three markets are converging, with similar levels of demand for

Mercedes-Benz cars in 2012.

As is already the case for

Audi and will soon be for

BMW, China is destined to

be the largest market for

Mercedes-Benz cars – in

2013, or 2014 at the

latest.

As with BMW, China

relegated the UK market

to fourth place in the

Mercedes rankings in

2010.

Mercedes-Benz: Sales in key markets

THREE GERMAN BRANDS

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Mercedes-Benz Cars Division: Sales in China, Germany, UK and US 2005-2011

China Germany UK US



INTRODUCTION


THREE GERMAN BRANDS

FOUR MARKETS

OUTLOOK REVIEW


China, Germany, the US and the UK are the four largest markets for Audi, BMW and Mercedes-Benz.

Despite the contraction of the US, UK and German premium car markets in 2009, the extraordinary growth

in China means that demand for the three German premium car brands fared better in these four markets

than in the rest of the world.

Skyrocketing premium car sales in China in 2010 and 2011, along with recovery in Germany, the US and

the UK, lifted the share of global sales for Audi, BMW and Mercedes-Benz accounted for by these four

markets to over 60% in 2011. They are therefore critical battlegrounds for these brands.

Four markets now account for 60%+ of Audi, BMW and M-B sales

FOUR MARKETS

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Passenger Car Sales of the Three German Brands in the Four Key Markets and the Rest of the World and Percentage Share of Global Sales 2005-2011

Four Key Markets Rest of World Share of Global Sales




Despite deliveries remaining below pre-crisis levels, Germany remains the largest market for the combined

sales of Audi, BMW and Mercedes-Benz.

However, demand in China overtook the UK in 2009 and the US in 2010, and is challenging Germany for

the top spot.

Combined deliveries of Audi, BMW and Mercedes-Benz brand cars in China fell short of Germany by just

32,000 units in 2011, and the economic uncertainty in the Euro-zone means it is almost certain that China

will be the largest premium car market, from 2012 – three years after it became the world's largest vehicle

market overall.

Four key markets in comparison

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Four Markets: Passenger Car Sales of the Three German Premium Brands 2005-2011

China Germany UK US




Audi remained the leading premium car brand in China in 2011. With 313,000 deliveries, Audi sold a third

more cars than BMW in 2011 and almost 50% more than Mercedes-Benz.

To put this into historical perspective, however, Audi car sales in China were more than double those of

BMW and treble those of Mercedes-Benz as recently as 2007. Audi demand has trebled since, but BMW

deliveries have more than quadrupled, while Mercedes has multiplied its sales almost seven-fold over the

same period. In fact, Mercedes-Benz sales were just 2,000 units below those of BMW in China in 2010

(boosted by the introduction of the new E-Class range) but trailed by 6,000 units in 2011 as BMW launched

its LWB version of the new 5-Series, which was specifically designed for the Chinese market.

China: German premium brand passenger car sales

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China: Audi, BMW and Mercedes-Benz Passenger Car Sales 2005-2011





Demand for Audi, BMW and Mercedes-Benz cars has ballooned in China in recent years, with the 3

German brands selling over five times more cars in 2011 than in 2006.

Combined sales of the Audi, BMW and Mercedes marques equated to just 11% of Chinese households

with an annual disposable income in excess of US$200,000 in 2006, but growth in sales significantly

outpaced the growth in this income bracket between 2006 and 2011.

Deliveries of the three premium German marques in 2011 equated to 14% of the households with an ADI

over US$100,000 and even 9% of those with an ADI over US$75,000.

China: German premium car sales outpace household growth

FOUR MARKETS

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China: Audi, BMW and Mercedes-Benz Passenger Car Sales and Households by Income 2005-2011


ADI> US$125,000 ADI> US$150,000 ADI> US$200,000




Despite the cooling economy, the ongoing emergence of affluent middle-class households in China,

especially in second and third tier cities, bodes well for Audi, BMW and Mercedes-Benz sales.

Even if demand continues to equate to the same proportion of the number of households with an

ADI>US$100,000 as in 2011, this suggests that the German premium marques will deliver 1.3 million units

in 2015 and 2.8 million in 2020.

However, sales are trending towards equalling 10% of the number of homes with an annual disposable

income of just US$75,000. At this level, a sales volume of 3.4 million units would be achieved in 2020.

The proposed ban on

Chinese government

officials buying

foreign cars would

naturally have a

detrimental impact on

sales, especially for

Audi, but new model

activity will inevitably

compensate for this,

and the removal of

the stigma of being

the cars of officialdom

might even benefit

demand.

China: Emergence of affluent households supports three Germans

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China: Audi, BMW and Mercedes-Benz Passenger Car Sales and Households by Income 2005-2020






The recovery of Audi, BMW and Mercedes-Benz car sales in their home market was negligible in 2010 but

demand increased by 6% in 2011.

However, growth was still lower than for the total passenger car market, which expanded by 9%, and the

addition of the A1 small car to Audi's portfolio and the new versions of the BMW 5-Series and X3 boosted

the market more than any major structural improvement. Mercedes-Benz sales actually declined slightly in

2011, despite the launch of the new C-Class Coupe, CLS, SLK and the revised C-Class.

German premium car sales had already suffered as a result of the increase in VAT from 16% to 19% in

2007, and the financial crisis meant that demand was down 13% from a peak in 2006 to a trough of 2009.

The premium brands clearly did not benefit from the scrappage incentive scheme.

Germany: German premium brand passenger car sales

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Germany: Audi, BMW and Mercedes-Benz Passenger Car Sales 2005-2011





Despite the weakness of

Audi, BMW and Mercedes-

Benz passenger car sales

in 2011 by historical

standards, demand still

equated to 20% of the

number of German

households with an annual

disposable income in

excess of US$100,000.

Moreover, the growth in

demand in 2010 and 2011

is again tracking the

development of affluent

households, as it did until

the VAT rise in 2007.

Nevertheless, the 1:5 ratio

of sales of Audi, BMW and

Mercedes-Benz cars to

households with ADIs over

US$100K is far short of the

1:3 ratio achieved in 2005.

Germany: Sales of the three Germans to 1-in-5 affluent households

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Germany: Audi, BMW and Mercedes-Benz Passenger Car Sales and Households by Income 2005-2011

Audi, BMW, M-B sales ADI> US$100,000ADI> US$125,000 ADI> US$150,000ADI> US$200,000




While German consumers on the whole have maintained a degree of caution in terms of purchasing and

borrowing, there has been something of a return to pre-crisis habits. More consumers have been willing to

spend money on bigger ticket purchases, such as large household appliances, holidays and home

improvements.

This willingness to spend and the steady rise in affluent households means that even if demand for the

dominant premium players' products equates to one in five homes with an ADI>US$100,000, as in 2011,

Audi, BMW and Mercedes will sell 1 million cars at home in 2015 and 1.5 million in 2020.

On the upside, if the demand to households ratio returns to the 2007 level (the year of the VAT rise), of

27%, sales volume will exceed 2 million units in 2020.

Germany: Affluence and the end of thrift support steady growth

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Germany: Audi, BMW and Mercedes-Benz Passenger Car Sales and Households by Income 2005-2020

Audi, BMW, M-B sales ADI> US$100,000 ADI> US$125,000 ADI> US$150,000 ADI> US$200,000




The UK passenger car market declined by 4% overall in 2011, as the scrappage scheme ended and VAT

was increased from 17.5% to 20%. However, combined sales of the three leading German premium brands

increased by 10% – outpacing the 5% growth in fleet sales and setting an all-time record of 312,000 Audi,

BMW and Mercedes-Benz registrations.

At brand level, Audi was the clear star performer, increasing sales by 14% and smashing its previous

record set in 2008 in the process – buoyed in particular by demand for the new A1.

BMW and Mercedes-Benz sales increased by 7% and 9%, respectively, in 2011 – bolstered by new

versions of the BMW 5-Series and X3, and the Mercedes CLS, SLK and C-Class, as well as the addition of

the C-Class Coupe.

UK: German premium brand passenger car sales

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UK: Audi, BMW and Mercedes-Benz Passenger Car Sales 2005-2011





In 2011, registrations of Audi, BMW and Mercedes-Benz passenger cars again followed the development

pattern of Britain's affluent homes, as they have done consistently, except in 2008.

UK sales of the three premium market leaders approached 13% of the number of households with an

annual disposable income in excess of US$100,000 in 2011. This percentage is a recovery from the

weakness of 2009 and 2010, and actually slightly higher than the proportion in 2008, when the financial

crisis unfolded.

UK: German premium brand sales track US$100K households

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UK: Audi, BMW and Mercedes-Benz Passenger Car Sales and Households by Income 2005-2011





The effects of the VAT increase are fading in the UK, and consumer confidence is rising as positive

economic data and lower inflation improve expectations of the future economic situation.

However, consumer confidence levels remain well below pre-crisis levels, negatively impacting consumers'

willingness to spend.

Nevertheless, even if demand for the German premium brands equates to 13% of the number of homes

with an ADI over US$100,000, as it did in 2011, Audi, BMW and Mercedes are on track to sell 400,000 cars

in 2015 and over half a million in 2020.

If the demand to households ratio returns to average pre-crisis levels, sales volume will exceed 600,000

units in 2020.

UK: Consumer confidence remains a sticking point

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UK: Audi, BMW and Mercedes-Benz Passenger Car Sales and Households by Income 2005-2020





With 14% growth in 2011, Audi, BMW and Mercedes-Benz autos sales (passenger cars and SUVs, which

are registered as light trucks in the US) outpaced the total market's recovery. As in Germany though, sales

remained stubbornly below the 2007 peak.

BMW managed to fend off a strong challenge from Mercedes-Benz in 2011 and both brands have sales

double those of Audi.

However, as in China, Germany and the UK, Audi enjoyed the highest percentage growth of all three

brands in 2011. Audi is seeking to replicate the recent successes of its Volkswagen sibling by offering

products tailored to US tastes, such as a sedan version of the A3, which is scheduled for launch in 2014.

US: German premium brand autos sales

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US: Audi, BMW and Mercedes-Benz Autos Sales 2005-2011





The penetration of Audi, BMW and Mercedes-Benz is understandably weak in the US due to strong

competition from both domestic upmarket players, such as Cadillac and Lincoln, as well as from the

Japanese premium brands Acura, Infiniti and Lexus.

Nevertheless, demand still tracks the development of wealthy US homes, although sales of the three

German marques typically equate to only 2% of the number of households with an ADI of over US$100,000

(compared to 13-14% in the UK and China and 20% in Germany in 2011).

US: Weak penetration but consistent development

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US: Audi, BMW and Mercedes-Benz Autos Sales and Households by Income 2005-2011

Audi, BMW, M-B sales ADI> US$100,000 ADI> US$125,000 ADI> US$150,000





The widespread belt-tightening began to abate in 2011 as a slight increase in employment brought cheer to

many US citizens. However, lenders remain cautious in issuing loans for home, auto and other purchases,

although the situation is improving.

This, and the stable outlook for growth in the number of affluent US homes suggests that even if the ratio of

the three German premium brands' sales to households over US$100,000 is maintained, Audi, BMW and

Mercedes will sell more than 700,000 autos in 2015 and over 900,000 in 2020.

If the demand to households ratio returns to pre-crisis level, the leading German premium brands will easily

top sales of 1 million units in 2020.

US: Less belt-tightening, more credit

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US: Audi, BMW and Mercedes-Benz Autos Sales and Households by Income 2005-2020

Audi, BMW, M-B sales ADI> US$100,000 ADI> US$125,000 ADI> US$150,000




INTRODUCTION


THREE GERMAN BRANDS

FOUR MARKETS

OUTLOOK REVIEW


The ratio of sales of the premium German brands to the number of households with an ADI over

US$100,000 naturally varies by market.

Considering the outlook for the number of these households and by simply applying the (historically weak,

except in China) percentage ratio of 2011, provides a cautious outlook by market.

Even in this scenario, China is set to become the largest single market for the 3 German premium brands

under review in 2012 and to be nearly twice the size of Germany in 2020.

Global sales of over 5 million units are implied in 2015, rising to over 8 million units in 2020.

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Audi, BMW and Mercedes-Benz Passenger Car Sales 2005-2011, 2015 and 2020

Rest of the World

US

UK

Germany

China

Market outlook: Base case

OUTLOOK REVIEW




Applying the healthier pre-crisis percentage ratios of premium car sales by market to the outlook for

households provides a more bullish view.

As premium car sales in China continue to outpace the growth in the number of households over all

disposable income levels, the bullish outlook here assumes that this trend will continue, and equates

premium car sales to 10% of households that are forecast to have an ADI in excess of US$75,000 in 2015

and 2020.

In this scenario, global sales of almost 7 million units are implied in 2015 and 11 million units in 2020.

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Rest of the World

US

UK

Germany

China

Market outlook: Upside scenario

OUTLOOK REVIEW




Regardless of new model activity, Audi is expected to pull further ahead of the Mercedes-Benz Cars

division in the coming years, as a result of the phenomenal growth potential in China.

However, Audi still trailed the BMW brand by 80,000 units in 2011 and, unless it can gain share through

new model activity, it is expected to lag BMW through 2015 in our cautious base case as BMW stands to

benefit more than Audi from growth in the US and the rest of the world (ie outside the four key markets

under review).

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2

3

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8

9

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2005 2006 2007 2008 2009 2010 2011 2015 2020

Pa

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mill

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Mercedes-Benz

BMW

Audi

Brand outlook: Base case

OUTLOOK REVIEW




In our bullish scenario, which is largely led by a more optimistic outlook for premium car sales in China,

BMW is still forecast to sell more cars globally than Audi in 2015.

However, the gap between Audi and BMW global sales is set to narrow to less than 50,000 units in 2015,

with Audi set to deliver 2.33 million units compared to 2.37 million for the BMW brand.

However, these scenarios assume a similar competitive situation and all three brands, are naturally looking

to extend their respective portfolios.

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2005 2006 2007 2008 2009 2010 2011 2015 2020

Pa

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Mercedes-Benz

BMW

Audi

Brand outlook: Upside scenario

OUTLOOK REVIEW




Deliveries of the Mercedes-

Benz Cars division trailed Audi

for the first time ever in 2011.

This was essentially because

Audi particularly benefited from

the boom in demand for

premium cars in China, and the

addition of the A1 small car.

However, the comprehensively

redesigned A-Class family will

inevitably boost Mercedes-

Benz's sales from 2012.

Audi's strong position in China

stands the brand in good stead,

but this alone will not be enough

to surpass BMW brand sales

globally by 2015, especially

given Audi's weaker presence in

the US.

However, the addition of the 5-

door variant of the A1 and a

sedan derivative of the next

generation A3 could yet help to

push Audi sales ahead of BMW.

BMW has been the leading

premium car brand since 2005,

but will face stiffer competition

from Audi as Chinese demand

continues to boom. However,

BMW will benefit more from any

recovery in the US.

Even if Audi does manage to

overtake BMW, the comparison

is skewed as only Audi offers

small cars, for which BMW

utilises the Mini brand.

Audi, BMW and Mercedes-Benz sales: The upshot

OUTLOOK REVIEW




Definitions of industry-specific terminology/abbreviations used in this report:

LWB – Long Wheelbase: Refers to extended versions of passenger cars. These are typically favoured by

Chinese consumers, and LWB versions of European models are therefore commonly developed for the

Chinese market.

SUV – Sports Utility Vehicle: Refers to the Audi Q5 and Q7, BMW X1, X3 and X5, Mercedes-Benz GLK, M

and GL model ranges. Sports Utility Vehicles are not registered as passenger cars in the US, but as light

trucks. However, they have been included here for the sake of consistent comparison.

Briefing definitions

REPORT DEFINITIONS




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