There have been many postings about the big luxury 3 that have resulted in robust arguments about who will continue to grow, who will be number 1 in sales in a couple of years and so on. The right way to forecast this will be to look at all models in each segments examining factors such as sales, market share, cars in pipeline, pricing etc. incentives & impact on sales..blah blah blah,.. and do this for all markets they compete in, but we’ll leave that for the car execs. This is autospies so we’ll take a completely different approach. How about looking at total volume growth for the big luxury 3 over a number of years and simply look at sales growth or momentum. The assumption is that their strategies are not changing appreciably so whatever we see in sales is a reflection of the current strategy, incentives, pricing market share changes and so on... The results of taking this approach will shock you some of you, especially those with little or no knowledge of what happens outside of the US market, but the interesting thing is that it may not be too far from the truth. Here’s a summary below, let the intelligent as well as brain-dead arguments begin:

So using data as far back as 2001, I worked hard to strip out related lines such as Motor Bike, Rolls and Mini sales for BMW and Truck and Smart sales for Benz so that we have numbers that reflect the true brand and not any lines owned by the brand.

Note: I would have liked to include Lexus (big lux 4?), but searched and could not find global numbers, just US only. Given the state of the US market, I believe their sales would have been between 470 and 500K last year down a bit from 2007, but don’t know for sure. Any who knows where I can get them, please let me know

- Mercedes has hit a growth brick wall! The company had a CAGR (combined annual growth rate) of 1.4% over the past 4 years, and this is not a typo. In fact its 8 year CAGR is 0.18%. Conclusion: MBenz’s sales have barely budged from 1.1 million sales over the past 8 years…downright scary, and does not seem to be improving!

- BMW has grown nicely over the past 4 years at a CAGR of 4.1%, and is responsible for some of MBenz’s malaise

- Audi has grown even quicker at a CAGR of 6.51% over the past 4 years, and is also responsible for some of MBenz’s problem

- If you assume the US market, a bigger market for BMW and Mercedes remains dead this year and some of 2010 and Audi continues to perform as well as they have, Audi could eclipse Mercedes by 2010. Even if things improve in the US, unless Mercedes does something radical to its strategy and products, Audi is scheduled to pass Mercedes in by 2011 based on current CAGR projections. In fact, barring a miracle, major changes in strategy or screw ups, it is “almost a guarantee” that Audi will be selling more cars than benz in 3 to 4 years

- Using the last 4 years to project, the earliest (again barring any screw-ups or changes), the Audi may have a chance to pass BMW in 2014, but I think realistically, it will be around 2016 because BMW is also working on a number of new models that should add to volume

In a very bad year (2008) Audi gained the most luxury market share worldwide 9and in the US) of any Luxury manufacturer. What’s scary for BMW and Mercedes is that Audi did it without the same amount of crazy incentives BMW and MBenz were offering when cars starting sitting in US lots. Wait till their financial reports for 2008 come out, guaranteed Audi will have the largest profit margin percentage of all three.

So what is Audi doing that the others are not or can't? One think is innovation that counts. From Quattro(Rally & Touring car championships), and FSI (Le mans) to TDI (le mans), Audi has been smart about where to spend money in racing, and has monetized their racing investments by moving them to real world cars. In addition, they have come up with some innovations that faciliate growth. For example, drive select now in the S5/A5, A4 and Q5, changes steering ratio, transmission shift points, throttle sensitivity and engine response will allow reduce the ability of other car makers to differentiate less based on handling characteristics. Instead the frontier will slowly shift to styling, quality feel, brand loyalty, safety and so on, and those are areas where Audi already excels

- Many comments on this site show a lack of understanding of what platform /parts sharing does for car manufactures. It has clearly helped to reduce Audi’s R&D costs and cost per part. Basically, Audi spreads the same (and in some cases lower) development costs BMW or Mercedes may have over more units (Porsche, Seat, Skoda, VW, Bentley, and Lamborghini) for a lower overall average cost. BMW and Mercedes can’t match this. I’ve read many comments about the A4’s Audi 3.2 V6, and how its smaller and less powerful than say the BMW 335 turbo or Infinity 3.7 etc..but those are from people who don’t get it. Audi isn’t trying to match a 3.2 with a 3.7. They’re just trying to save money by running a longer cycle with their very efficient engines…they also understand that anyone who wants more power can get the S4 with over 300HP or RS4 with over 400HP. In the end it goes to the bottom line and does not negatively impact sales as most people think. Who else would go from a 4.2V8 to a 3.0 supercharged V6 and increase performance and efficiency while improving balance and handling (new S4). The new A4 is lighter, yet stronger, faster yet bigger that its predecessor. The A8’s 4.2liter engine has been around since the late 90s, they just made it more efficient over 10 years instead of building a bigger engine as most of the competition has. Benz has gone through 3 engines (4.2, 5.0 and now 5.5) over the same period. Think of what that means from a costs, parts, maintenance, and retooling point of view, not to mention efficiency and improvement.
-Here’s my prediction, barring any miracles (and miracles do happen) within 5 years Audi will absolutely eclipse Mercedes in sales, and in just under 10 years BMW will fall next. Audi has managed to combine what's best about BMW (handling/feedback) with what used to be the best about Mercedes through the 80s (comfort, quality feel and solidity)in a package that's more attractive on the oustide and inside where it has no equal. Here’s a graph that shows the growth trends, and some raw sales numbers. You heard it hear first with some real numbers to back it up, now let the madness begin...and while its on click on the link below to enjoy some pictures of what the future of luxury cars will be...

The BIG Luxury Three (Audi, BMW & Mercedes). Who will be no. 1 in sales in 2020, and who's in trouble!

About the Author