Deepening rivalries test German luxury car dominance

Sun Aug 24, 2014 5:41am EDT
 
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By Laurence Frost and Andreas Cremer

PARIS/BERLIN (Reuters) - Berlin-based PR executive Herbert Franz should be a soft target for German luxury automakers - his last car was a BMW (BMWG.DE: Quote) X3 - but he can't wait to leave them behind.

"This car is hip," said Franz, 52, at the city's biggest Jaguar Land Rover (TAMO.NS: Quote) showroom, while eyeing up a British-built Evoque SUV that he fully intended to purchase.

Decked out in bright red blazer and canary yellow trousers, Franz might not be the typical customer in Germany's conservative premium market. But his shifting taste in cars foreshadows less comfortable times ahead for global leader BMW, as well as Audi (VOWG_p.DE: Quote) and Mercedes-Benz (DAIGn.DE: Quote).

The German premiums have long been on a roll, producing an export-driven sales explosion and huge returns while mass carmakers struggled through Europe's crisis.

But in a headlong sales race, second-placed Audi and runner-up Mercedes have both vowed to depose BMW, giving rise to heavy discounting, which sullies luxury brands and creates opportunities for the growing competition, observers say.

Now a host of younger or revived premium marques are poised to follow JLR by pitching dozens of new models against the big three, whose very ubiquity is taking the shine off their prestige.

"The German premiums have sacrificed some of their exclusivity by entering smaller, volume segments like compacts," said Bernd Hoennighausen, an automotive consultant.

"They've pushed volume with fleet discounts of around 20 percent," said Hoennighausen, who previously managed corporate fleets for Deutsche Bank and BNP Paribas.   Continued...

 
Infiniti chief designer Alfonso Albaisa draws a sketch of a car next to a quarter sized model of the Infiniti Emerg E car during an interview with Reuters at Nissan Technical Center in Atsugi, south of Tokyo May 20, 2014. REUTERS/Yuya Shino/Files