Premium brands now account for almost 25% of the European car market, according to consultants PricewaterhouseCoopers (PwC). This compares with less than 20% in 1990.

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Mercedes-Benz, Audi and BMW have all strengthened their positions in the European upscale car market, but the competitive environment is become more difficult.


“Market saturation is putting pressure on sales prices and manufacturer margins. Growing brands like Lexus and Infiniti are increasing the competition,” said Felix Kuhnert, a partner in (PwC) and leader of the automotive advisory division in Germany.


The growth of the premium segment can mainly be put down to the growing importance of the middle class, according to PwC. Thanks to increased incomes and the availability of low interest credit, cars from premium models have become more affordable. In addition they are a status symbol. “Many car buyers would rather buy an entry-level model from a premium manufacturer than a top model from a volume manufactuer,” said Kuhnert.


Established premium brands have responded by broadening their product ranges while others have been trying to position themselves as premium manufacturers and offer new products in premium segments. As a result volumes per model have fallen and margins at the premium manufacturers have fallen.

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However, worse is to come as Lexus attempts to repeat its success in the US market in Europe, and Nissan and Honda launch their premium brands, Infiniti and Acura respectively.


The danger is not just the short to medium term loss of market share for the established premium brands, rather it is the loss of sales at the top end of the market where there is more profit to made, according to Kuhnert.