Mercedes-Benz's double-digit sales growth threatens Audi, BMW in China

31 Jan 2017 IHS Markit Automotive Expert

Mercedes may have sold less than Audi and BMW in China but the premium brand is gaining ground with a growth rate of 26.6%.

IHS Markit Perspective

  • Significance:In 2016 Mercedes sales in China surged 26.6% year on year (y/y) while BMW sales rose 11.3% y/y and Audi sales increased 3.6% y/y.
  • Implications:With a steady stream of models being launched in China in segments that continue to attract local consumers, the three premium German brands are pulling out the stops to maintain their position in China.
  • Outlook:In 2020 the three premium German brands are forecast to sell a combined 1.8 million units per year in China, but Mercedes' rate of growth is expected to push it to account for over 595,000 units that year.

Overall growth in the Chinese vehicle market is slowing, with expansion rates forecast for 2018 in negative territory. But the three premium German brands, which also have a solid production footprint in China, are expected to post overall growth in the market, although at a lower combined rate than in previous years. Mercedes' annual sales in China hit 472,844 units in 2016, while Audi sold 591,544 units and BMW 516,355. In 2016 Mercedes' sales grew 26.6% year on year (y/y) while BMW's rose 11.3% y/y and Audi's 3.6% y/y in China. A continuation of Mercedes' high growth rates would threaten the current ranking of the three German premium players in China.

Strong growth in 2016

In China in 2016 Mercedes reported growth of 26.6% y/y with total volume of 472,844 units, making China its largest single market. The C Class sedan's biggest global market was China in 2016, where demand was strong for the new long-wheelbase variant. The new long-wheelbase variant of the E Class was also released in China last year. Demand for the long-wheelbase variant of the S Class was also "particularly strong in China" in 2016, according to a company release. Globally, the sport utility vehicle (SUV) segment is now the strongest segment for Mercedes, with sales up 34% y/y to 706,170 units, and China is also playing a strong role in this market.

While Mercedes does not reveal sales by model for individual markets, data from the China Association of Automobile Manufacturers (CAAM) show that in 2016 317,069 vehicles were sold by the Beijing Benz Automobile Company, a joint venture between BAIC and Daimler that produces Mercedes models in China. This total was up 26.73% y/y from 250,188 units in 2015. Among these sales, the top model was the GLC SUV with annual sales of 87,275 units in its first full year of local production and sales in China. Second was the C Class 1.8-litre sedan with sales of 78,371 units, up 28.19% y/y, followed by the GLA 1.6-litre SUV with sales of 51,889 units, up 26.66% y/y. This was followed by the E Class 1.8-litre model with sales of 41,468 units, down 25.29%. The C Class 1.6-litre followed with sales of 26,744 units, up 19.44%, while sales of the 3.0-litre E Class jumped 252.98% y/y to 15,736 units. The GLA 2.0-litre variant posted sales of 15,028 units, up 786.61% y/y.

Overall, the SUVs in Mercedes' local line-up accounted for 154,229 sales in China in 2016, while sedans provided 162,840. Please note CAAM data are of locally produced models, excluding imports.

Immediately apparent from the numbers is that models with 1.6 litres have booked higher sales, reflecting the 50% cut in new car purchase tax in place from 1 October 2015 until 31 December 2016. This helped spur the market for small-engined models. Another trend was for buyers of higher-end models such as Mercedes brand products to continue to be attracted to powerful engines, which is apparent from the strong growth in 3.0-litre E Class sales. (Please note Mercedes van production in China has not been included in this analysis.)

BMW sales in China rose 11.3% y/y to 516,355 units in 2016, including both the BMW and Mini brands, according to the automaker. BMW sales topped half a million units in China for the first time. The automaker also does not share a country sales breakdown by model. The CAAM data show that sales of BMW Brilliance Automobile in China, which makes BMW models in the country, totalled 310,099 units in 2016, up 7.85% y/y from 287,531. The top-selling model among these sales was the BMW 5 series sedan, with 143,626 units, down 2.43% y/y. This was followed by the 3 Series with 97,112 units, down 1.53% y/y, and the X1 SUV with 54,914 units, up 33.11% y/y. The 2 Series sedan booked 14,406 units, up from just 9 a year earlier, again likely benefiting from the small-engine purchase tax cut. But what is apparent from BMW's data for sales of locally produced models is the lack of variety in the fast-growth SUV segment.

Audi's sales in China in 2016 totalled 591,554 units, giving an annual increase of 3.6% y/y. The automaker has reported a surge in the compact segment, with sales of the Audi A3 climbing 29.7% y/y to 89,213 units, while Q3 SUV sales rose 27.6% y/y to 89,776 units. "Today, Audi is conquering especially young customers with these models, after back in 2013 the company pioneered local production in this then-nascent segment of the Chinese premium market," said the company in a statement. Audi also launched the new long-wheelbase A4 L.

The Audi brand is built in China under the FAW-Volkswagen joint venture. CAAM data for 2016 includes 536,289 Audi sales, up from 509,997 in 2015.

Audi's top-selling model in 2016 was the Audi Q5 SUV with 129,453 units, up 13.56% y/y from 114,000. This was followed by the A4 L sedan 2.0-litre turbocharged model with sales down 18.55% y/y to 89,542 units, while sales of the Audi Q3 SUV soared 29.75% y/y to 88,901 units, followed by the A3 1.8-litre turbocharged model, with sales up 37.57% y/y to 81,579 units. This was followed by the Audi C7 1.8-litre model (the C7 refers to the latest Audi A6 variant) with sales of 65,363 units in its first full year. The Audi C7 2.5-litre variant booked sales up 18.57% y/y to 56,028 units. The C7 3.0-litre variant's sales leapt 591.55% y/y to 13,506 units.

Overall Audi has a strong line-up of locally produced models, and shares the load between SUVs and sedans as well as larger and compact sedans and SUVs. But Audi's challenge will be to maintain growth and its high volumes in the country.

Outlook and implications
IHS Automotive forecasts for light-vehicle sales in China show that in 2020 these three German premium brands will together have sales in excess of 1.8 million units, marking an increase of 3.58% y/y. The top brand by volume sales remains Audi with sales of 651,000 units, while Mercedes is forecast to have overtaken BMW by then to post sales of 595,000 units. BMW is forecast to sell about 560,000 units in that year in China.

The growth rates for the three brands show a steeper trend for Mercedes in the coming years. In 2017 Mercedes sales are forecast to grow around 9.3% while BMW sales are expected to rise 3.95% and Audi sales to slip 4.3% as the competition intensifies. By 2019 Audi is forecast to regain stronger expansion with a solid 6.19% y/y growth rate that year, while BMW is expected to slow to just 1.5% y/y growth with Mercedes posting about a 4.6%y/y improvement.

Behind the numbers is the story of local production and the models offered by these automakers in China. While the surge in demand for SUVs continues to lift sales in the segment, demand for mainstay sedans is very much the core for these premium brands in China.

Our forecasts for 2020 are for Audi's leading volume-selling model to be the Audi A6, contributing 19% of Audi's sales in China, followed by the A4 sedan with around 18% and the Audi Q5 SUV again with about 18%.

In the same year the top volume-selling models for BMW are forecast to be the BMW 5 Series sedan with 24% of its volume, followed by the BMW 3 series sedan with 17% and the BMW X3 SUV with about 14%.

For Mercedes, the E Class is forecast to be the top volume-selling model, providing 20% of its volume in 2020 in China, followed by the GLC SUV with about 15% and the C Class with 15%.

Sales will be driven by volume production levels, with Audi producing 10 models in the country in 2020, shared equally between sedans and SUVs and covering the smaller compact segment as well as medium and larger models. This is an increase from five models under the current line-up of locally produced models in China.
Meanwhile by 2020 BMW will have six models locally produced in China - up from five currently - with four sedans and two SUVs.

In 2020 Mercedes will have 11 models locally produced in China, according to our light-vehicle production forecasts. The load is expected to be shared between sedans, SUVs, and vans. In 2017 Mercedes has seven models locally produced in China but the brand is strengthening its compact offerings, while also bringing in larger D-segment SUVs to target its main competitors' market share.

About this article

The above article is from IHS Automotive Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.


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