Premium SUVs poised for sales surge after disappointing 2013

The Mercedes GLA is forecast to rise to No. 2 in the European premium SUV segment in 2015, its first full year of availability.
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European sales of premium SUVs are expected to surge as the market heads toward 1 million units by 2020, analysts predict. The segment grew 15 percent in 2012 because of strong European demand for models such as the Audi Q3 and Range Rover Evoque but sales last year were down 5 percent to 584,651. The momentum will be back this year, according to LMC Automotive.

"The strength that we have seen in the premium brand share [for SUVs] is set to continue to grow, helped by the ongoing proliferation of vehicle lineups from the key players," LMC head of sales forecasting in Europe, Jonathon Poskitt, told Automotive News Europe.

The sector has expanded as key players such as BMW and Audi have launched smaller models. Last year's best-seller was the compact-sized Audi Q3, launched in 2011, figures from JATO Dynamics show, while the rival BMW X1, which arrived in 2009, was second.

LMC predicts the European market share for premium SUVs will rise to 4.7 percent in 2016 with sales of 895,000, up from 3.5 percent last year. The segment will top the 1-million mark by 2020 as models such as the Mercedes-Benz GLA, Porsche Macan, Maserati Levante, Lamborghini Urus, as well as a new crossovers from Jaguar and Bentley, join the segment. “Manufacturers clearly see the potential for further growth in SUVs, as do we,” Poskitt said.

Mercedes on the move

The automaker likely to rise fastest in this sector is Mercedes, which is currently working to close the gap in sales and models between it and its German premium rivals. Mercedes has just launched the GLA, which will compete against the Q3 and X1. Analyst IHS Automotive expects the A-class based model to supplant the X1 as the segment’s No. 2 seller in 2015, which will be the GLA’s first full year of sales in Europe. The Q3 is forecast to remain the segment’s top seller in 2015.

Next year Mercedes will launch the successor to the GLK, which is a BMW X3 rival. The new-generation GLK will move away from the boxy look of the current car, Mercedes design boss Gordon Wagener told Automotive News Europe last year. The new GLK also will be offered with right-hand drive, Mercedes said, which will give the carmaker access to the UK, Europe’s second-largest market after Germany. Last year, the GLK’s sales slipped 10 percent, dropping it to seventh place in the segment well behind its direct rivals, the third-ranked X3 and the No. 4 Audi Q5. The GLK also was beaten by the Range Rover Evoque and the Volvo XC60 (see chart).

The X4 (shown) is the second coupe-styled SUV after the X6 from BMW, which pioneered the niche. Audi and Mercedes plan to add rival models soon.

Diversification trend

The premium SUV segment also is growing because automakers are creating sub-niches or expanding into those niches. BMW’s mid-sized X6 was the first premium coupe-styled SUV. It will be joined by the X4 compact-sized, coupe-styled SUV this year. Audi and Mercedes plan to launch their own coupe-styled SUVs.

Audi unveiled a coupe-SUV concept at the Beijing auto show last month that a spokesman described as “another possible member of the TT family, with more of an SUV emphasis.” The model will rival the X4. At the same show Mercedes revealed the Concept Coupe, which is expected to rival the X6. “We see a great deal of potential for Mercedes in the combination of a coupe and SUV,” Dieter Zetsche, CEO of Mercedes’ parent, Daimler, said in a statement during the company’s annual shareholders meeting last month. The concept, a coupe version of the ML SUV, is expected to evolve into a production model next year that will be badged as the MLC.

Also competing at the sportier end of the SUV market is Porsche’s newly launched Macan, the German automaker’s second crossover after the larger Cayenne, which finished 10th in European premium SUV sales last year. Porsche sales boss Bernhard Maier is bullish about the Macan and the segment overall. “This segment has had tremendous growth and is expected to be fastest-growing segment globally in the future,” Maier told Automotive News Europe.

Premium brands also will be targeting buyers looking for both smaller, cheaper SUVs as well as crossovers that are larger, more exclusive and cost six digits. Audi has confirmed that in 2016 it will start building the subcompact-sized Q1 in 2016. The Q1 likely will be based on parent Volkswagen Group’s MQB platform, a spokesman said. The Q1 will be the fourth crossover added to Audi’s lineup since the Q7 debuted in 2005. Audi sales boss Luca de Meo told ANE that “expanding our Q-line of SUVs is the top priority at Audi.”

Meanwhile, Audi sister brand Bentley will debut its first luxury SUV in 2016, adding a variant with a plug-in hybrid powertrain a year later. “We would like to solve the problem for people who’d like to spend more on an SUV,” Bentley sales boss Kevin Rose told journalists recently. He predicted Bentley’s SUV would cost more than 140,000 pounds (about 170,000 euros).

While the overall segment is expected to rise, the arrival of smaller-sized premium SUVs has coincided with declining sales of the larger-sized vehicles in the segment. IHS figures comparing 2013 European sales with those of 2007 show that the Q7 has slumped 74 percent, the X5 fell 68 percent, the Lexus RX slipped 58 percent, the ML dipped 48 percent and the Volvo XC90 is down by 73 percent. (The second-generation XC90 will debut this year and deliveries will start in 2015). The trend will continue to favor smaller premium SUVs, according to LMC. Said Poskitt: “It means that car buyers have had greater choice within a brand’s range. Or more alternatives if they were considering more expensive non-premium vehicles.”

This story is from the current issue of the Automotive News Europe monthly e-magazine, which is also available to read on our iPhone and iPad apps.You can download the new issue as well as past issues by clicking here.

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