FRANKFURT (Bloomberg) -- German premium automakers BMW, Audi and Mercedes-Benz are gaining customers at the expense of mass-market rivals with a flood of small cars that even penny-conscious buyers are willing to pay extra to drive.
During the six-year downturn in European auto sales, BMW brand's market share has climbed to 5 percent from 4 percent, Audi has risen to 6 percent from 4 percent and the Mercedes brand has grown 5 percent, up from 4.5 percent. PSA/Peugeot-Citroen, General Motors Co. and Ford Motor Co. have each lost more than 2 percentage points of share in that time.
BMW, Audi and Mercedes have remade the region's competitive landscape by pushing into smaller cars.
Underscoring the upheaval, BMW Group has surpassed Fiat Group's market share in Europe for the first time.
BMW Group's market share in the first eight months in the EU and EFTA countries was 6.3 percent with unit sales of 514,864, up 3 percentage points from the year before. Fiat Group's share was 6.2 percent with unit sales of 507,751, down from 6.5 percent, according to the latest sales figures released on Tuesday by industry association ACEA.
"The luxury carmakers have invaded the compact and small-car segment, and many customers are willing to pay a little more to buy a luxury car," said Peter Fuss, a partner at consultant Ernst & Young in Frankfurt.
Eight-month European sales at Mercedes gained 6 percent, chiefly on demand for new small cars such as the A-class hatchback, B class and CLA four-door coupe. The company offers 23 models -- up from 19 six years ago -- and plans to add another 13 all-new vehicles in the next eight years. Its sales in the region last month gained 9 percent even as the market dropped 5 percent.
The BMW brand's August deliveries surged 9 percent, propelled by a Gran Turismo version of the 3-series sedan introduced this year. The 3 series was the fourth-best-selling model in Europe last month, with demand up 47 percent, edging ahead of Ford's compact Fiesta, according to researcher JATO Dynamics. BMW has expanded to 21 models from 14 in 2007.
Audi has doubled its lineup in the last six years to 46 vehicles, including variants such as convertibles and station wagons. Additions during that time include the A1 subcompact and Q3 SUV. The company's A3 compact was the sixth-best-selling model in Europe in August, beating GM's Opel Corsa and Peugeot's 208, JATO Dynamics said.
The BMW, Mercedes and Audi brands have increased their combined sales globally 27 percent to 4.3 million vehicles in 2012 from 3.4 million in 2007. The figures don't include BMW's Mini brand, revived in 2001, which sold more than 300,000 vehicles last year.
Trend toward small luxury
Daimler CEO Dieter Zetsche said at the Frankfurt auto show last week that even after adding production in Hungary, Mercedes is struggling to meet demand for its compacts -- some of them the lowest-priced cars the company has ever sold after adjusting for inflation.
The base price of the Mercedes A class is 24,336 euros ($32,500), the BMW 1 series 21,900 euros and the Audi A3 21,600 euros, according to the 2013 Auto News Neuwagen-Katalog published in July.
That compares with starting prices of 16,975 euros for the VW Golf, 16,450 euros for the Ford Focus, and 16,770 euros for Opel's Astra. Opel's most expensive model, the mid-sized Insignia, begins at 24,325 euros.
"There's a trend toward buying smaller luxury cars instead of a larger mass-market model with people whose children have left home," said Christian Ludwig, an analyst with Bankhaus Lampe in Dusseldorf, Germany.
The German premium producers can offer financing deals thanks to their robust balance sheets and because their cars have a higher resale value than mass-market competitors, according to Simon Empson, managing director of Broadspeed.com, a UK car Web site.
BMW has leasing deals in Germany on the 1 series for about 330 euros per month, while GM offers the Opel Astra for around 315 euros. "In essence, you can buy these days a BMW for less than a Ford," Empson said.
PSA's sales in the region this year are down 12 percent, GM's 8 percent, Ford's 7 percent and Fiat's 9 percent -- all more than the industrywide drop of 5 percent. Even the VW brand, which has weathered the downturn better than its mass-market rivals, dropped 8 percent in the region.
Facing pressure from above from premium carmakers and from below by the likes of Hyundai Motor Co., mid-level brands are resorting to sales incentives to maintain demand.
Discounting in Germany, Europe's biggest car market, averaged 12 percent off the list price last month, according to trade magazine AutoHaus PulsSchlag.
PSA and Renault offered an average of 14 percent off list, Ford and Opel had discounts of 13 percent, and Fiat offered 12 percent off.