Premium compact SUV sales forecast to top 500,000

Sales of compact premium SUVs in Europe are poised to top half a million for the first time this year because of new model launches from brands such as BMW, Land Rover and Mercedes-Benz, according to forecasts.

The segment has expanded significantly since 2010, when about 270,000 units were sold. Analysts at IHS Automotive now predict sales will exceed 600,000 units in 2016.

They expect innovation in the segment will be a key driver of this growth. This includes the launch of the Land Rover Discovery Sport, the niche’s first seven-seat vehicle, as well as more economical versions of diesel models and more segment-busting variants such as coupe-styled SUVs and possibly even a cabriolet.

The compact premium SUV market is led by Audi’s Q3, with European sales up 3 percent last year to 76,078 units. It was followed by Volvo’s XC60, which grew by 35 percent to 62,650 sales over the same period. Mercedes added a second model in the segment last year, the A-class-based GLA, which achieved sales of 44,930 to rank seventh in the segment in less than a full year of availability in European markets.

Despite being around since 2008, the Audi Q5, which is the Q3’s big brother, managed to grow sales by 9 percent in 2014 to hold fourth place.

“Audi has done a lot to them [the Q3 and Q5], appealing to customers in terms of interiors, technology content, brand and styling,” IHS Automotive Principal Analyst Ian Fletcher told Automotive News Europe.

Surprise sales rise

Volvo’s XC60 was the biggest winner among vehicles in the segment’s top 10, rising to second place from No. 6 in 2013. Volvo attributed the surprise sales rise, which was unexpected for a vehicle launched seven years ago, to the introduction of its new four-cylinder 2.0-liter Drive-E diesel. The powerplant offers CO2 emissions as low as 117 grams per kilometer, qualifying the car for lower taxes in many European countries.

“Basically all of the growth came from the D4 Drive-E engine,” a Sweden-based company spokesman told Automotive News Europe. This engine now accounts for 36 percent of XC60 sales in Europe, he said. More variants of the Drive-E diesel, based on the company’s new modular four-cylinder range, will be launched this year, he added.

The big model launch in the segment for 2015 already has occurred with the arrival of the Land Rover Discovery Sport. A replacement for the Freelander, IHS expects the Discovery Sport will have double the sales of the Freelander to reach almost 40,000 this year.

The Discovery Sport is based on the same platform as the fifth-placed model in the segment, the Range Rover Evoque, which it closely resembles in terms of front-end styling. Despite the similarities, the British automaker does not expect the Discovery Sport to cannibalize sales of the older Evoque. “They will appeal to different people. They might look similar, but they are vastly different inside. The driving position in the Evoque is a lot lower,” Murray Dietsch, director of Land Rover programs, told Automotive News Europe late last year.

To differentiate it from the model wearing the more luxurious Range Rover badge, Land Rover described the Discovery Sport as “premium, not precious.” However, Discovery Sport buyers will have to wait until year-end to get a version with Jaguar Land Rover’s new low-friction 163-hp 2.0-liter diesel, which produces as little as 119g/km of CO2, down from 162g/km. Dietsch said the same engine also will go in the Evoque this year, addressing a big complaint that the car uses too much fuel. IHS believes that the more economical engine will help to keep Evoque sales above 50,000 for the next three years, keeping it ahead of the BMW X3.

According to media reports in the UK, Land Rover also will launch a convertible version of the Evoque toward the end of this year.

X3 struggles, X1 to shine

BMW, meanwhile, has failed to lift sales of the X3, which dropped 18 percent last year to below the Evoque. The dip came despite BMW introducing a more economical, two-wheel-drive X3 variant last year, badged 18d, which cut CO2 emissions to 131g/km from the four-wheel-drive 20d’s figure of 143g/km.

IHS’s Fletcher speculated that the X3 could have suffered from last year’s launch of the X4 coupe-styled crossover. IHS, however, predicts that the all-new X1, BMW’s smallest SUV, which is due to go on sale in November, will become the segment leader. The analysts expect that in its first full year of sales in 2016 the X1 will outsell the Q3 and stay at the top for the next two years.

In 2015, Mercedes will try to gain its first proper foothold in the larger compact segment when it launches the GLC replacement for the GLK model. The GLC will be aimed at the X3 and Q5. Sales of the GLK have suffered from the vehicle not being converted to right-hand drive, which prevented sales in Europe’s second-largest market, the UK. Mercedes has said the GLC, which uses the automaker’s new naming system to link it to the C class, will be available with the steering wheel on the right.

The company has also said the design will be less off-road influenced compared with the angular GLK. A coupe version of the GLC will be launched in 2016, IHS predicts. Other new models due in 2016 include the Jaguar F-Pace, the Infiniti QX30 and Tesla’s Model X. The arrival of these last few remaining premium producers to one of the industry’s most lucrative segments is likely to ensure the niche enjoys further good growth over the next two to three years at least.