Aging models such as the BMW 1 series and Audi A3 as well as the continued rise of SUV alternatives will cause sales in Europe’s compact premium segment to fall for a second consecutive year, according to predictions.
The sector had been one of Europe's most dynamic in the last decade as BMW, Audi and Mercedes-Benz added more variants to their compact lineups. However, after exceeding 1 million sales in 2016, the sector dropped below that number last year and will struggle to top 900,000 in 2018, LMC Automotive forecasts.
The biggest pressure on the segment will come from the arrival of new premium compact SUVs such as the BMW X2, Jaguar E-Pace and Volvo XC40, said David Oakley, LMC’s analyst for Europe, the Middle East and Africa.
The segment-leading A3 and the third-ranked 1 series aren't due to be replaced until 2019, dissuading customers from choosing cars that will be 7 years and 8 years old, respectively, when they are updated, JATO Dynamics global analyst Felipe Munoz argued. "Their current models are too old and not attractive enough" to lure buyers away from newer compact SUVs from both premium and volume automakers, he said.
Mercedes has the chance to pull ahead of its two biggest rivals by launching the new A class this summer. The German automaker recently released details of the fourth-generation A class ahead of its debut at the Geneva auto show next month. Mercedes promises the new car will be a larger and more luxurious model than the current car.
The A class, combined with the arrivals of the A3 and 1 series next year, will help the segment rebound in 2019 and push sales past 1 million units again in 2020 before leveling out, according to LMC.
However, LMC believes that premium compact SUVs, which Automotive News Europe counts in a separate segment, will continue to put pressure on hatchback equivalents. The compact premium market tracked by ANE includes hatchbacks (the core model) as well as sedans, minivans, coupes and cabriolets. If you take away the non-core models, sales of compact premium hatchbacks will be overtaken this year by premium compact SUVs for the first time, 518,480 to 459,110, LMC predicts. By 2022, SUVs will outsell hatchbacks 735,268 to 571,034, LMC forecasts.