Emerging markets drive demand for cars

Emerging markets drive demand for cars

Sascha Herrmann, sales director at Audi’s Frankfurt dealership, would love to sell more of the German premium carmaker’s Q5 sports-utility vehicles and A7 Sportback sports coupés.

The only trouble is that he cannot get hold of them. He says: “The Q5 is sold out and for the A7 Sportback the delivery takes until August. This is really extraordinary.”

Germany’s premium carmakers BMW, Audi and Daimler, are struggling to meet rocketing global demand.

Sales are continuing to soar in China and other emerging markets, but recently they have also picked up in the US and Europe.

Ian Robertson, BMW’s head of sales, says it was having difficulties catching up with demand for its “X” utility vehicle models. “I’m sitting on order banks running through to the end of the year and beyond,” he says.

The situation is similar at Audi. Peter Schwarzenbauer, head of sales, says: “The average delivery time for all our models is between three and five months – ideally we would have around two to three months.

“We have ramped up our production but that doesn’t help as long as some suppliers are not able to catch up.”

Joachim Schmidt, Mercedes-Benz’s head of sales, says its German plants ran close to capacity limits last year and would continue to do so. “In the year 2011 we are therefore once again planning special shifts.”

Analysts say that Germany’s big three producers are reaping the benefits of years of investment in new technology and vehicle line-ups. All three have expanded their portfolios into more affordable small cars and new segments.

Arndt Ellinghorst, head of European automotive research with Credit Suisse, says: “They are focusing on quality, trying to be premium, and being ahead of others on technology. This is now paying off”.

As in the past year, a big driver for the surge has been emerging markets, with China leading the way. Audi’s January sales in China were 32 per cent higher than 2010 and BMW’s sales were up 70 per cent, while Mercedes even reported an 87 per cent sales surge.

Analysts have warned of the risk that Germany’s producers might become over-reliant on China’s fast-expanding premium car market. But the January data suggest that the sector has solid roots in markets around the world.

All three German producers reported global double-digit sales increases. Most notably, BMW, Mercedes and Audi also reported sharply higher sales in the traditional markets of the US and western Europe.

BMW’s Mr Robertson says: “Clearly the new markets played a very strong role, but the mature markets also showed good recovery”.

Felix Kuhnert, head of automotive at PwC, the consultancy, estimates that the global market growth has led to a shortage of 264,000 cars in Germany, as domestic carmakers prefer to export cars to emerging markets and the US.

“A certain preference for these countries is an understandable move to win long-term market share,” he says.

One reason for the rebound in Europe is that premium carmakers benefited less from scrappage bonuses than their mass-market competitors, and so are not seeing the same drop-off in sales now that the incentives have expired.

According to JD Power, preliminary figures show that sales in Europe – including Russia – of Audi and Mercedes-Benz grew by 3 per cent last year, while BMW notched up 7 per cent, even as the overall light vehicle market contracted by 4 per cent.

Jonathon Poskitt, JD Power analyst, says: “As economic fundamentals are picking up in Europe, premium sales are improving accordingly.

“Add to this that the premiums have been ramping up sales of new models like the BMW X1 and Audi A1, and the picture looks rosy for them.”