Math Madness: Who Will Be The Premium Market Leaders in 2010 and to 2030?

If you read the press and take it verbatim you might think Lexus is the undisputed luxury car leader, then and then the very next day BMW may be claiming to rule the world. But lets lets not forget Audi in the wings telling you by the next millennium that they will be the leader of the segment.

Who do you believe, and what is hype? Even though we consider ourselves an equal opportunity website there is no doubt AutoSpies can be divvied into two camps pretty easily, the Pacific Rim enthusiasts on one side the Germanic European fan boys on the other. Each touting who rules the luxury roost. Never mind there are other brands out there (Cadillac, Jaguar, etc) we always seems to congregate in these two camps when it comes to who is the best. So for the purpose of discussion we will limit our scope to these two competent factions of the enthusiast fan base.

Lets start out with the truths as we know it. Of the main players in the Pacific Rim camp we have primarily 3 Lexus, Infiniti and Acura each with a different flavor and fan appeal. On the European front we are represented by Mercedes Benz, BMW, Audi, and Porsche. All worthy players in their own right.

So what does the battlefield look like?

You would have to be living under a rock to not know that Lexus will lead the way here for 2007. Selling 322,434 cars last year and a by my projections they will yield around 335,976 for 2007, they are quite impressive. But if you take a look you will see that BMW is trailing but not really that far behind. With additional models coming in 2008 and beyond this might take them over the top for 2008.

For those of you are wondering, wow I got my 2007 projections. I simply took the growth rate so far for this year and factored it into last year’s sales. A fair shot for all.

Let’s look at market share.

Using 2006 sales data we can see to no one’s surprise the Lexus also leads the way here as well. Using superior marketing and targeting the soft underbelly of the American buyer they have carved out an impressive share of the market. Of the combined total of almost 1.3 million cars sold last year by these seven brands, Lexus sold almost ¼ of the entire total. In this case quantity again is a factor. .Projecting out 2007 sales to the end of the year, shows this margin increases to just over 25% for the year. Taking bigger and bigger slices each year clearly seems to be the strategy. As you can see from below BMW is still the big gun for the European community.

How about Sales Growth?

Another way to reveal trends is to look at sales growth. Who is doing the best job at maximizing the gain in sales over last year? The first thing you must do is take the figures and strip out the entire “Daily Sales Rate” mambo jumbo some manufacturers use and get to a real figure. How many more cars did I sell this year than last is the rule here? Using a raw percentage format you can see who did well last year and who the leaders are for 2007.

Now before any of you get excited, you have to remember that the bigger you get, the harder it is to maintain momentum. So Audi isn’t over taking Lexus anytime soon. But you can correctly argue that they are on a roll for them. In the below table you see that while Lexus maintains a respectable growth rate of just over 4% for 2007 BMW who has similar sales is gaining rapidly at almost double the rate. Is there a power shift on the horizon?

Is the big picture a shrinking pie?

If you took these seven manufacturers and mapped them back to 2000 you may see an unsettling trend. While the premium market is still growing, it is showing signs of slowing. Perhaps reaching a saturation point in the US market? In the year 2000 we saw the seven add sales of 120,022 vehicles combined, but in 2001 that total had dropped by over 60% of that to a mere 40,843 vehicles. While it rebounded again two years later the economic downturn again took its toll in 2005 and plummeted again. It has yet to recover.

But who is benefiting how is just maintaining and who are the losers? As you can from above Acura has bore the brunt of this latest downturn down almost 10% after an already soft 2005 sales year. By the end of 2007 they will be down over 27,000 vehicles compared to 2005! While Infiniti is showing an increase for this year, it is also against a rather dismal 2006. So much so, that even at the respectable growth rate of over 6% rate it won’t even reach 2004 sales levels for 2007.

Who is picking up the pieces?

If you look at it for the last two years Lexus is continually rising, but their progress is remarkably close to the losses that the other two Pacific Rim companies are posting. Is Lexus cobbling up the other two sales? I doubt it, but it does sound like a good movie story line. Anyway you look at it though, there is no doubt the Lexus engine is slowing from almost 11% just a few years ago to just over 4% for 2007. Interesting.

This slowdown would be easy to discount because of the size of Lexus, if it weren’t for the acceleration of BMW from just under 3% annually in 2006 to over 8.5% for 2007. This trend may show signs of continuing as BMW plans an onslaught of new models by 2012 almost twice those projected by Lexus for the same time period.

But who is winning?

If we were to pit these giants against each other, we would see these 4 Europeans claimed over 54% of the lions share of sales for the group in 2001. But the Pacific Rim Godzilla’s had whittled it way to just under 49% in 2004. This might have been a sad story if it wasn’t for the tenacity of the German 4. If the trend continues for the next 2 months then by the end of 2007 these 4 premium companies will have reversed the loss in market share and will have reclaimed the market with over 51% of the share in just two years. The Europeans are not out just quite yet now are they?

So now for a little fun.

Predicting the future is a risky business. While it might be easy for us to predict the short term, the long term is much more of a challenge. Well as we all know, I am not one to shy away from a challenge, so lets see what the short term holds for these 7 manufactures and then look further down the road.

As we all know, nothing moves fast in the corporate world, economic hardships and corporate policies take a few years to take hold and bear fruit. With that in mind, if we take our current sales gain percentages for this year and apply them to the next few years we might get a glimpse into the near future. Taking the percent of gain so far for this year, we can take a pretty close look 2007 will pan out as. We can also take these numbers and if they hold true see what 2010 might look like as well.

2007 will end like last year with Lexus on top, BMW in second and Mercedes in third. But if we apply the current growth rates and pan forward to 2010, we see the BMW’s acceleration will move it past Lexus to take the number one spot. Now this may seem to be a bit far fetched for some of us to believe. It may not be that unreasonable due to the fact that BMW is not that far behind, and they plan to release almost double the new models of Lexus by 2010.

Sounds pretty interesting to me. But what does the long term hold? Lets stretch out the scenario for another 20 years and see what happens? In this case BMW has stretched its lead, and approaching 2 million units for 2030. Primarily due to slower growth Lexus sits at 887,619 unit and actually was passed by of all people Audi! Unlikely? Yes, but it sure shows that you are never too far behind given enough time. In this case 23 years.

So now after seeing the scenarios and the trends who do you think will be on top in 2010 and the future and why? I gave my picks no matter how far fetched they may be. I always root for the underdog