Mercedes and BMW Hit Hardest by Slump

I love this part of the article:

With a decline of just over 7 percent, Audi is the German upmarket car brand least affected by the current drop in sales. The Volkswagen (VOWG.DE) subsidiary sells a higher proportion of its cars in the compact and lower midsize range. In addition, Audi is profiting from the other two German luxury carmakers' failures by offering what many consumers are looking for during the crisis: premium with a touch of understatement. By contrast, Mercedes-Benz and BMW have been caught unprepared by the new trend in consumer behavior.

This is a perfect analysis. Audi has been least affeced by the current drop in sales and will emerge from the crisis as the strongest premium brand in the world.

Ya, that's exactly how it will play out...

The armor is cracking. Yes, thirsty high HP engines are not going to sell as well in this recession, but I think the bigger problem is value, more so with MB and Porsche. Can't pay layed off workers full salary and run a business. Didn't they learn anything from the U.S. makers? Guess not. Shed cost or die.

Thanks for that link FanboyOfTheTruth. Didn't catch that one on my own.

Well the same will happen with the TOO EXPENSIVE 5GT and X6 Series...too big, and not fuel economy oriented....beside the uglyness...so BMW is not in a good position, in fact I question the the last desicions regarding the GTs and X6 cause they won't be good sellers ...for sure.

The pressure to forge a deal is considerable because the real challenge to both brands—on top of plummeting sales and changes in consumer behavior—comes from another German brand: Audi.

The newcomer in the premium class can rely on the platforms and engines of the huge VW conglomerate. Audi has to invest much less in new models and is making life difficult for the leaders on the upscale market.

The A3, for example, is based on VW Golf technology. And the A1, which will be released at the end of the year, uses technology from the VW Polo. What Audi saves in engineering costs can then be spent on extravagant interiors. In fact, some of its models appear more luxurious than those of its competitors BMW and Mercedes-Benz. VW CEO Martin Winterkorn says that he is determined to make Audi the leading premium brand.

The reactions of Mercedes-Benz and BMW to Audi's attack show how seriously they take this threat. They are no longer smiling superiorly at the upstart. Instead, they have started to chip away at Audi's image—for example by trying to associate it with VW's Czech subsidiary Skoda, which makes relatively inexpensive cars. It certainly can't be a long-term successful strategy, says Zetsche, if you take a Skoda body, glue four rings onto the hood, and sell the vehicle as an Audi.

Thin-Skinned
But VW's strategy of equipping its many brands with essentially the same engineering technology has so far paid off. Consumers are not switching in droves from Audi to Skoda, although such a vehicle would give them similar road performance at a substantially lower price tag. Neither Mercedes-Benz nor BMW have figured out how they intend to compensate for Audi's cost advantages. And that's not the only problem.

Clearly, BMW and Mercedes-Benz have no answer for Audi's cost advantages. The two independent luxury marques will continue to waste crucially important money on absurdly high development costs due to a lack of economies of scale.

It is just a matter of time before Mercedes-Benz gets passed by Audi and BMW will suffer that same fate 4 years after Mercedes-Benz.

Making the best handling every-day cars (BMW) or high-end sports cars(Porsche) will not be the answer. Remaining profitable is the answer and Audi has proven that it has been significantly more profitable than BMW both for 2008 and 2009. Hence you see the more focused regional sales mix for Audi (China and India instead of the U.S.), better interiors (the article just mentioned this) and beter sales performance (much smaller decline than BMW or Mercedes-Benz).

I agree, VW is really taking a page from the Asian makers (especially Honda). This partially explains Audi's recent successes and why I think VW is really the one to watch in Europe over the next 5 years.

We can laugh at Honda's obvious mismanagement of the Acura brand, but inspite of that, I believe their are two key manufacturing philosophies they use that explains why the Acura brand delivers one of the best price-to-features value in the industry.
1) Extensive reuse of parts and platforms from the lower cost / higher volume products sold as Honda's
2) Elimination of factory installed options with limited trim packages.

VW recently admitted it's a great cost savings method and said they plan to follow Honda in that direction. When they do that, they will be deploying both techniques and be able to undercut all European manufacturers without sacrificing product quality. If MB and BMW don't follow them, I think they will lose their independence within 5 years like Porsche just did.

Bimmers looks great! But potential buyers are concerned about their fate as they see other BMW owners having unresolved troubles like: fuel pump failures, jerky transmissions, fluttering hardtop roofs... Are these quality control problems or just design failures? BMW says the chances of happening are small, but I say if you do get one of these, it's hell...

I don't know if I can agree. My experience is that BMW makes a very good product (unlike my MB experience). Problem I see is still value! They are the best value in the premium Euro brands IMO, and thus will probably be the last to fall. But they still need to improve.

I love comments like this.....and you failed to list Audi for years Audis have been terribly unreliable that is nothing new. If you truely think Audis are more reliable than any other German maker your sadly mistaken. THe 1.8t, 2.7t, 3.0, 4.2, have all been problematic engines in anything theyve been not to mention their electronics issues. The 2.0 was a huge improvement to average in reliability but thats not saying much in the way of compliments. BMW of the three brands has for years been the more reliable, and while Audi certainly has came along way in both reliability, competive products and quality over the passed decade it still has a long way to go. Its only clear advantage is that its simply a part of the VW family so for years they have just pulled from VWs parts bin, and shared many parts, technology, and R&D with VW group. It is only from this business standpoint that they make sense otherwise they just dont seem to be able to cut it...

I think Audi is in for a big surprise, they have shown their colours and I am impressed with the product line. It was a good wake up call for BMW and Merc.. they will be back with a fury of amazing products. Each and every new BMW released has so much to offer. You ever look around and see the hundreds of 3 series cabs floating around. Its all waves and cycles. Each has their time but I really think that its just the beginning of a very nice and prolonged war that only benefits the consumer as they battle it out for better value and sales.

"Mercedes and BMW Hit Hardest by Slump"?

- Overpriced cars usually are.

bmwdrvr, look at what you just wrote:

"It is only from this business standpoint that they make sense otherwise they just don't seem to be able to cut it."

Well, given that making sense from a business standpoint is the most important thing, Audi has the upper hand.

I can show you JD Power & Associates data that shows Audi is as reliable than BMW and MORE reliable than Mercedes-Benz.

I can also start spewing 2008's global sales figures for the three brands as well as global sales figures for 2009 and various market sales information and profitability information that will prove Audi is indeed a BIG force for BMW and Mercedes-Benz to reckon with.

How can you not be a force to be reckoned with when you have cut your competition's sales lead more than half in less than one year, are making hundred of millions of dollars more in annual profitability, are the clear leader in the world's largest auto market by annual sales which is growing very quickly (China), and are gaining significant marketshare compared to your rivals in the second largest auto market in the world in annual sales (United States).

It's no secret that Audi has gained enormous momentum and BMW/MB have clearly taken notice.

If Mercedes-Benz thinks it can chip at Audi's image by using tired old unfactual cliches like slap four rings on a Skoda bullshit, then as usual BMW and Mercedes-Benz arrogance will continue to undo them. Audi first of all is not an upstart as anyone knows. It has 100 years of history which proves quite important in competing in the luxury market. Horch was always more luxurious than MB in its day. Audi has plenty of its own technologies, own platforms, and one can go on an on that it does not need Skoda (it is actually the other way around- VAG needs Audi for its core development - just look at Bently and Lambo benefiting from Audi control) to take on MB or anyone else. Audi's motorsport program is evidence enough that MB and BMW should be worried. So good luck with that marketing camgpaign Zetsche (I think your oversized mustache is constricting blood flow to your head). Obviously, since Audi is kicking MB's butt all over Europe, no one is buying into Zetsche's line, and anyone with any grain of automotive intelligence (except for fanboys) won't either. Desperate times at MB if they have to attack the competition rather than rely on the benefits of their own brand to sell their cars. It's not like MB doesn't use many of the same suppliers as Audi, BMW, Porsche, or VW. Doesn't MB build crap like the A and B Series, not to mention their ridiculous mini vans like the Vento which are as luxurious and prestigious as a lawnmower. Zetsche needs a reality check. MB is not any more luxurious or prestigous than Audi or BMW. Had Lexus been more successful in establishing greater global penentration then MB would be totally in the toilet. Audi already leads Europe and China (two out of three) and they have the war chest to keep growing. Audi's range will prove to be the factor for its continued success.

Audi is taking over, just a sign of things to come!

I totally agree with you BobbyJ and here is why:

BMW's 2008 global sales: -5.8%
Mercedes-Benz's 2008 global sales: -5.1%
Audi's 2008 global sales: +4.1%

BMW's 2009 global sales YTD: -18%
MB's 2009 global sales YTD: -18%
Audi's 2008 global sales YTD: -7.5%

BMW's 2008 profit: -90% to $300 million
MB's 2008 profit: 0.3 billion Euro loss
Audi's 2008 profit: $2.81 billion

BMW's 2009 profit YTD: -33 million Euro
MB's 2009 profit YTD: -2 billion Euro (2 straight 1 billion Euro + losses)
Audi's 2009 profit YTD: + $1 billion

Market leader in China (world's largest auto market): Audi
Market leader in Western Europe: Audi