BMW, Mercedes, Porsche Upstage Motown Makes

Detroit's North American Motor Show this month erased any lingering doubt about the international supremacy of German automotive engineering. The designers of the BMW, Mercedes-Benz and Porsche brands have U.S. consumers eating out of their hands.

It's not just that they've fallen head over heals for BMW's Mini Cooper, which was voted North American Car of the Year at the motor show. With the launching of new upscale models, such as BMW's first Rolls-Royce and Porsche's Cayenne sports utility vehicle, German carmakers are redefining the luxury segment, one in which the "Made in Germany" stamp clearly dominates.

German makes have continually increased their share of the tough U.S. car market. The United States is now market No. 1 for German vehicle manufacturers. The U.S. market share held by all German makes has grown threefold since 1990. It now stands at 10 percent. In the U.S. luxury car segment, the Germans shine with 32 percent of the market. Premium brands BMW, Mercedes and Porsche are expected to increase their market share in 2003.

Not just in the United States have German cars gained stronger currency. The automobile industry in Germany experienced its second-best year for exports last year. German car makers currently export seven of 10 cars they assemble. Exports to Asia and eastern Europe are steadily increasing. Despite spluttering demand in most of western Europe, German cars are selling strongly in Britain.

Despite general economic uncertainty, industry analysts expect deliveries of German cars in the United States to fall only by the slimmest of margins in 2003. Bernd Gottschalk, president of the German Automobile Association, said that he expects 16.4 million vehicles to be sold in the United States in 2003, slightly fewer than the 16.7 million sold in that country in 2002. Analysts at Commerzbank estimate that car exports should remain at a very high level, even if the global economy makes only a slow recovery in 2003.

This is especially good news for German carmakers because the domestic market has shifted down yet another gear. Sales volumes at home are set to decline again this year and prices will remain under pressure. German automobile companies simply haven't been able to transfer the air of excitement surrounding top-range luxury models to their bread-and-butter brands, especially at home.

Germany's carmakers face a tough year on the domestic front in 2003. New car registrations in Germany in 2002 fell for the third consecutive year. Not even the most optimistic of carmakers is pinning hope on a demand spurt following the IAA Motor Show in Frankfurt this September, when a parade of new models is supposed to be introduced.

While Germans might come to keep abreast of new models and technological developments, few will hand over cash. Those who are uncertain about their financial futures don't rush out to buy the newest car on the market. The increase in gasoline tax by more than EUR0.03 ($0.03) a liter will hardly be beneficial, and the higher tax levied on company cars also won't help matters.

BMW leaps ahead

Of all German carmakers, it was BMW that leapt ahead of its rivals on the U.S. market. It posted a 20.4 percent increase in deliveries last year to 256,000 vehicles, mostly thanks to the introduction of the revived Mini. This new car was feted by motoring experts and was an instant success in Britain and in the United States. Since the first new Mini came off production lines in spring 2001, 144,000 units have been sold worldwide. In the United States, where the car was launched last March, 25,000 units have been sold.

The Roadster Z4 has also been successfully introduced on the U.S. market, with around 3,700 units being sold there, BMW Chairman Helmut Panke said at the motor show in Detroit. While many are painting a gloomy picture of how the U.S. market will develop, Panke is confident that sales of BMW cars will remain strong. Indeed, BMW expects to sell more vehicles in the United States this year than the company will on its home market. Last year, the number of units sold in the States trailed German sales by only 2,000 vehicles.