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Two highly-publicized key trends in the U.S. new luxury vehicle market today include product proliferation, with several luxury makes bringing to market incremental all-new products designed to appeal to virtually every nook and cranny in the marketplace; and the movement downward (on both size and price) to meet fuel economy requirements and gain share by appealing to a younger demographic.
Regarding the first of these patterns, Audi, BMW and Mercedes-Benz by themselves have added a net of 30 models to their lineups since 2005. In the area of downsizing, these same three German makes have each moved downstream in the CUV space with the launches of the Q3, X1, and GLA, respectively, while Mercedes-Benz and Audi are both pursuing the younger sedan buyer with the CLA and A3, respectively.
Given these trends, one would expect the premium space in the U.S. to be expanding. However, that is not the case. In fact, the luxury share of the U.S. industry, whether measured using premium segments or makes, has remained remarkably steady for the past five years, varying only within the 10-12% range (see below).

There are at least four reasons for this lack of growth in the luxury arena. First, while some of the luxury makes, including the three German brands mentioned above, are certainly gaining share (together they have added six tenths of a point of U.S. share since 2010, based on IHS Automotive April CYTD new vehicle registration data for the years 2010 through 2015), other luxury makes have retreated, and, in two cases, disappeared. Cadillac, Lincoln, and Volvo have all lost share since 2010, while Hummer and Saab are no longer around.
Second, in contrast to the product proliferation exhibited by the Germans, other makes have actually reduced their model counts. Jaguar, Maserati, Cadillac and Volvo together now offer nine fewer models than they did ten years ago.
Third, although some luxury categories are rapidly growing, particularly the compact crossover segment, other parts of the luxury market are declining. The three traditional luxury sedan segments full size, midsize and compact – have given up about a point and a half of market share in the past five years, almost completely offsetting the gain by small crossovers.
Lastly, it is not as if the U.S. consumer has to move up to a luxury brand to get virtually any safety or connectivity technology available today. Whether the consumer looks at a Jeep Grand Cherokee, Toyota Avalon, Nissan Maxima, Ford F-Series Platinum edition or GMC Acadia Denali, all of which are considered mainstream products, he or she will find much of what they might have expected only in a luxury product. The fierce competition in the non-luxury space is creating exceptional vehicle content and customer value that make it all the more likely that a “mainstream” owner does not even have to consider a premium product.
These trends taken together suggest that despite the aggressive product actions and indisputable images of several luxury makes, the premium market has been and most likely will continue to represent just over a tenth of the overall U.S. light vehicle market.
Tom Libby is manager, loyalty practice and industry analysis, IHS Automotive
Posted June 26, 2015


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