Can Mercedes Take 5% of American Car Market?

Cars and Drivers

Published: April 1, 2015 6:34 am

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It seems improbable that a single luxury car company could take 5% of the U.S. car market. After all, Hyundai, with a relatively wide product line, has 4.2%. But Mercedes has grown fast enough, and the luxury car market is expanding quickly enough, that its 2% share could eventually reach 5%.

Mercedes currently leads all luxury car makers in America. During the first two months of this year, it sold 51,415 cars and light trucks, up 7.3% from the same period in 2014. Mercedes is on its way to reach 325,000 sales this year.

Luxury car manufacturers hold over 11% of the entire U.S. car market. Together, BMW and Mercedes have about a third of that. The Lexus division of Toyota Motor Corp. (NYSE: TM) is the only other brand that comes close to BMW and Mercedes in overall sales.

ALSO READ: Why Lincoln Cannot Triple Its Sales

Two things have to happen for Mercedes to grab much larger sales. The first is that the portion of luxury car sales in the United States needs to move over 15%. The demographics of car buyers should help that. Luxury brands tend to have older buyers, and the bulge of Americans over 50 years old continues to rise.

The second advantage Mercedes would need is a shrinkage of the sales of the weaker luxury brands. Infiniti, the luxury division of Nissan, has lost its way. It is no longer in the top tier of luxury cars based on sales. Most months, Ford Motor Co.’s (NYSE: F) Lincoln brand and General Motors Co.’s (NYSE: GM) Cadillac lose ground. They have neither the brand power nor product lines to make up ground. The Acura brand of Honda Motor Co. Ltd. (NYSE: HMC) is barely a luxury car brand at all. Luxury buyers don’t flock to it as a high-end manufacturer. Jaguar and Land Rover are niche products, and models made by Mercedes and BWM continue to cap their prospects. Only Audi has made substantial inroads into the luxury market recently.

It is Audi and BMW that Mercedes have to best. BMW is the more powerful of the two. Its reputation as a performance brand could hurt its overall sales. A fast car with a hard ride does not represent features that many luxury car buyers find attractive. Mercedes hopes to flank BMW with models that include a pickup. Pickups are the largest segment of the American market.

If Mercedes can take share from BMW, and if the luxury car market in America continues to surge, it has a chance to take 5% of the overall U.S. market.

ALSO READ: Will UAW Impede U.S. Auto Production?

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