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Audi, BMW and Mercedes pressure Ford, GM as UK market booms

Germany’s premium automakers are benefiting most from a boom in UK car sales that has far outpaced the recovery in the rest of Europe.

Audi, BMW and Mercedes-Benz are winning sales and market share from mass-market manufacturers such as Ford and General Motors’ Vauxhall brand after expanding their lineups and offering more fuel-efficient vehicles, analysts say.

UK car sales increased 11 percent to 1.29 million in the first half. In June, the market was up 6 percent year-on-year, the UK’s 28th consecutive month of growth after the country bounced back faster than other western European countries following the 2008-2009 financial crisis.

The UK has passed France as the region’s second-largest car market after Germany.

As in the rest of Europe, the German premium brands are aggressively pushing into smaller car segments traditionally dominated by volume automakers. Mercedes is expanding its compact lineup with the GLA crossover and BMW is adding the 2-series Active Tourer compact minivan. Audi recently added a sedan version of its A3 compact to its UK lineup.

The combined UK market share of Audi, BMW and Mercedes is a little more than 17 percent after all three increased share during the first half.

Jonathon Poskitt, LMC Automotive’s head of European sales forecasting, said increased consumer confidence as the UK economy picks up and a wider choice of models are helping to lift premium car sales. “The greater feeling of wealth means that car buyers are increasingly looking to the more expensive badges,” he said.

Audi’s UK chief, Andre Konsbruck, said new fuel-efficient versions of the A4, A5 and A6 cars sold under the Ultra badge are “attracting considerable attention” from fleet buyers.

The 2.0-liter diesel A4 Ultra sedan has CO2 emissions of 109 grams per kilometer. “Demand for Audi in the UK has never been greater,” Konsbruck told Automotive News Europe.

Fleet sales account for a little more than half of all new-car sales in the UK and CO2 figures are a key selling point as road taxes are based on a car’s CO2 emissions.

Ford, the UK’s top-selling brand, saw its market share decline to 13.5 percent from 14 percent in the first half even as its unit sales increased by 6 percent (see chart, below).

Vauxhall, the No. 2 brand, saw its share fall 0.4 percentage points to 11 percent despite 7 percent growth in volume.

Vauxhall says it will not change course to head off competition from above. “We’re not going to start to go premium. Our position is in the middle of the market and that is where we’re going to stay,” a Vauxhall spokesman said.

Vauxhall said the upcoming launch of the latest generation of its Corsa subcompact and a new minicar will boost sales. “A new citycar is coming next year, with bigger volume than the Agila it replaces,” the spokesman said.

Ford of Britain Managing Director Mark Ovenden said the company extended its sales lead over its rivals through the first half. New models such as the Edge SUV, Mustang and the upscale Vignale trim line will keep Ford in front, he said in a statement.

LMC’s Poskitt said premium automakers will be keeping up the pressure on volume brands as they add smaller cars in segments traditionally dominated by volume brands.

Despite the premium success, affordable brands are doing well in the UK.

The country is now Kia’s No. 1 market in Europe. Kia’s sales increased by 10 percent to 40,849 in the first half.

Skoda’s sales were up by 21 percent to 32,384. Dacia’s volume was up 80 percent to 12,976, two years after Dacia launched the brand in the UK, almost a decade after the brand’s rollout in the rest of Europe.

The UK’s SMMT industry association predicts full-year sales of more than 2.4 million for 2014. The country’s best year to date was 2003 when 2.58 million cars were sold.

SMMT CEO Mike Hawes said a major reason for the UK’s increased sales is attractive finance packages such as the popular PCP (personal contract purchase) packages that enables buyers to finance the value drop rather than the car itself and offers them the chance to buy or return the car after the finance period concludes.