German Premium Carmakers Ramp Up Production to Meet Unexpectedly High Demand in U.S., China

With credit once again beginning to flow and economic activity slowly rebounding, wealthy consumers in China and the U.S. are again buying luxury autos and prompting Audi, BMW and Mercedes-Benz to ramp up production. Among the hottest-selling models are BMW’s new 5 series, Mercedes’ E class and Audi’s A8.

Frankfurt-based Commerzbank AG analyst Sascha Gommel said, “The Chinese appetite for German nameplates is absolutely bottomless. There are more than 900,000 millionaires in China and many of them are bursting to show off their wealth.”

German automakers are also benefitting from the addition of new models to their product lines. BMW can’t keep its new 5 series in stock in China and Audi has seen brisk sales of its new A8 sedan. Mercedes plans to launch a new extended E class model specifically designed for the Chinese market.

All three German automakers are adding production workers and increasing capacity to meet the higher than expected demand for their models.

Daimler has been forced to add 1,800 temporary workers and has also added Saturday shifts at its German assembly facilities to support sales of its SLS gull-wing sports model, E class convertible and GLK sports utility vehicle. BMW has also hired temporary workers and has agreed to give a one-time payment averaging 1,060 euros to employees covered by a wage agreement. Audi says it has also added production shifts to keep pace with demand.

BMW’s popular new 5 series is completely sold out in every market, and buyers are facing delivery times of up to four months. The 5 series, with a base sticker price of $44,500, went on sale in Europe last March and in the U.S. in June.

Munich-based Merck Finck & Company analyst Robert Heberger said, “German premium manufacturers have really worked to improve the quality of their cars,” and added, “Daimler’s new E class is of a much better make than its predecessor. BMW benefits from a positive product cycle. The 5 series is brand new and such state-of-the-art models are always in demand.”

The world’s largest premium automaker, BMW, recently raised its 2010 sales forecast to a 10% year-to-year increase over 2009 levels. The automaker is also projecting an increase in its 2010 operating margin of more than 5% on sales of more than 1.4 million passenger models, including SUVs.

BMW has increased its first-half deliveries by 13%, and Mercedes-Benz also posted a 12% first-half increase. Audi, which has set its sights on dethroning BMW as the world’s No. 1 premium automaker by 2015, saw its first-half deliveries increase by 19%.

HIS Global Insight senior analyst Sascha Heiden said, “It’s really the other side of the 2009 coin, when everyone was ringing the death bells.  BMW and Mercedes field relatively new models with their 5 series and E class, so that may help the German companies attract more buyers.”

Commerzbank AG’s Gommel said, “German luxury cars are a synonym for status, comfort and safety. Those are the traits you want to embody when you’re courting future partners for business. In China, buying a German luxury car is seen like buying a ticket to future wealth.”

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