Volume brands caught in prestige pincer

Two unequivocal factors affected the Australian new-car market in 2014 – three if you include the downturn in the mining states of Queensland and Western Australia.

The on-going rise of SUVs is one of those factors, and the downmarket rush by traditional prestige brands is the other.

With the introduction of the latest Mercedes A-Class, and price reductions for Benz's larger-selling models – such as the new C-Class, for instance – the historic trend for budget brands to push prestige brands further upmarket has been reversed. To remain competitive with Benz, rivals BMW and Audi have been forced to head downmarket also. That has had some impact on brands that have not previously been perceived to be prestige brands.

Where previously brands like Volvo, Alfa Romeo, Peugeot/Citroen and even Honda have comfortably occupied a niche somewhere between the brands that sell large numbers of affordable cars and those in the rarefied prestige and luxury echelons of the market – that niche is shrinking rapidly with the encroachment of the prestige brands. It's even beginning to impact on sub-prestige brands such as Mazda, Volkswagen and Toyota.

Meanwhile, 'cheap' brands like Hyundai and Kia are pushing from below to avoid getting their feet wet in the long-threatened tide of Chinese imports. The situation will have a profound impact on the nature of the market and our more popular brands, as they grapple with a car-buying population that aspires to own a prestige badge for the same money as a 'dependable' model of car.

The Chief Executive of the Federal Chamber of Automotive Industries, Tony Weber, places the credit/blame squarely on the shoulders of Mercedes-Benz.

"I think you have to have a look at the price of the luxury brands," he told motoring.com.au yesterday, during the industry's VFACTS presentation for 2014.

"Mercedes-Benz told me last year that the C-Class used to start at $80,000 15 years ago; it now starts at $60,000, which obviously in real terms is substantially less. It's a better car, so they've moved down, in terms of price point.

"Also, many luxury brands have a wider array of vehicles in different segments, so they're starting to drift down into areas where they weren't [operating] historically, in terms of both market segment and price. Hence they're playing in a different area and people are buying.

"And I think the other point about luxury brands is that it reflects in part that Australians are becoming wealthier, as we are now in the 23rd year of economic growth in this country. It makes a difference to people's standard of living, and that's reflected in the car fleet."

For companies such as Porsche – Australian sales doubled in two years, Maserati – 2014 sales exceeding volumes for 2011 through to 2013 combined – and Audi – now racking up its 10th consecutive year of record-breaking sales, the move into lower level prestige territory has yielded real dividends. But spare a thought for the mainstream brands in the market. Just two companies in the top 10 sold more cars in 2014 than they did in 2013 – and things are going to get harder before they improve.

Prestige and luxury brands, 2014 sales versus 2013