PARIS/BERLIN: Leading German car marques have become victims of their own success, as the likes of BMW, Audi and Mercedes-Benz have been drawn into a sales war that could undermine their brand image and create opportunities for new challengers.

"The German premiums have sacrificed some of their exclusivity by entering smaller, volume segments like compacts," Bernd Hoennighausen, an automotive consultant, told Reuters.

And with this interest in the volume segment comes an entry into the corporate fleet market. "They've pushed volume with fleet discounts of around 20%," Hoennighausen explained. "This may open the door to newer players like Jaguar, who are starting to offer fleet-relevant products."

The need for luxury automakers to sell smaller cars in order to meet tighter carbon-dioxide emissions targets - and avoid fines - is also pressing. And none are discounting harder than German brands, Arndt Ellinghorst, an analyst with ISI Group, asserted.

"Steep discounts and attractive financing show how non-exclusive premium cars have become," said Ellinghorst, who added that if this trend continued, then "the race to sell more vehicles will eventually damage brand equity and profitability".

This "inherent contradiction" had also been noted by an analyst at UBS, the Swiss bank. "Buyers of premium-branded cars are looking for some degree of exclusivity that will set them apart from less fortunate car owners," said Philippe Houchois.

He predicted that an emerging group of challenger brands - including Maserati, Alfa Romeo, Infiniti, Volvo, DS and Tesla, as well as Jaguar Land Rover - would account for almost one third of global premium sales growth over the next four years.

Members of this group were bullish about the outlook, with Eric Neubauer, joint-CEO of France's Neubauer Group, citing his dealerships' experience with Land Rover as proof that Germany's market-leading brands can be challenged.

The Land Rover Evoque, he said, had been successful in wooing clients away "from BMW, Mini and everywhere else in the premium universe. The strength of Land Rover is that we win new customers who then become loyal."

Andy Palmer, the executive leading the promotion of the Infiniti brand, had a different take. "Our theory is that there's room for something visibly different that is styled in a more provocative manner," he said. And he thought this was especially true in China.

Data sourced from Reuters; additional content by Warc staff