The German Big Three have grown faster than the overall market in the past 17 years, as their combined market share has increased from just over 10 percent of the market in 1997 to 16 percent in 2013. One of the reasons for this impressive growth is the increase in models and versions, most notably SUV’s.
Mercedes moves first, Audi catches up quickly
Mercedes-Benz was had the edge in SUV sales, as it has produced the G-Class (or G-Wagen) since 1979, although at that time, the G-Class had little in common with the luxury SUV’s that would become so successful in the new millennium. Even without the G-Class, Mercedes-Benz was the first of the Big Three to offer a modern luxury SUV, when the M-Class large premium SUV was introduced in 1998. BMW followed just two years later and has been the luxury SUV leader since overtaking the Stuttgart brand in 2003. Audi was a laggard, not offering an SUV until 2005, but the brand has showed the steepest growth curve and, after passing Mercedes-Benz in 2009, is challenging BMW for the lead, only 8.500 units behind the München brand and selling more than twice as many SUV’s as Mercedes-Benz in 2013.
Large SUV’s
The first generation M-Class peaked in 2002 at 48.873 sales in Europe and was –naturally- the segment leader until it was overtaken by the BMW X5, which had been introduced in 2000. Audi didn’t respond with the introduction of its Q7 until both of its competitors already had their second generations due, in 2006. The Q7 has never really been able to match the sales figures of the M-Class and X5, except for its first year, when the X5 was in run-out mode awaiting the second generation. Audi have stretched the Q7’s life cycle extremely long, as the model only has been updated once and a second generation has been postponed, with no timeframe given yet. In the meantime, the M-Class was renewed again in 2011 and the X5 is also in its third generation since 2013. Amazingly, Q7 sales have remained relatively firm, stabilizing at between 11.000 and 13.000 annual units from 2009 until 2013, after peaking at just over 41.000 units in 2007.
Every generation of the Mercedes-Benz M-Class has led the segment at least once, as the second generation was on top in 2006 and 2007 and the third generation in 2012 and 2013. The BMW X5 was the segment leader from 2003 till 2005 and from 2008 till 2010, and the recently introduced third generation is likely to take over from the M-Class again in 2014.
Mercedes also introduced the even larger GL in 2006, but its size proved that this model was tailored for the North American market. It’s success in Europe has been limited, peaking at just over 8.000 units in 2007, compared to a peak of 30.000 units in the US.
BMW invented the large SUV / Coupe crossover in 2008 with the X6, and with relative success. The X6 peaked at close to 20.000 units in 2009 and has outsold the Audi Q7 from 2009 until 2012. The other brands haven’t followed yet, and the X6 is due to be renewed this year.
Midsized SUV’s
BMW had the first mover advantage in the midsized premium SUV segment, as it introduced the X3 in 2004. And the smaller size and more affordable price made the midsized SUV attractive to European customers. The X3 soon started outselling its larger sibling, while Mercedes-Benz and Audi didn’t have their offerings ready until 2008, when the GLK and Q5 were introduced. Both brands followed a different design approach, with the brand from Ingolstadt making a more trendy, rounded crossover-like Q5, while the GLK was more square, with a rugged SUV-look. 
Audi proved to have taken the right direction, as the Q5 immediately took off and was the segment’s best selling SUV from 2009 to 2011, outselling the GLK by at least 20.000 units per year. The GLK only managed to outsell the X3 in 2010, when the latter was in run-out mode, awaiting the new generation. As a result of the poor performance of the GLK, Audi has outsold Mercedes-Benz in SUV sales from 2009 onwards.
The second generation BMW X3 was introduced in 2010, and with the new generation GLK due this year, Mercedes-Benz is likely to step away from the square SUV-design and go for the Audi approach of a stylish, trendy crossover styling. The Audi Q5 won’t be renewed until 2016, and is likely to fall behind further as the competition increases its momentum.
Compact SUV’s
As the midsized SUV’s gave the German luxury brands a taste of success, they decided to try their luck at an even smaller size. Again, BMW was the first to jump into the niche, introducing the X1 in 2009. This time, Audi was quick to react, as the Q3 became available late 2011. And they struck gold, as the Q3 outsold the X1 from its first full year on the market, giving Audi a shot at taking over the luxury SUV crown in 2014. Mercedes-Benz, the first mover in large SUV’s in 1998, was the laggard in the compact premium SUV segment, as the GLA was only introduced late 2013, when BMW and Audi were already selling over 60.000 annual units each in this hot segment.
It’s not about timing, but about execution
Being the first to introduce a luxury SUV in 1998, Mercedes-Benz enjoyed a few years without any competition, but they were slow to see the trend of smaller sized SUV’s and crossovers. As a result, BMW has been king of the SUV’s for over 10 years now, while Mercedes-Benz is forced to play catch-up, especially after the unsuccessful design choice on the GLK. While Audi has been late to join the party, and all of their offerings are still in their first generation, they have enjoyed great success with their SUV’s and crossovers in Europe. Appealing design is one of the key drivers, as Audi recognized that while customers appreciate the practicality of a crossover, most prefer it to look more feminine and trendy as opposed to rugged and capable. This has helped the brand to top the overall premium charts since 2009.