Most European luxury car brands posted healthy sales increases in the first 10 months of 1994 compared with the same period a year ago. (chart) EUROPEAN CARS DRIVE BACK

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European luxury car makes are on the rise, a comeback that testifies to the power of sustained brand images.

Sales are up this year for BMW, Volvo, Mercedes-Benz, Saab, Jaguar and Porsche models, a trend that could continue with the rollout of fresh new products and features such as the first side-impact air bag, being offered on a Volvo Cars of North America model. Only Alfa Romeo Distributors of North America and Audi of America have shown sales declines, and Audi appears poised for a resurgence based on price cuts ranging from 7% to 25% applied in October across its line.

Audi is following the lead of other European marketers, who have been holding the line even as the strong yen has put upward pressure on Japanese competitors' prices. Lexus sales declined 9.7% this year through October, while American Honda Motor Co.'s Acura and Nissan Motor Corp. USA's Infiniti posted 6.7% and 4.6% increases, respectively.

With prices close to parity, brand image is proving to be an advantage for most European makes over the relatively new Japanese brands, said John Bulcroft, president of the Advisory Group, a Cresskill, N.J., auto marketing consultancy.

The early success of Toyota Motor Sales USA's Lexus unit didn't just force the Europeans to reconsider pricing. It also spurred a rethinking of how to leverage brand equity, said Andy Goldberg, general manager-integrated marketing communications for Mercedes-Benz of North America.

"Lexus demonstrated the need for Mercedes-Benz to make clear to buyers why heritage was important, by explaining the core values of the brand and how that translates into the way the car performs," Mr. Goldberg said.

In current Mercedes-Benz advertising from Lowe & Partners/SMS, New York, that means reinforcing strengths in areas such as engineering and safety, while at the same time appealing to younger buyers by communicating an affordable price and a more youthful attitude.

BMW's introductory campaign for the redesigned 740i sedan, from Mullen, Wenham, Mass., illustrates another way European makes are building on their strengths. The car, priced at $57,900, was introduced last month as "The BMW of luxury cars," playing on BMW's already strong reputation for performance.

"When a car is state of the art, heritage adds a remarkable aspect of legitimacy," said Jim Mc-Dowell, VP-marketing for BMW of North America.

A strong brand image enabled Jaguar to survive rough times, according to Michael Dale, president of Jaguar Cars, the company's U.S. marketing arm.

Jaguar's new XJ line of sedans goes a long way toward solving the company's problems on quality and value points while maintaining the prestigious image, Mr. Dale said.

One European make that is trying to rebuild its image is Audi. The German importer is trying to position itself as the brand offering the best value for top German engineering, in advertising by McKinney & Silver, Raleigh, N.C.

The campaign is based on a strategy that includes price cuts, a simplified model lineup, and a decision to market its all-wheel-drive Quattro system as a $1,500 add-on instead of as part of a more expensive option package.

Mr. Bulcroft predicted 1995 will be another strong year for European luxury marketers, despite new competition such as the redesigned Lexus LS400 that was introduced in November and a freshened Lincoln Continental that Ford Motor Co. will bring out in December.

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