IMI Magazine

IMI Magazine

Ups and downs in the model mix

Cover feature -

Spoilt for choice

Platform and component sharing enables manufacturers to offer an ever-wider choice of model derivatives - and that's having a major impact on market segments. Report by Arthur Way.

A review of last year's car and light vehicle market provides clear evidence of changing preferences among European consumers. Reports from the marketplace highlight the extent to which the traditional volume segments, such as lower medium and upper medium cars, are losing ground to both supermini models and the growing ranks of models in the MPV and SUV categories.

Within the small car sector there were sharply contrasting fortunes between the mini and supermini segments. In the case of the former, total demand in Europe fell by around 20% with older models such as the Citroën Saxo, Ford Ka and Peugeot 106 performing particularly poorly. Notwithstanding their increasing number on UK roads, Smart car sales in 2003 were little changed from the 2002 level. However, it is a different story for superminis where sales advanced by around 5%, led by newer models including Citroën's C3 and the revamped Nissan Micra.

The lower medium and upper medium segments remain under constant erosion, both recording declines of around 10%. Lower medium models were more or less level pegging with superminis in 2002 but were more than half a million units adrift last year. Biggest casualties were the Citroën Xsara, Ford Focus, GM Astra and Volkswagen Golf. The Golf's position was not helped by the run-out of the previous model.

Meanwhile, in the upper medium segment, sharp falls were seen for the Citroën C5, Ford Mondeo, Nissan Primera, Peugeot 406 and Renault Laguna. More positively, there were strong gains for GM's Vectra and Toyota's Avensis, which points to the benefit of having new products in the marketplace.

When it comes to large cars, European buyers continue to move away from the volume manufacturers' products and towards prestige marques. Sales of GM's Omega and Toyota's Camry, for example, slumped by nearly 50%, while the BMW 5 Series and Mercedes-Benz E-class both scored gains.

Then there's the growing popularity of specialist models. Taken together, European sales of coupés and cabriolets increased by close to 20% with the new generation of low cost models - exemplified by Citroën's C3 Pluriel and Ford's StreetKa - fuelling much of this growth. This demand is also strong higher up the price range with German models predictably have a dominant role, especially Mercedes-Benz's CLK class.

However, the most significant feature is the rising popularity of SUVs (up 13% last year) and especially MPVs (up 19%). SUV premium sector sales shot up by almost 50%, fuelled by the arrival of Volvo's XC90, Porsche's Cayenne and Volkswagen's Touareg. The only dull spot in the SUV firmament was seen in the small sector which saw a decline of 10%.

The strength of the MPV segment stems largely, but not exclusively, from the success of smaller models. It is apparent that vehicles like the Ford Fusion and GM Meriva are striking a chord with a growing band of consumers and, as the choice becomes wider, it seems prudent to assume that further growth on top of last year's 70% enlargement will occur in this subsector. Mid-size and large MPVs also notched up increases, albeit on a less spectacular scale. With an increase of around 15%, demand for large MPVs increased faster than that for mid-range models where the advance was limited to 6%.

These trends in Europe as a whole are being quite closely replicated in the UK market, as seen in the accompanying tables which analyse the market according to nine categories and have been sourced from the SMMT.

In the two small sectors, there is a conspicuous loss of popularity in the mini segment which saw a 3.5% dip in unit sales last year and an unequivocal rise in superminis which witnessed a 5% volume gain thanks to the noticeable influence of private buyers. Alan Pulham, franchised dealer director of the Retail Motor Industry Federation, notes that "in the past, consumers would upgrade to a larger car in search of refinement and reliability, but today's small car will often have the same level of equipment and be as dependable as any larger car".

There can be no doubt, though, about the shaky foundations of the lower medium and upper medium segments which recorded falls of 6.7% and 5% respectively as traditional saloons, hatchbacks and estates lost favour. Together these two categories accounted for almost half (49.8%) of the UK's new car market in 2002, but by last year this had declined to 46.5% and the general expectation is that further weakening is inevitable.

Reflecting the continuing buoyancy of the UK economy, there were useful gains in the executive and specialist sports segments with rises of a modest 3.7% for the former and 8.4% for the latter. Perhaps adding weight to the contention that the rich are getting richer, and reflecting the rapidly inflating levels of boardroom remuneration, there was an exceptionally strong increase of 32.4% in sales of luxury saloons.

However, as in the wider European market, the most significant shifts in the pattern of demand are evident from a review of the dual purpose (4WD) and multi purpose (MPV) segments, both of which scored substantial increases last year and together now account for 10.5% of total demand compared to 9% in 2002. Moreover, a scan of fleet sales indicates that this is by no means a private buyer phenomenon. Indeed, the percentage rise in 4WD sales to the fleet sector were ahead of the overall average, and were only slightly adrift in the case of MPVs.

Leaving aside the aforementioned (and low volume) luxury saloon segment, the dual purpose and multi purpose sectors recorded easily the highest growth last year at 15.7% and 18.5% respectively which will probably come as no surprise to those familiar with seeing parents on the school run. Under these circumstances, vehicle manufacturers have had to respond to successful innovations from rivals which, in turn, has led to a boost to the market. A classic example is seen in the mid-range MPV sector which was effectively pioneered by Renault with the Megane Scenic, whose success has prompted others to enter the arena including Citroën with the Picasso, Ford with the Focus C-Max and GM with the Zafira.

The intriguing question now is the degree to which these trends will continue. Are UK and continental European consumers moving towards a 'van culture', following in the tracks of their North American counterparts who, for many years, have been showing a preference for what they call light trucks? Or will the European market for SUVs and MPVs peak in the near future and go no further?

To a certain extent, manufacturers have made a rod for their own back. Rationalisation of vehicle platforms and sharing of components and systems across model ranges are helping to bring new variants and concepts to market more rapidly and cheaply than if they needed to be designed from square one.

That means a greater willingness to experiment with new vehicle types in the hope of striking lucky as in the case of the Scenic which spawned a new genus. At the same time, though, it could prove a costly mistake, with Renault once again providing an example with the Avantime.

But at least Renault is big enough to absorb the cost of misreading the market with one niche model - unlike smaller producers unable to exploit economies of scale which an ever wider choice of models demands.