One of the frequent themes discussed on TTAC is the rising inequality of the mainstream car market in Europe. Since the Great Financial Crisis, Europe's auto market has not only undergone a severe contraction in terms of volume, but also a radical shift in its composition.
Prior to the Great Financial Crisis, the "mainstream" brands (think Ford, Opel/Vauxhall, Renault, Peugeot, Citroen) had a firm grip on the majority of the market. Budget brands were not yet established – only Skoda had any real legitimacy, Dacia was still a punchline and GM's Korean offerings were more like the Nexia than the Cruze. Premium brands like Mercedes-Benz, Audi and BMW were offering smaller, more affordable nameplates (like the A-Class, A3 and 1-Series), but they were still confined to the upper echelons of the segment.
What a difference a decade makes. Budget offerings have grown increased their market share by 37 percent, while premium cars have grown another 28 percent. And it's all coming out of the mainstream segments. And that situation is only going continue over the next 5 years.
From a product perspective, it's easy to understand just why this happened. At the bottom end, brands like Dacia have been aggressively expanding in European markets, as well as rolling out new models. While nobody would try to pass them off as any sort of premium transportation, they are gaining a certain sort of "cheap chic" cachet as basic, unpretentious transportation. The fact that they're winning critical acclaim doesn't hurt either.
The premium end of the market is a bit more complex. On the one hand, the luxury auto makers have been chipping away at the traditional territory of the mainstream auto makers. Mercedes, Audi and BMW still offer the A-Class, A3 and 1-Series, but there are more lower-end nameplates too: the Audi A1 and Q3, the Mercedes B-Class, CLA and GLA and the BMW X1. Pricing for most of these models is within the upper-end of a well-equipped conventional car. Given the choice between a very well-equipped Ford Focus and a more modestly equipped German luxury car, a good number of consumers will opt for the latter – even if the premium car might be qualitatively inferior.
The other, more politically dicey argument to be made, relates to income inequality. Car ownership in Europe has always been a more expensive and difficult proposition than in North America. Middle class consumers who can afford a car in Europe's current economic climate might be more inclined to go with a low-cost car like a Dacia, rather than spend the extra money on the Renault equivalent. Meanwhile, increasing inequality means that there is more demand for premium cars of all stripes. Luxury brands offer more performance car and SUV nameplates in 2014 than they did in 2004, and the demand has to be coming from somewhere. Not all of it can be in the lower tiers of the segment.
So what's the solution if you're a mainstream brand, and your customer base is as weary of ever buying a new car? Simple. Make a cool product that's easy to afford.
Thanks to Fiat Chrysler for the chart, which was shown in their latest Five Year Plan.
from The Truth About Cars http://ift.tt/Jh8LjA
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