Cars: morituri te salutan?
Manufacturers fight a fierce battle in Europe to gain market positions
Endless war in the European automotive industry. Nobody wants to give up a bigger piece of cake, and that’s why commercial offers are intensified, model renewal is accelerated and costs are adjusted to the maximum. Because even in an up market like the current one there are winners and losers.
In Spain we took the palm, but now the commercial battle is worse in the rest of Europe, “says José Antonio Bueno, consultant Roland Berger. Traditionally the competition has been tougher in Spain, because there is no dominant brand: there are five or six with shares of between 10 and 13%, while in Germany and Italy Volkswagen and Fiat exceed 20%. But now offers and discounts appear as a key element in mature markets such as German or French, where sales no longer register significant growth, at least not as spectacular as in Spain.
The battle is fought on all fronts. In the design centers, very pressured to reduce the time of development of models and to at the same time get more attractive products than competitors. In the factories, with continuous plans of reduction of costs. And finally, in the commercial networks.
There had never been such a wide range of products: just a dozen new items are about to arrive or are about to reach the market right now. Among them, the BMW 5 series. the Mercedes SLK, the Seat Altea, the Renault Modus, the Peugeot 407, the new Opel Astra, the Jaguar Familiar, the Mitsubishi Colt and the Smart four doors. And never have there been so many facilities to buy a car. Low interest rates facilitate offers to buy cars without paying entrance or postponing payments. The quota system with final residual value is also being imposed, that is to say, with a commitment to repurchase after a few years by the concessionaire or manufacturer. Is it a concept derived from ‘renting’, which facilitates the acquisition and converts the car into a fixed monthly expense such as renting the house, children’s school or the credit card fee, says Joan Pla, director General de Quadis, the first group of dealers in Spain. Here, the English Court has specialized in this modality to break into the automobile market.
Aesthetics, not only technology, is a key element, as can be seen with the pull of the sales of convertibles in Europe (they grew by 17% in 2003). For that reason, not getting the right model is very expensive. This is what is happening to Volkswagen, which sees its European leadership threatened, after the semi-generation of the fifth generation of the Golf, which have only started to take off after having lowered prices. The slowness in the renewal of its range is behind the problems of Volkswagen. Quite the opposite of what happens to its high-end subsidiary Audi, which contributes almost three quarters of the group’s profits.
With VW losing gas, Fiat in crisis and Opel with an uncertain future, in the side of the winners appears first the Japanese Toyota. Toyota was a sleeping giant that is stealing market forced marches, admits one of its competitors. In this first quarter its sales in Europe have grown by 22.7% while the whole market has only made 3.2%. His secret: quality products throughout the range, including off-road vehicles, and now also good marketing. The Japanese colossus plans to increase its production capacity in Europe by more than 50% next year, to some 760,000 units. It will expand the production of its plants in France, the United Kingdom and Turkey, but its growth will come mainly from the Czech Republic, where it is building a joint factory with the French group PSA (PeugeotCitroën).
The two French manufacturers PSA and Renault have been benefiting from this fierce competition and their models, cheaper than those of Volkswagen, are today appreciated in the market. Renault is possibly the brand that maintains a more daring strategy, and its president. Louis Schweitzer, seems to take for granted that all the champions have some failure in their career. The most recent of Renault has been the Avantime, which stopped being manufactured a few months after being put on sale. His next challenge: the 5,000 euro car, which he plans to bring to market next fall. An economic model, but with all the international requirements in terms of safety and polluting emissions.
Its competitors put in doubt, but Schweitzer argues that, thanks to a good programming of costs, do you get the numbers? It will be initially manufactured in Romania (at the Dacia plant, owned by Renault). Later, the industrial plans will take the manufacture also to Russia and Morocco and for the year 2006 it is thought of Colombia and Iran. The war thus extends to emerging markets.