Driven by intense competition in the global automotive industry, there has been a proliferation of niche products designed to exploit demand and generate enhanced margins while capitalising on existing platforms.
According to “Light Vehicle Niche Markets” a new report from the
Economist Intelligence Unit (EIU), the phenomenal growth in global demand for multi-purpose vehicles (up 90%) and for sports-utility vehicles (up 65%) in the last five years is a clear illustration of the trend in buyers’ preferences to more focused vehicles. Driven by the US market in particular, sales of sports utilities alone now account for almost 17% of the global car market. Niche vehicles now represent around 43% of world demand for passenger cars.
Global sales of niche vehicles, selected years 1998-2005
* production figures; ** 2004
Sports-utility vehicles (SUVs)
SUVs have been one of the most dynamic segments in the light vehicle market in the last decade, and certain manufacturers-Honda, Renault, GM and Toyota-are well placed to benefit from this subsegmentation. In the US they are no longer niche vehicles, but form a major part of the domestic passenger vehicle market. In Europe, Japan, Australia and certain Middle Eastern markets, although popular, they account for only 5% of the passenger vehicle market. The EIU predicts that global demand will grow by around 19% between 1999 and 2005, with the biggest growth stemming from western Europe. With forecast production of 495,000 units in 2000, Ford’s Explorer leads this global segment, followed by the Jeep Grand Cherokee with a projected 356,000 units.
The world market for multi-purpose vehicles (MPVs) increased strongly in the 1990s to reach almost 4m units in 1999 from under 2.1m units in 1994 – a growth rate of over 90%. Much of the recent growth has come from Europe, where the number of models available has increased dramatically in the last few years, and the market has responded strongly to the increased offerings such as compact minivans-a clear case of supply-side market growth. However, the report predicts that the market will peak in 2000, declining slightly over the next 5 years. Despite the significant amount of activity in Europe and also Japan, the US remains the most mature market and accounts for around 50% of global demand.
The market for sports cars is currently around 1.6m units, with the US market accounting for around 55% of sales. The market in the US appears to have settled at around a level of 850,000-900,000 units a year, while the Japanese market has collapsed from almost 250,000 units to less than 100,000 a year currently. The west European market, now accounting for around 550,000 annual sales, is the one market that is still growing and has strong potential for further growth. According to the report, demand will be driven largely by new model launches and also the sustained success of a number of models, such as the Mazda MX-5 and VW Golf cabriolet, which have become “classics”. With its Mustang model, Ford retains a small lead over GM’s Pontiac range on the US market, while Mercedes leads this sector in western Europe.
Manufacturer activity is pointing towards further growth in the luxury car market globally. Much of the growth is supply-led in nature, with makers investing heavily in new products. The west European luxury car market hit a high spot in 1999, having been buoyed by the impact of the Mercedes-Benz S-class, and the introduction of the company’s CL coupé will keep the market strong into 2000. The next BMW 7-series-due in late 2001-will similarly lift volume from 2002 onwards. The North American market is buoyed by the new Cadillac DeVille. Prospects in Japan continue to improve, driven by a recovering economy and model actions affecting key ranges. South America continues to account for a very low proportion of luxury car sales, but the importance of eastern Europe-especially Russia-continues to grow. Cadillac leads this global market with its DeVille, followed by the Lincoln Town Car and Mercedes’ S-class.
The “city car”, “segment A” and “sub B segment” all describe the small cars that sit beneath the “supermini” B segment. Overwhelmingly, these cars are targeted at urban usage and interest has been heightened in recent years due to issues of traffic congestion and the environment. The “A segment” clearly poses a threat to the “B segment” and is witnessing a lot of new product activity and related growth. The highest growth will come from Asia, and in particular India, where “A segment” cars already dominate the market, through Maruti. Pricing, rather than environmental concerns, is the main consideration in this region. There are also growth opportunities in Japan where “minicars” remain a hotly contested, but established, segment of the market. Several European manufacturers are bringing out new environmentally-friendly small cars based on B segment platforms. For example there will be a small version of the Volkswagen Lupo (called Lupino) and a shortened Peugeot 106. Suzuki is the leading producer of city cars, with output of almost 630,000 units forecast for 2000, followed by Fiat and Toyota.
New niche markets-opportunites for the future?
· The Economist Intelligence Unit identifies several potential new niche markets, such as sport wagons-a crossover between estate cars and sports-utilities-and the sports saloon/SUV hybrid. The latter will appeal to the more car-orientated SUV buyers who have already opted for SUVs such as the Toyota RAV-4 and Lexus RX300. The Chrysler Varsity is an example of this hybrid model. The steady growth of the SUV market provides plenty of scope for “crossover” and hybrid vehicle experimentation. Such models will progressively appear towards the middle of the decade.
· Another sector with potential is that of “van-derived cars” (ie car-derived vans sold in passenger format). PSA and Renault lead the way with the Berlingo/Partner and the Kangoo. The Kangoo has recently topped the sales lists in France for several months. However, this is likely to remain a French phenomenon for some time to come, as is the micro-car-very small, normally 2-seater, cars made by specialists such as Aixam, Ligier and Microcar. In France, several of the smallest (and slowest) can be driven from the age of 14 without passing a test. A smaller number of these are also sold in Spain.
· New materials technology is leading to the greater use of plastic and aluminium in vehicle manufacture, particularly in low-volume niche vehicles. In emerging regions the use of plastic could be allied to the low-cost manufacture of ultra-flexible vehicles that are easily adapted to multiple applications: for example pickups, delivery vans and open-air taxis.
· The North American vogue for pickups as private transportation will largely remain a US phenomenon, with some initial adoption by emerging markets in Asia and South America. Total sales of these vehicles in North America number around 1.5m units or 10% of the market. In western Europe pickup sales have been running at around 75,000 units per year, virtually all being used as commercial vehicles.
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