The automotive cake used to be easy to slice. Five or six slices of varying sizes and most were able to feed reasonably well. This feature, written by Anthony Lewis, is extracted from the bi-monthly Lotus Engineering newsletter, proActive.
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Today that cake is divided into so many slices that some must be trying to survive off crumbs. Or, put it another way, niches within niches.
Depending on how you define your model line-up, there are now as many as 20 different segments, or slices, that need to be taken seriously.
As an easy example, look at BMW. The company had three core models (five if you include estate or wagon versions) and now has seven.
The European market consisted of around ten segments, depending on how you wanted to define it. Today that could easily be 20 or so. This splintering has been spurred by the growth of niche vehicles – a growth that shows no signs of diminishing.
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By GlobalDataAccording to figures from JATO Dynamics, car makers sold 428,000 more specialist, or niche vehicles last year in Europe, a 16.8 per cent increase to almost three million units, while there was a decline of 656,000 “traditional” cars such as hatchbacks, saloons and estates, representing a 5.5 per cent slide.
Within that blossoming niche market, small people carriers like the Vauxhall/Opel Meriva and Ford Fusion, showed the biggest growth, up 69.6 per cent while what might loosely be described as “coupés and roadsters” also saw significant growth, up 21.4 per cent.
No prizes for guessing that the Peugeot 206CC is the leader here, accounting for one-in-three of all segment sales – a segment that also includes Mazda MX-5, Toyota MR2 and Ford StreetKa.
Elsewhere among the layers of this particular mix, the van-derived cars have gone all posh and become “multispace” vehicles – and sales increased 5.1 per cent last year, led by the Renault Kangoo and Citroën Berlingo.
From just these few examples, a picture emerges of a rapidly, even radically, shifting market. It is also worth noting that one of the biggest casualties of this shift has been the traditional large car sector from volume brands, down by 20 per cent in 2003.
Also down, by 22 per cent, was the city car section – Ford Ka, Renault Twingo, VW Lupo et al – but that was probably more to do with lack of new models in 2003 than anything else; Fiat Panda made a late entry in 2003, but that was about it.
So, why and how has this happened? There are several strands worth exploring.
The first is that the speed of car makers to go from design to production has increased greatly, aided by the advances in CAD-CAM design technology. Where design freeze to job 1 was typically 30-36 months, it is now more in the order of 20-24 months; some car makers are suggesting that could be reduced to 18 months quite soon.
But since it all starts at the design stage, what is the designer’s point of view. Jaguar’s Ian Callum believes that crossover vehicles are the next niche.
“We are already seeing them in concept form, particularly in the United States, and this trend will inevitably make it across to Europe. They are designed to bridge the gap between sports utility vehicle and estate car. In the United States auto makers are also looking at a substitute for minivans, which have lost much of their glamour or appeal.
“Most manufactures are covering the spectrum from A segment vehicle to full-size sport utilities. Companies like Mercedes-Benz and Volkswagen are even moving into the super luxury car market (with Maybach and Phaeton).
“I think that what we are likely to see beyond crossovers in the future are more sports cars – even Volkswagen is understood to be looking at doing a sports car to stretch the brand still further,” said Callum.
As for Jaguar itself, “I would like to do an SUV, but we are not in a position to do one. We are not a big player, we are only producing 150,000 vehicles a year while companies like BMW are producing one million.
“Besides there are other things that need doing – such as replacing the models we already have.
“At PAG we have to be careful not to cannibalise sales from each other. If Jaguar were to do an SUV, what impact would that have on Land Rover, for example?
“Now that we have an estate car (X-Type) a crossover vehicle of some sort could be a possibility, but we would have to address a number of problems, particularly off-road performance because there is a ride-height issue.
“I would rather wait and see where the cross-over trend ends up to fully understand it before we make any decisions at Jaguar.”
That cautious approach is a luxury that Jaguar can afford while volume car makers can’t.
Their cause has been helped enormously by advances in more flexible manufacturing systems, a point highlighted in a recent report from CSM Worldwide. “In an increasingly competitive environment, OEMs continue to be pressured to find new offerings based on highly flexible platform architectures,” said CSM.
It is predicting growth in “tall B-segment programs”, which we have already identified as “small people carriers” like the Fiat Idea or Renault’s upcoming J77, as an example of this trend.
CSM is also predicting that Europe’s C-segment – or lower medium – will grow by one million units to 6.2million between now and 2009, and the A Segment, or city car, by 0.7million to 1.7 million units, spurred by new arrivals, and reversing last year’s trend.
Ian Callum’s brother, Moray, design chief at Mazda Motor Corporation in Japan, gives a different twist to the idea of niches. Now that the Mazda brand has been revitalised with what Moray describes as “a succession of good launches since the Mazda6 in 2002”, the company would start going into different segments.
“We need to expand the range and some products will be geographically specific. There is obviously the potential in North America for non-car vehicles, 4x4s and SUVs, but with limited resources we need to do things differently. The RX-8 is a typical example – it’s a sports car but it’s practical.
“We are not going to be pigeon-holed by segments. In North America we might be seen as a Japanese import company up against Nissan, Toyota and Honda, but in Japan we are equally popular among race car enthusiasts as pick-up truck fans.
“You need to be a little bit of everything to survive.”
It is that sentiment that takes us to perhaps the most fundamental reason for the inevitable growth in niche vehicles. In a 2003 report, the EC’s Futman Project (Future of Manufacturing in Europe 2015-2020 – the Challenge for Sustainable Development) suggested that “flexibility and customisation were the new techno-organisational concepts in the automotive industry.
“Ten years ago, the Japanese model ‘lean production’ was the portfolio for organising manufacturing processes. Today it is obvious that there is more to being competitive although many elements of the lean production concept have become standard means of organisation.
“Today flexibility and the ability to customise products are gaining importance. One of the major problems in this respect is how to handle increasing complexity and how to ensure integration while maintaining economies of scale and keeping capital lockup in manufacturing equipment under control,” said the report.
And it came up with this intriguing “blue sky” vision from an un-named European car maker as a vision for manufacturing cars in 2020: “Small scale factories producing 5-10,000 cars a year. The space frame and other basic parts would come from suppliers closer to the assembly factories. In the factories, components chosen by the customer are added.”
That is, surely, the ultimate in niche models.
One of the other nuggets from the Futman project was there is now major awareness of the arguments over whether it is best to build-operate-own or pay-on-production. This is because increasing flexibility is not only looked for with respect to product variants but with respect to the volume or capacity of production, too. But the report points out that there are too few examples to be conclusive.
Modularisation – or “construction kits” – and how platforms are used works at different levels of the supply chain, with respect to the product as well as the manufacturing equipment.
But there does seem to be different approaches among OEMs in Europe and in Japan on how to balance the reduction of complexity on the one hand and the integration of the different modules and systems into one working car on the other hand.
While European companies rely increasingly on networking with strong, independent suppliers, the Japanese tend to a more hierarchical system. While the first seems to have advantages with respect to innovation the second may foster the reliability of the car as a whole.
Another means of reducing complexity and making the manufacturing process reliable and flexible could be the localisation of production in possibly smaller factories close to relevant markets, an idea hinted at by Mazda’s Moray Callum, and one that fits perfectly with a re-definition of niche vehicles – by type and by geographical location.
This article was first published earlier this year in Issue 1 of the Lotus Engineering newsletter, proActive. Current and back issues of proActive are available for free download in pdf format here.
