Premium penetration Since 1999 the growth of market Go deeper with GlobalDataThis combined growth performance was only eclipsed in home territory Germany, where the trio jumped from 34% in 1999 to 42.5% last year. Even in France and Italy, whose car buying public is fairly loyal to homebuilt products, the German threesome increased market share to 13% and 23% respectively. Private car buyers in the UK during January and February opted strongly for the Mercedes C-class for 13.6% of their purchases, ahead of BMW’s 3 Series (9.7%), the Mondeo (7%) and Audi A4 (7.2%.). When the total D segment is analysed during the same two months, the A4, 3 Series and C-class took three out of the top six places, behind Vectra, Mondeo and Passat. |
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Vauxhall released pricing and specification details of the new Vectra a full three months before the car’s market launch on June 13. For the company to show its hand so early reflects the Vectra’s pivotal importance to the griffin-badged brand at a time when the D, or upper medium segment, is under siege in both British and European market battlefields, and on several fronts.
Vectra, developed at a cost of several hundred million pounds, may be the most technologically advanced and best equipped car Vauxhall and Opel has produced. But it will be released into a shrinking, increasingly hostile and crowded brand-sensitive environment, where new contenders are upsetting the old order and changes in buying patterns are having a major impact.
Professor Garel Rhys, director of automotive industry research at Cardiff Business School, pointed to a decline in the British D segment market share from 25.1% in 1997 to the current level of 21% and falling. That means instead of generating 600,000 UK units last year, the sector – dominated by Mondeo and Vectra – accounted for 508,000 cars.
According to Rhys, changes in volume, taste, branding strategy and rapidly approaching UK taxation changes were instrumental in General Motors’ decision to end car production at Vauxhall’s Luton base as part of its move to trim European production capacity in a contracting market sector. He likened the D segment’s contraction to the demise of the Ottoman Empire, where a growing band of manufacturers seek a “chunk of a collapsing structure”.
Vauxhall and Ford in particular and more recent “colonists” like Renault, Nissan and Peugeot were most under threat in a changing order where, he said, “demand is going down as supply goes up”. By contrast, the lower medium or C category has dropped only 3% to 31% since 1995, while the burgeoning supermini class has risen from 27% to 31.5%.
Making successful inroads into the D segment have been the premium brands, particularly BMW, Audi, Volvo, Mercedes and, more lately, Jaguar whose 2-litre, frontwheel- drive X Type now limbos in at below £20,000. The downward price migration of ‘aspirational’ badges co-incides with a greater element of choice among user-chooser corporate drivers and sustained growth in the retail sector.
This pressure on the mass volume makers of D segment cars is likely to be compounded by the incoming CO2-related benefit-in-kind tax bands, which Rhys equated to a “latterday horsepower tax”. He said: “Company car drivers facing heavier tax bills will either downsize or take the option, if offered, of compensation for the loss of a company car through increased salaries. Or they could opt for personal contract purchase schemes.
Then they will become genuine user-choosers which will not be good news for Mondeo and Vectra sales.” Rhys noted: “For a long time the big players have been addicted to fleet and daily rental business. At the same time C class cars, like Focus or Astra, are getting larger and better equipped. “So the result is that, while the private buyer might pick up a cheaper used ex-fleet Mondeo, he is more likely to buy a new or nearly new Focus. The stigma attached to Mondeo man and his repmobile does not help where people have choice. Also this type of car keeps getting bigger.”
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Volkswagen, in particular, has steadily gained momentum and its previously lacklustre Passat is accounting for nearly 7% of the UK D segment this year. Equally Alfa Romeo, once threatened with extinction in Britain, has pushed the 156 on to choice lists. VW’s brand elevation continues apace with its 12-cylinder Phaeton and the Tuareg premium sports utility vehicle.
Alan Pulham, franchised dealer director of the Retail Motor Industry Federation, said Ford, Vauxhall and Peugeot were hoist by their own collective petard, having majored on fleet contracts for so long, at the expense of retail business.
Earl Hesterberg, Ford’s vice president of sales and marketing in Europe, acknowledges that Mondeo has been caught in the pincer movement between premium brand intervention and downsizing. He warned that volume manufacturers had to be more realistic and avoid the dangers of “denial” by altering their model portfolios.
Ford benefits from Premier Automotive Group brands Jaguar and Volvo at the top end and the popularity of Focus below. But, in terms of nominal Mondeo losses, keeping the sales within the family involves inter-brand “cannibalism”.
To a more limited extent Saab plays a similar role for Opel and Vauxhall. After particularly strong performances in Italy and Germany last year where Mondeo’s D segment share (excluding premium brands) more than trebled and almost doubled respectively to 8.2% and 14.9%, it struggled in the UK during the first two months of this year.
To add insult to injury the Mondeo lagged behind the outgoing Vectra, dropping to 13.1% from last year’s overall share of 17.2%. Laguna and Passat climbed to equivalent 5.4% and 7.6% shares.
There is no room for complacency in the C segment, either, where in Germany Mercedes’ A-class commands 9% of the sector and Audi’s A3 will be joined by fellow upmarket migrant BMW’s 1 Series in 2004.
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It is no co-incidence that the first model to use the new Focus platform next year will be the long overdue MAV (multi activity vehicle) as Ford joins a niche accounting for 22% of European C segment volume. It will debut at this Autumn’s Paris motor show. Professor Rhys claimed Ford, in trying to redefine its core brand, had surrendered the value for money ethos while misguidedly emphasising engineering excellence and driving dynamics.
“GM and Ford are in considerable difficulty with D segment, however good their cars are,” he said. “It used to be a big profit earning area for the likes of Mondeo, Sierra, Cortina and Cavalier. That just magnifies the problem. There was an era when Ford could sell Zephyrs and Zodiacs, with Vauxhall punting Veloxes – a lot of car for your money. That is now the preserve of Skoda and the Koreans.” Vauxhall was ingenuous when the new Vectra’s press material declared that “half a million customers can’t be wrong”, referring to Vectra sales since 1995.
Many company car drivers included in that number had little say in what they drove, which explains the company’s wooing of the growing ranks who pay their own money and make their own choices. •
