The last few years have seen numerous new models – such as compact MPVs – appear on the European car market that seem to signal the beginning of a re-segmentation of the passenger car market. In the light of the many new vehicles and styles of vehicles appearing on the market, this review looks at how the structure of the UK car market has changed since 1997 and looks at how it might develop in the near future. By Ian Henry.
A buoyant recent history
The UK market itself has been quite buoyant in the last few years and indeed since 1996, total registrations have consistently been over 2 million units. While there may be some decline from the 2.2million units recorded in 2000, the price reductions and competitive environment experienced recently are expected to maintain a broadly positive short-term volume outlook for the UK.
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The year 2000 ended with strong demand from both private and business users. Although the changing tax regime for company cars has made the perk of having a company car less attractive than in the past, the fleet sector represented around 46% of the market last year; pure business demand accounted for 9% and private buyers 45%.
The buoyancy of the new car market is partly related to the positive outlook for car production. Despite the imminent end of UK volume car production by Ford and the slimming down of Vauxhall’s production activities in the UK, increased investment by all the other vehicle manufacturers continues. Indeed, in 2000 UK-produced cars represented around 28% of the market, and while there will be some negative impact from the loss of UK production of the Ford Fiesta and Vauxhall Vectra (both of which are consistently in the top 6 or 7 in the UK sales charts), increased investment elsewhere will result in increased sales for some UK-built models.
Traditional segments – a thing of the past?
Traditional segmentation of the passenger car market is based on ABC segmentation as follows:
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By GlobalData| Segment | Sample Models |
| A – Mini | Rover Mini |
| B – Supermini | Ford Fiesta, VW Polo |
| C – Lower medium | Ford Focus, Renault Mégane, VW Golf |
| D – Upper medium | Ford Mondeo, Renault Laguna |
| E – Executive | BMW 5-series, Mercedes-Benz E-class |
| F – Luxury | BMW 7-series, Mercedes-Benz S-class |
| Sports cars | Alfa Romeo Spider, Porsche 911 |
| MPV – Multi-purpose vehicles | Renault Espace, Ford Galaxy |
| SUV – Sports utility vehicles | Land Rover, Toyota Landcruiser, Suzuki Vitara |
source: Industry Sources | |
However, this traditional segmentation is arguably now insufficient for analysing the structure and dynamics of the UK passenger car market. Hence, in this review we have moved away from the traditional segmentation adopted by the SMMT. As models emerge which cross traditional boundaries, a more refined segmentation will be required. Models like the VW Lupo and Seat Arosa cross the A and B segment boundaries according to some analysts, resulting in the emergence of the A/B segment (sometimes called sub-B). And there have been other changes, including:
- The launch of the Citroen Berlingo and Renault Kangoo in passenger versions has created a new sub-segment, admittedly still a small one in the UK, but of growing significance in France and Spain. The passenger car versions of these purpose-built vans might well be described as van-derived cars, the reverse of car-derived vans that are vans based on cars. They will soon be joined by models from Mercedes-Benz (Vaneo) and Fiat (Doblo), both of which will also be launched in passenger formats, as well as in van format. Indeed, it is noteworthy that the Mercedes-Benz model will now be oriented more to the passenger rather than the commercial version, despite having been conceived as a commercial model in the first place.
- The emergence of the Renault Scenic has created a second segment of ‘compact’ MPVs (what we call C-segment MPVs): these are smaller than traditional European MPVs like the Renault Espace and Ford Galaxy. Such has been the success of the Scenic across Europe, that several VMs have accelerated their plans for similar models: Vauxhall was first with the Zafira (from Opel’s Bochum plant in Germany), but Nissan (Tino, based on the Almera, but made in Spain), Citroen (Picasso, based on the Xsara, and also made in Spain), Fiat (Multipla) and Mazda (Premacy, the first Japanese import) have already joined the battle and will soon be joined by similar models from Ford, Honda, VW and Peugeot. This segment already represents nearly 2% of the UK market – within 5 years it is quite reasonable to expect this share to have more than trebled and it could easily reach 10% or more, especially if Ford in particular is successful with its Focus-based MPV due in the next 2-3 years.
In addition, the Sports Utility Vehicle segment has grown from under 2% in the early 1990s to approaching 5% in each of the last 3 years. This segment appears to have reached its peak in terms of both volume sales and the proportion it accounts for of the total market. However, now that Ford has its new Maverick and if or when Vauxhall eventually brings out a small SUV to compete against the Land Rover Freelander, then a supply-led revival in the share of the market accounted for by SUVs could be seen.
The changing segmentation of the UK market is shown in the table below:
The UK car market, by segment, 1997-2000 | ||||
| Segment | 1997 | 1998 | 1999 | 2000 |
| A | 2% | 1% | 2% | 2% |
| A/B | 6% | 6% | 5% | 6% |
| B | 25% | 25% | 27% | 28% |
| B/C | 0% | 0% | 0% | 0% |
| C | 28% | 28% | 28% | 27% |
| D | 25% | 24% | 22% | 20% |
| E | 4% | 4% | 4% | 4% |
| F | 1% | 1% | 1% | 1% |
| C-MPV’s | 0% | 0% | 0% | 2% |
| MPV’s | 2% | 2% | 2% | 2% |
| Sports | 1% | 1% | 1% | 1% |
| Roadster | 1% | 1% | 1% | 1% |
| Cabrio | 1% | 1% | 1% | 1% |
| Coupes | 1% | 2% | 2% | 2% |
| SUV’s | 4% | 4% | 5% | 5% |
| hef | 100% | 100% | 100% | 100% |
source: Industry Sources | ||||
Diesel averse in the UK?
Moving on from the vehicle segment analysis, some consideration needs to be made of the trends in fuel preference of UK consumers. The UK diverges somewhat from mainland Europe, which is steadily moving towards diesels (as was discussed in the recent just-auto article on Germany). In 1997, diesels accounted for a little over 16% of the UK market; this fell by almost 1% to 15.3% in 1998 and to 13.8% in 1999; it is true there was a slight pick up in the share accounted for by diesels in 2000, to 14.3%, but the impression is clear – UK drivers do not like diesels.
In terms of the diesel penetration by segment, the diesel penetration was as follows in 2000:
- A/B: 4.7%
- B: 6.1%
- C: 17.3%
- D: 20%
- E: 16.4%
- C MPV: 22.3%
- MPV: 51.6% (the first time any segment has had a diesel penetration of over 50%)
- SUV: 34.6%
Body-style trends – the UK switches to hatchbacks!
In terms of the body styles, between saloons, hatchbacks and estates, there has also been some notable change in recent years. The main switch appears to have been the steady decline in the share of the market accounted for by traditional saloons, in favour of 3-door hatchbacks, a development that might seem surprising given the apparent popularity of MPVs and SUVs:
- In 1997, 3-door hatchbacks accounted for 23.7% of the market and while this dipped a little in 1998, it climbed in 1999 to 24.7% and over 25% in 2000
- By contrast, 5-door hatchbacks have seen a decline from 43.4% in 1997, by almost 2% to 41.5% in 200
- Of even more note has been the decline in 4-door saloons, from 15.3% in 1997 to 12.3% in 2000
- Intriguingly, estate cars are actually on the rise, from just 8% in 1997 to nearly 9% in 2000; in parallel, we have the growth in the MPV segment, both traditional and C-segment based models, from just over 2% in 1997 to nearly 3.7% in 2000
The UK passenger car market by body style, 1997-2000, % | ||||
| Body style | 1997 | 1998 | 1999 | 2000 |
| 3-dr hatch | 23.7 | 23.1 | 24.7 | 25.2 |
| 4-dr saloon | 15.3 | 14.6 | 14 | 12.3 |
| 5-dr hatch | 43.4 | 43.1 | 41.4 | 41.5 |
| Estates | 7.9 | 8.7 | 8.5 | 8.7 |
| MPV | 2.1 | 2.1 | 2.4 | 3.8 |
| SUV | 3.8 | 4.3 | 4.4 | 4.4 |
| Sports | 3.8 | 4.1 | 4.6 | 4.1 |
| shgh | 100 | 100 | 100 | 100 |
source: Industry Sources | ||||
And for the future?
Looking ahead, what might the structure of the UK passenger car market look like in 2005? The trend towards C-segment MPVs, such as the Picasso, Scenic and the new models to come from Ford, VW and Honda (ensuring some supply push), will undoubtedly continue, especially in urban areas where these vehicles’ greater ride height compared to conventional cars and their interior flexibility are greatly liked by consumers. We believe that by 2006, it is quite conceivable that C-segment MPVs will account for over 10% of the market. Indeed, if the decline in traditional C and especially D segment cars accelerates beyond the rate apparent in recent years, then the switch to C-segment MPVs could be even faster. Our view on the likely shape of the UK car market in 2006, 5 years out is shown in the chart below.
The UK car market, by segment, 1997-2006 | ||||||||||
| dzh | 1997 | 1998 | 1999 | 2000 |
2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| A | 2% | 1% | 2% | 2% | 2% | 2% | 3% | 3% | 2% | 2% |
| A/B | 6% | 6% | 5% | 6% | 7% | 7% | 6% | 6% | 6% | 6% |
| B | 25% | 25% | 27% | 28% | 28% | 29% | 28% | 28% | 27% | 27% |
| B/C | 0% | 0% | 0% | 0% | 1% | 1% | 2% | 2% | 4% | 5% |
| C | 28% | 28% | 28% | 27% | 26% | 25% | 24% | 23% | 22% | 20% |
| D | 25% | 24% | 22% | 20% | 18% | 17% | 16% | 16% | 15% | 14% |
| E | 4% | 4% | 4% | 4% | 3% | 3% | 3% | 2% | 2% | 2% |
| F | 1% | 1% | 1% | 1% | 1% | 1% | 1% | 1% | 1% | 1% |
| C-MPV’s | 0% | 0% | 0% | 2% | 3% | 5% | 7% | 10% | 12% | 14% |
| MPV’s | 2% | 2% | 2% | 2% | 2% | 2% | 2% | 2% | 2% | 2% |
| Sports | 1% | 1% | 1% | 1% | 1% | 1% | 1% | 1% | 1% | 1% |
| Roadster | 1% | 1% | 1% | 1% | 1% | 1% | 1% | 1% | 1% | 1% |
| Cabrio | 1% | 1% | 1% | 1% | 1% | 1% | 1% | 1% | 1% | 1% |
| Coupes | 1% | 2% | 2% | 2% | 1% | 1% | 1% | 1% | 1% | 1% |
| SUV’s | 4% | 4% | 5% | 5% | 5% | 4% | 4% | 3% | 3% | 3% |
| fhj | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% |
source: Industry Sources | ||||||||||
To view related research reports, please follow the links below:- A Profile Of The UK Motor Industry |
