In a bid to reverse losses and boost profitability, in Europe, Ford and Renault are prepared to follow Citroen and go upscale, hoping to snatch sales from the premium brands.
Typically, premium brands deliver double-digit operating margins while mass-market brands earn single-digit profits on their volume models – that is, if they even make a profit, which most have not during the European downturn.
Of course, as we are talking about the segment where the German premium brands compete, the problem is that not everyone will find success in the crowded sector.
But the need to move upscale has been heightened by increased pressure in what analysts describe as the “squeezed middle” of the European car market. The downward pressure comes from BMW, Mercedes-Benz and Audi. The German premium brands have increased their shares of the European market in the first eight months of this year with the help of models such as the Mercedes A class compact and the Audi A1 subcompact.
Pushing upward are Korean sister brands Hyundai and Kia, as well as budget brand Dacia. Those three automakers also gained share in Europe during the first eight months.
Both Renault and Ford plan their upscale assault with luxury trim versions of existing cars – Ford with Vignale and Renault with Initiale Paris. For the moment neither plans to create stand-alone models, which Citroen has done successfully with its DS brand.
The two automakers have also said the benefits that customers will get will go beyond the luxurious interior to also include an upgraded dealership experience. “It needs to be as much about what happens around the car as what happens in it,” according to Renault design boss Laurens van den Acker.
By contrast, Ford, Citroen, Peugeot, Renault all lost European market share during the period. Only Opel/Vauxhall maintained its position in a market, which as a whole was down 5% through August, according to figures from European auto industry group ACEA. Overall, the top eight volume brands lost a combined 1.5% of European market share in the period.
) - Monday, October 7th, 2013 - filed under Ford
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