Low-Cost Vehicles Compete With Mid-Range Automakers’ image

In a depressed European market, low-cost vehicles narrow the distance with mainstream brands, becoming a challenge to mid-range automakers.

“The differences are becoming more subtle. We’re getting customers who have plenty of money. They might have owned a (Renault) Scenic, but now they’re looking for simplicity, and to save some cash for other things,” said Renault saleswoman Chloe Gomez.

Renault’s cheap replacement of its boxy Logan sedan, which is present at the Paris auto show, has chrome dashboard, parking radar feature, touch-screen GPS and other stylistic characteristics worthy of a mid-market rival. The so called ‘back-to-basics trend’ was adopted by other brands such as GM’s Chevrolet, VW’s Skoda, Kia and Hyundai.

Renault’s Entry models were quickly acclaimed in markets such as Indi, becoming the automaker’s biggest earner, reaching profit margins of 6% and heading to 9%. The company’s workers are paid 5 euro in Romania and 3 euro in Morocco, compared with 30 euro in France. Renault’s plants use hand-me-down tooling from other automaker’s facilities.

“There may have been an element of luck in the success of the Entry strategy,” Barclays analyst Kristina Church wrote in a recent note. “But management certainly hasn’t been slow to capitalise on it.”