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Wednesday, December 28, 2005

More Predictions for 2006: The Europeans

From what I've garnered through years of reading Automotive News Europe, and finally moving over here, I see Europe as a very crowded and super competitive market for the car. Most cars are very small, which means smaller profit margins for manufacturers. The prices to run and maintain an automobile are also outrageous. Many Europeans do not know how to drive at all. If fuel prices continue to increase dramatically as they have over the past year in America, I see the US having a very similar market to the European one.

Mercedes-Benz: While I predicted that the Chrysler Group portion of Daimler Chrysler would do adequately, but not amazingly, I feel that the Mercedes portion of the conglomerate will be an albatross yet again. One of the bigger blunders of Mercedes is the company's venture into the small supermini market. Mercedes produces the tiny A Class and B Class for Europe, as well as another company known as Smart which features three premium small cars in its lineup. None of these vehicles is offered in the US. In the case of Smart, the vehicles are not profitable in Europe at all. I do not know how well the A Class and B Class sell, but I think putting the Mercedes star on cars this small can only lead to brand dilution. I understand that Mercedes has built for many years large vans and heavy trucks for government use, but these vehicles don't harm a brand's reputation the way small FWD little dingy cars do. And to have not only another new company of your own invention compete in this segment, but to also hurt your Chrysler arm's sales in Europe is really silly. Mercedes is also a bit of a jumble in the larger segments it competes in. Several, including myself, have called this company the GM of Germany, and it really is. Expect more of the same problems in 2006, but less help from Chrysler.

Volkswagen: Volkswagens are once again the best selling marque in Europe, but barely so. To win in Europe means to sell just over a million vehicles, which in comparison with the sales of companies in America is quite small. VW has to some extent turned the corner from their disastrous foray into luxury vehicles, and is letting the Phaeton die a slow death. While they have for the time being ceased competing with their competent luxury arm Audi, they are quite muddled in the lower less expensive tiers of automobile sales. Seat and Skoda essentially are lower priced rebadged VWs, but only one is making money (Skoda), and one is losing a lot (Seat). It really makes no sense to keep both, but VW has just announced that it will invest millions more into making Seat competitive. It won't work though. VW should do well in Europe in 2006, but in America it will need to prove that its cars are not unreliable. Diesel sales, and the release (finally) of the new Golf should help a turnaround overall. VW should strongly consider releasing the small Polo as well in America, but a decision on that is too late to save 2006. Should be an average year overall for the company.

BMW: I've seen a 1-series in the flesh before most Americans have, and I have to say it looks rather ridiculous. It sells though. I can't see one working for the US market unless they got rid of the hatchback shape. Other than that, I really can't think of a criticism for this brand. I do feel that many of the Bangle designed vehicles are ugly, including the 7 series and 6 series. But the BMW name has so much panache, and BMW is so organised as a company, that even questionably designed vehicles are not at a disadvantage in the market place. The new 3 series is wonderfully done, as is the new 5 series. It should be yet another great year for this company.

Peugeot: Here's a company I knew little about before moving to the UK. Their 206 is one of the most popular cars in Europe and the UK. However it is old, and until it is replaced, the company won't be doing as well as it could. The new 207 should boost popularity considerably. It's a good looking car, and if it builds on its predecessor, will continue where the 206 left off. Peugeot, like its twin company Citroen suffers at not having a luxury brand, but I feel luxury brands are overrated. The money always has been and always will be in selling to the middle class. Citroen is introducing the C5 next year, but outside of France the car probably won't sell. 2006 depends very much on the success of the upcoming 207. If that does well, then the entire brand will do well. Pairing up with Toyota for the 107 and C1 was a good move as well and can't hurt things.

Fiat: It's a wonder that a company that creates such beautiful vehicles in brands such as Alfa Romeo and Maserati can create such bland things like Fiats. However Fiat is improving, and the company is no longer in the dire straits it was only two years ago. It's living proof that a car company can itself around quite quickly. The new Punto is needed quickly, as the current one is dated and very bland. Lancia is a completely forgettable brand that should be let go. It's not even sold in much of northern Europe. Fiat has a reputation of poor reliability. In order to combat this the company needs to inject a great deal more excitement into their vehicle's aesthetics. The Maserati turnaround has been quite successful and the brand has entered a market in America that was all but dominated by Porsche. The entry has been well received. If sales of the new Punto do well, expect this company to also show significant improvement. However a reluctant worker's union that is much stronger than the UAW could ever dream of being might hamper things. Ferrari will continue on as always.

Renault: Led by the great Carlos Ghosn, Renault has had a string of successes in the last several years. It has successfully paired itself with Nissan, a Japanese company that sells decently in Europe, especially in Britain with its Micra supermini. Its Clio is a well liked vehicle that is often at the top of the sales charts. This is a company that is successful in many areas, and is seeking to enter the luxury realm not with their own lineup, but with the lineup of a failed luxury company (Jaguar or Saab at the moment). The new Clio has just arrived and builds on the success of the last generation. Renault will need to continue to deliver quality vehicles in the hyper competitive supermini market in Europe, and hope for the best from its Nissan stablemate who is slowing down slightly in America. 2006 should see more of the same success however, but no breakaway hits.

I'll be on holiday until the 5th of January, but after that I will have the Japanese manufacturers 2006 predictions.

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