asks Remy Pothet, Global Practice Head of TNS Automotive
With the increasing polarisation of the new car market, global market growth over the next decade will be driven mostly by the budget and premium car segments, leaving the mass volume OEM's to fight for market share in the middle.
OEM's are tapping into growth opportunities at both ends of the market.
In fast growing emerging markets, the rising number of new affluent consumers who aspire to exclusive and luxury models, is encouraging car manufacturers to develop their high-end product portfolio. At the current pace, the premium car segment could well reach up to 8% of the global car market by 2020.
At the other end of the spectrum, growth in the low-cost car segment is forecast to accelerate, reaching 20% of the global car market by 2020. This increasing demand for budget cars is fuelled by a combination of factors: the rise of middle-class consumers from BRIC and Central Europe with a limited budget (US$ 10k) for their new car purchase, the long-term market trend towards small, environmentally-friendly cars, and the rising demand in Western markets for basic, no-frills cars as consumers choose to divert their spending from automobiles to alternative categories that better reflect their priorities.
Innovation is at the heart of the budget car segment.
Low-cost cars are no longer synonymous with poor quality, obsolete technology or cheap imitations! Instead, traditional car manufacturers and newcomers from China and India are increasingly investing in highly innovative and cost-effective processes to develop sturdy and reliable models that meet consumers' specific functional needs.
Traditional OEMs under mounting pressure.
Dacia is a perfect illustration of the shift in the automotive industry. Initially designed to address consumer needs in emerging markets, the Dacia Logan by Renault achieved unexpected success among Western European consumers who rapidly adopted this cheap, yet robust model. This success story unsurprisingly prompted all of the big players in the car industry to follow in Renault's footsteps...
But are low-cost car owners really committed to their brand? I certainly think so, and so do car owners in France. Dacia recently astonished many car industry insiders by taking second place on the Car360 podium, in terms of brand performance as voted by vehicle owners, behind Audi and ahead of Mercedes. This illustrates that Dacia has indeed succeeded in attracting highly committed consumers who appreciate the brand for delivering on its promises at a very attractive price!
One thing is clear: traditional OEMs need to re-think their marketing strategies quickly and find innovative ways to reposition themselves in this increasingly dynamic market if they don't want to see their market share being squeezed further by the low-cost car phenomenon.....