Something for everyone
Last week we had a few news reports that made me think about the question of the product portfolio offered by the car manufacturers and what the connection is between that and market success. If you are present in only certain segments, you will exclude yourself from the consideration set of customers who are focused on others, and your market share potential will consequently be limited. Most obviously in terms of current press commentaries is whether established manufacturers should be trying to maintain a presence in the city car ‘A’ segment, where margins have always been thin, but are now even more challenging due to the addition of compulsory emissions and ADAS equipment. The CEOs of Renault and Stellantis both lobbied the EU hard for a regulatory relaxation that would allow them to remain competitive in this sector which represents around 7% of the car market. This resulted in the ‘Small Affordable Cars’ proposal that creates a new type approval category and where regulations will be fixed for 10 years to reduce development costs and improve the ability of European-built cars to compete with the lower cost Chinese imports.
The news reports that caught my eye including the reporting on the growing share held by Chinese brands in Europe (EU+EFTA+UK) in April, approaching 10% of the total market, up 114% year-on-year. Having been at the Beijing Show last month as I reported in an earlier blog, what we see today in Europe is the tip of the iceberg in terms of the brands and models that could potentially face us, subject only to the decisions by the manufacturers on where to invest in building brands, networks and homologating the models they already have for EU type approval. Whilst in some cases they could cover every segment in the market, including some tiny niches like high performance supercars, the return on this effort could be limited, and if the same parent company brings multiple overlapping brands to market, this could result in cross-brand cannibalisation rather than overall incremental growth.
That leads into the second story that caught my eye – the Capital Markets Day held by Stellantis where the headline story was on the brand and product portfolio. Many investors and commentators anticipated that under the relatively new leadership of Antonio Filosa, there would be a culling of brands and models, particularly in Europe. The geographical focus of some brands will be restricted to reflect their historical roots, such as Lancia for Italy and DS for France, but this only limits network investment – the engineering and manufacturing investment will be little-changed. There was reference to products being added – to fit into the new EU Small Affordable Car category, but also further up the scale, leveraging the relationship that Stellantis has with Leapmotor. Other alliances and collaborations were also announced, all with the objective of improving brand coverage and lowering costs. The claim is that segment coverage will increase in Europe from 50% to 90%. This does not address the ‘elephant in the room’ of huge overlap between Stellantis brands in the same segments, which only makes sense if there is high customer brand loyalty – something that is in decline. The national sales companies and dealer networks may cry out for a full product range, but if customers cross-shop between brands and deals, there is little upside.
On the flip side of the same coin, we have the story of Ford, one that grieves me as a former Ford employee and long-time consultant to ‘big Ford’ in the 1990s. Ford’s European market share collapsed from over 10% in 2005 to 3% in 2025. Products that were positively reviewed such as Fiesta and Focus have been dropped, and the car business is now reliant on joint ventures to try to plug the huge gaps that exist in their market coverage. To the VW collaboration that gives Ford models such as Explorer and Capri (in return for which VW gets access to the hugely-successful Transit platform), Ford are now adding a collaboration with Renault for small BEVs based on the widely-acclaimed Renault 5, also used by Nissan for their Micra. Good news for Renault, but is this really the solution to Ford’s problems when BEV penetration in these small car segments is still below 10%? If you don’t have good market coverage, you can’t support your network or fleet customers looking for a single brand solution (and Ford has some genuinely strong propositions for the fleet sector with their Ford-Pro offer). Formerly loyal customers will turn to brands that offer a more direct replacement for their Fiesta or Focus, whether that is established brands still active in the segment, such as Hyundai, Kia and Toyota or the many Chinese brands who will also bring small car product.
Product complexity is expensive – an area where I did a lot of work in my former career, but more flexible base platforms that can span three or more product segments enable segment coverage with a lower investment, and more flexible multi-model manufacturing. Adding variant and option complexity is more questionable, as the incremental revenue from this is often a mirage, and many buyers focus on a tiny subset of the potential build variations, meaning that incremental investment is not recovered, and supply chain complexity dramatically increased. Where platforms are used to support multiple brands, particularly within multi-brand groups such as Stellantis, VW and now a number of the Chinese players, the balance is much more delicate. The differentiation has to be real from the customer perspective if this is not to lead to intrabrand competition, and the family feel across models has to be maintained if the brand values are going to be meaningful across the range. It is an approach that the late Ferdinand Piech went to great lengths to instil in the VW Group. Others still need to learn those lessons.