Fleet News

Competition for sales in fleet markets set to soar

A new financial study shows how the fiercely competitive European fleet segments can have a major impact on a manufacturer's profits.

Some of Europe's biggest car manufacturers are facing major difficulties next year amid increasing competition and deteriorating economic confidence.

Companies like Ford, GM Europe, DaimlerChrysler and Fiat are busy rethinking their targets for 2002 in the light of the September 11 terrorist attack, and trying to balance production with likely demand.

Of the majors, only PSA Peugeot Citroen appears to be in a comfortable position as it enjoys continuing success with the 206 and high expected demand for the European Car of the Year, the 307.

Overall, manufacturers in the key fleet market segments will be under considerable pressure from new models. The supermini segment will see new launches from Volkswagen, Ford, Citroen, Daewoo and Honda, among others, while Fiat, Peugeot, Toyota have all launched into the lower medium segment.

The upper medium sector will also become more crowded, with new cars like the Opel Vectra and Nissan Primera.

But that means fleets should be able to negotiate more cost-effectively with their suppliers, as the auto industry struggles to shift slow-selling stock.

In a new report, leading analyst Schroder Salomon Smith Barney has focused on how the market changes may affect a company like Renault — which will have an older product range than some key competitors.

'In 2002, Renault's Clio has two new formidable competitors in the form of Volkswagen's new Polo, being launched now, and Ford's Fiesta, out at the beginning of next year.

'The Megane saloon and hatchback will also probably find life tougher against the new Fiat Stilo and Peugeot 307,' said the report.

It adds that the Renault Scenic will find market conditions increasingly tough. Although it gets a small facelift in January, next year it must fight new Peugeot 307 and VW Golf-based minivans.

'Until now Renault has had a dominant position in the European compact minivan segment with a market share in 2000 of 55% in France and 41% in Western Europe. Both the 307 and Golf are popular selling models in France as well as Europe, so effectively there are likely to be four main compact minivan players in France, up from two.'

'Renault plans to launch the new Scenic, last of the Megane range, in mid-2003, a full 12 months after these two rival models are likely to emerge.'

The report also says that Renault has the oldest model range of small and medium-sized cars in Europe.

'The Twingo city car, the Clio small car, the Megane range of lower medium-sized vehicles and the Scenic compact minivan together accounted for almost 60% of Renault unit sales in 2000 and, we estimate, over 70% of profits,' the report said.

'They key point we have been making,' it added, 'is that each of these future new models is still between 15 and 30 months away from full replacement and facing competition in the interim from replacement or new rival models.'

What the report does not say, however, is just how many other manufacturers will be under pressure next year. There are still far too many cars being produced, for too few customers. That means fleet buyers in Europe should be in the driving seat when it comes to price negotiations for some time to come.

  • For details of the Schroder Salomon Smith Barney study call +44 (0) 20 7986 4000.

    Could radical styling affect sales of Renault's large cars?

    The new study into the financial performance of French car manufacturer Renault has expressed concerns about its large car plans — claiming the manufacturer's radical styling for the Avantime and Vel Satis might affect their long-term sales.

    'As Fiat has shown in the past, avant-garde vehicles turn heads initially, but often suffer from a short sales life,' said a spokesman for report publisher Schroder Salomon Smith Barney.

    It was unlikely Renault would achieve good margins with its large car products, the study added.

    'In order to head off longstanding prejudice in some markets such as Germany about its large cars, Renault has elected to be a safety and equipment market leader with these new models. However, equipment-rich packages are being offered at competitive prices, threatening likely profitability.'

    The study says Renault is expecting to boost sales in four particular sectors of the market. They are:

  • The commercial success of the Laguna.
  • The renewal/extension of its large vehicle range — Avantime, Vel Satis, Espace.
  • The introduction of the new Trafic commercial vehicle.
  • Expansion of its diesel engine range.

    'While we agree that each of these initiatives should boost sales and profits,' said Schroder Salomon Smith Barney, 'we doubt they will be able to offset the erosion to sales and profit likely to arise from the aging Megane/Scenic range.

    'We would like to point out,' it adds, 'that even on a best-case scenario the new models (Laguna II, Trafic, Vel Satis, Espace and Avantime) are likely to add 140,000 units to annual European unit sales compared with 1999, but falls in sales of other Renaults will more than cancel this out.' (December 2001)

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