Economy

Small But Chic: Europe's Booming Premium Compact Car Sector

Small But Chic: Europe's Booming Premium Compact Car Sector

The success of the Audi A1 and Citroën DS3 has sparked automaker appetites, with Fiat and Peugeot set to join the fray.

Citroën's DS3 (cmonville)

GENEVA - Competition may already be fierce in the luxury small car sector, but things are only going to get tougher. After last year's wave of small cars, such as Audi's A1, Citroën's DS3 and new variants of the Mini, carmakers at the Geneva Motor Show have confirmed their confidence in the future of the high-end small car.

BMW has unveiled its new Minicar Rocketman concept, a three-seater only a few centimeters longer than the original Mini. The German carmaker has also given signs that it wants to follow Audi's example and launch a new BMW model, smaller that the present BMW 1 Series.

It will then not come as a surprise that Mercedes shows the same appetite for the small car market. "We are going to replace our A and B segment cars with two new different variants', Dieter Zetsche, Chairman of Daimler AG has said. Audi officials have already promised new variants to the A1, in addition to the five-door model, the coupe and the four-wheel-drive option.

And the list of carmakers interested in manufacturing luxury small cars does not end there. The Fiat 500 is expected to soon hatch an entire family, including SUVs and station wagons. Ford has been closely watching Citroën's DS3, and Peugeot has no intention of allowing its sister brand to reap all the benefits.

"There has been a real break from the past: top of the range vehicles no longer come only as big sedans with powerful engines', said Vincent Rambaud, CEO of Peugeot. "This is a great opportunity for us to create new, reasonably priced vehicles." Peugeot's concept HR1 car presented last year at the Paris Motor Show, slated to reach the market in two or three year's time, is clearly part of the strategy.

But is the market big enough for everyone to play? "The sector has grown under the influence of demand. With each new small car entering the market, it is getting bigger," says Thomas d'Haussy, a Citroën official. In Europe, the luxury small car market grew from 520,000 to 554,000 cars sold between 2007 and 2010, according to J.D. Power. Latecomers have had no difficulty in finding customers. According to Peter Schwarzenbauer, sales manager for Audi, "we expect to sell 120,000 A1 models this year, 20,000 more than we first expected". The DS3 has also seen a hefty 76,000 orders since it was launched a year ago.

Ian Robertson, sales and marketing director at BMW, says the new competitors do not scare him a bit. He is confident that the "top of the range market will grow faster than the rest. Small car sales will progress faster than sedan sales. We strongly believe in the potential of premium small cars."

More models could also mean a risk of cannibalization. Half of the people who bought the DS3, for example, already had a Citroën. The alternative for them was to buy either a Mini or a fully equipped C3. Thomas d'Haussy says that he has not seen any signs of cannibalization: "The DS line actually helps us maintain our clients, who would otherwise have chosen a luxury car".

Read the original article in French

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Geopolitics

Iran-Saudi Arabia Rivalry May Be Set To Ease, Or Get Much Worse

The Saudis may be awaiting the outcome of Iran's nuclear talks with the West, to see whether Tehran will moderate its regional policies, or lash out like never before.

Military parade in Tehran, Iran, on Oct. 3

-Analysis-

LONDON — The Iranian Foreign Ministry spokesman Saeed Khatibzadeh said earlier this month that Iranian and Saudi negotiators had so far had four rounds of "continuous" talks, though both sides had agreed to keep them private. The talks are to ease fraught relations between Iran's radical Shia regime and the Saudi kingdom, a key Western ally in the Middle East.

Iran's Foreign Minister Hossein Amirabdollahian has said that the talks were going in the right direction, while an Iranian trade official was recently hopeful these might even allow trade opportunities for Iranian businessmen in Saudi Arabia. As the broadcaster France 24 observed separately, it will take more than positive signals to heal a five-year-rift and decades of mutual suspicions.


Agence France-Presse news agency, meanwhile, has cited an unnamed French diplomat as saying that Saudi Arabia wants to end its costly discord with Tehran. The sides may already have agreed to reopen consular offices. For Saudi Arabia, the costs include its war on Iran-backed Houthis rebels fighting an UN-recognized government in next-door Yemen.

The role of the nuclear pact

Bilateral relations were severed in January 2016, after regime militiamen stormed the Saudi embassy in Tehran. Amirabdollahian was then the deputy foreign minister for Arab affairs. In 2019, he told the website Iranian Diplomacy that Saudi Arabia had taken measures vis-a-vis Iran's nuclear pact with the world powers.

It's unlikely Ali Khamenei will tolerate the Saudi kingdom's rising power in the region.

He said "the Saudis' insane conduct toward [the pact] led them to conclude that they must prevent [its implementation] in a peaceful environment ... I think the Saudis are quite deluded, and their delusion consists in thinking that Trump is an opportunity for them to place themselves on the path of conflict with the Islamic Republic while relying on Trump." He meant the administration led by the U.S. President Donald J.Trump, which was hostile to Iran's regime. This, he said, "is not how we view Saudi Arabia. I think Yemen should have been a big lesson for the Saudis."

The minister was effectively admitting the Houthis were the Islamic Republic's tool for getting back at Saudi Arabia.

Yet in the past two years, both sides have taken steps to improve relations, without firm results as yet. Nor is the situation likely to change this time.

Photo of Iranian Supreme Leader Ali Khamenei in 2020

Iranian Supreme Leader Ali Khamenei in 2020

commons.wikimedia.org

Riyadh's warming relations with Israel

Iran's former ambassador in Lebanon, Ahmad Dastmalchian, told the ILNA news agency in Tehran that Saudi Arabia is doing Israel's bidding in the region, and has "entrusted its national security, and life and death to Tel Aviv." Riyadh, he said, had been financing a good many "security and political projects in the region," or acting as a "logistical supplier."

The United States, said Dastmalchian, has "in turn tried to provide intelligence and security backing, while Israel has simply followed its own interests in all this."

Furthermore, it seems unlikely Iran's Supreme Leader Ali Khamenei will tolerate, even in this weak period of his leadership, the kingdom's rising power in the region and beyond, and especially its financial clout. He is usually disparaging when he speaks of Riyadh's princely rulers. In 2017, he compared them to "dairy cows," saying, "the idiots think that by giving money and aid, they can attract the goodwill of Islam's enemies."

Iranian regime officials are hopeful of moving toward better diplomatic ties and a reopening of embassies. Yet the balance of power between the sides began to change in Riyadh's favor years ago. For the kingdom's power has shifted from relying mostly on arms, to economic and political clout. The countries might have had peaceful relations before in considerably quieter, and more equitable, conditions than today's acute clash of interests.

If nuclear talks break down, Iran's regime may become more aggressive.

Beyond this, the Abraham Accord or reconciliation of Arab states and Israel has been possible thanks to the green light that the Saudis gave their regional partners, and it is a considerable political and ideological defeat for the Islamic Republic.

Assuming all Houthis follow Tehran's instructions — and they may not — improved ties may curb attacks on Saudi interests and aid its economy. Tehran will also benefit from no longer having to support them. Unlike Iran's regime, the Saudis are not pressed for cash or resources and could even offer the Houthis a better deal. Presently, they may consider it more convenient to keep the softer approach toward Tehran.

For if nuclear talks with the West break down, Iran's regime may become more aggressive, and as experience has shown, tensions often prompt a renewal of missile or drone attacks on the Saudis, on tankers and on foreign shipping. Riyadh must have a way of keeping the Tehran regime quiet, in a distinctly unquiet time.

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