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".
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