Ford Motor Co and other carmakers are squeezing minivan bodies onto the chassis of subcompact cars to lure buyers as industry sales shrink.
The new models, to debut at the Geneva car show today, are intended to win back consumers who consider subcompact cars too small and sport-utility vehicles too expensive. Carmakers are also trying to cut costs as global sales drop, analysts said.
"People want something different and the development costs for putting a new `head' or top on a car platform are peanuts," said Peter Schmidt, a consultant with Auto Industry Data in Warwick, England. "It's absolutely essential for carmakers in Europe to enter these new product niches because the profit margins in the conventional business is becoming very small."
While worldwide sales are expected to fall by 3.3 percent this year, the market for the subcompact vans will more than triple by 2004, analysts said. By using their existing car platforms, unprofitable Ford and Fiat SpA are responding to investor pressure to save money and bolster profit.
Ford is presenting the Fusion, based on the Fiesta car and on sale this fall. General Motors Corp, which is unprofitable in Europe, is presenting Concept M and Mazda Motor Corp the MX Sport. Volks-wagen AG and Fiat will follow with similar models. The five-seat vehicles are expected to cost about 15,000 euros (US$13,042), analysts said.
The new models blend the characteristics of a subcompact car and a van or sport-utility-vehicle, with higher roofs and extra space for passengers and luggage. Drivers and passengers sit higher than in small cars for better visibility. Carmakers can charge a premium of 10 percent or more, analysts said.
"This segment is going to explode," said Colin Couchman, an auto industry consultant with DRI WEFA in London. "Having more interior space is important for families and people with hobbies and active lifestyles."
These new vans are smaller than the Renault SA's Megane Scenic and General Motors' Opel Zafira, the best-selling vans in Western Europe. Scenic sold about 314,000 models last year.
Carmakers charge more for the van derivatives than the two-or four-door cars. General Motors' Zafira costs ?12,151 (US$17,195) before tax in the UK, or about 16 percent more than an Astra four-door car on which it's based.
DRI-WEFA estimates that sales of the small vans in Western Europe will more than triple by 2004 to 650,000. The subcompact car segment will decline over that period, as people turn away from sedans and coupes.
Overall sales in Western Europe will fall between 2 percent and 4 percent this year from last year's 14.8 million vehicles sold, executives have said.
In Japan, sales were down about 1 percent to 4.06 million vehicles, declining for a fourth year in five. Demand in 2002 is likely to be little changed and will focus more on mini-vehicles, analysts said.
In the US, the largest market, demand will fall to 15.6 million from 17.2 million, as richer incentives from General Motors and others to boost sales following the Sept. 11 terrorist attacks pulled forward some sales, according to JD Power-LMC.
"There clearly is a payback still to be had for last year's very high selling rate in the US," said Charles Young, a JD Power-LMC analyst.
General Motors brought back no-interest loans on some models as an alternative to cash-back offers of as much as US$2,002. Ford and DaimlerChrysler also are extending their incentives.