New Fiat 500, Italy's rebound poised to boost minicars

Italy’s economic rebound and the arrival of the refreshed Fiat 500 will help pull minicar sales out of a slump that caused the segment to drop to a five-year low in 2014, analysts at IHS Automotive predict.

European minicar sales fell 32 percent to 1,125,160 million in 2014 compared with 2009, with Italy down 50 percent to 244,642 during the period, IHS figures show.

However, the analyst firm predicts that Europe’s overall minicar sales will rise to about 1.2 million this year and 1.25 million next year because the volume in Italy -- Europe’s No. 1 market for the entry-level models -- is poised to increase to 260,000 this year and 300,000 in 2016.

That is still way below the roughly 500,000 minicars, also known as A-segment cars, that were sold in Italy in 2009, when a government-subsidized car-scrapping program artificially inflated demand. Similar schemes, which were used across Europe to boost sales during the height of the global financial crisis, pushed total minicar volume to 1.65 million five years ago.

Fiat’s dominance

What is expected to drive Italy’s minicar sales rebound is the country’s improving economic climate and the debut of the revised version of the 500, Fiat's higher-end, higher-priced minicar, which is Europe’s best-seller in the segment, according to data from JATO Dynamics.

Fiat also claimed second place in the segment with the more practical, more affordable Panda. European sales of the Panda increased by 11 percent to a little more than 76,000 through May.

The 500 also is a hit outside its home country, ranking as the UK’s best-selling minicar and No. 10 overall after five months, according to figures from the Society of Motor Manufacturers and Traders (SMMT).

Strong demand for the 500 helped make the UK Europe’s No. 2 market for minicars last year, IHS figures show. The UK nearly topped Italy in 2014 as demand rose to 237,138.

Overall UK car sales are being boosted by low interest rates that cut monthly finance figures low enough for buyers like Duncan Watson, a medical equipment salesman from Leighton Buzzard, southern England, who recently chose a new minicar over a second-hand model.

Watson is paying 138 pounds (about 195 euros) a month for a Peugeot 108 that he bought for his daughter, Ellie, on a personal lease from a local dealer. “I only cared about whether I could afford the monthly cost, and tried to get this as low as possible,” he told Automotive News Europe.

The 108’s sister model, the C1, is currently Citroen’s top-selling car in the UK, brand CEO Linda Jackson told Automotive News Europe in June.

Working together

The 108, C1 and Toyota Aygo are the second generation of minicars built at PSA/Peugeot-Citroen and Toyota’s joint venture plant in Kolin, Czech Republic. All three ranked in the bottom half of the European top 10 through May with a combined volume of 97,562.

In April, PSA CEO Carlos Tavares told Reuters he wanted to maintain the French automaker’s minicar arrangement with Toyota, but he indicated an openness to adding partners to further spread costs.

“To make A-segment cars, it‘s better to have the kind of grouping of several [automakers] that are going to share a given investment and then make derivatives out of the common investment,” Tavares said.

Tavares was chief operating officer at PSA’s French rival, Renault, when it teamed up with Daimler to create a joint rear-wheel-drive minicar. The results are the current Renault Twingo, the Smart ForTwo and ForFour, all of which debuted in 2014.

The Twingo was given a more premium styling to better compete with the Fiat 500, a move that has proved to be a success as European sales were up 39 percent to 42,417 in the first five months.

The Twingo’s rise means Renault is poised to retake third place in the segment from the VW Up, which had an 11 percent sales decline in the January to May period.

“New competition in the sector is probably the thing that is harming the Up at the moment,” IHS Automotive principal analyst Ian Fletcher told Automotive News Europe. The Up was launched in late 2011 along with its sister models, the Skoda Citigo and Seat Mii. The minicars are made at VW Group’s factory in Slovakia.

Special models

Of the three, only the Mii has increased sales so far this year, rising 4.4 percent to 10,456. It was helped by growth of the Spanish market and the debut of a new upmarket variant, Seat CEO Juergen Stackmann told journalists during a visit to the UK in July.

The Mii by Mango is a more premium version of the minicar that was created in collaboration with Mango, a Barcelona-based fashion house. The special edition Mii costs 9,480 euros compared with 6,500 euros for an entry-level Mii in Spain.

Stackmann said Seat sold 5,000 units of the model in its first year, with 80 percent being purchased by women. “It was far ahead of our expectations,” he said. “The [Mii’s] average transaction price has gone up tremendously.” IHS expects Spain’s minicar segment to double from a low of 24,558 in 2011 to about 52,000 this year.

The trend for more premium features and higher-end models in the sector also has boosted Opel/Vauxhall’s Adam, which is now available as a three-door hatchback, convertible and as a crossover that is called Adam Rocks.

Sales of the car rose 9 percent to 24,984 in the first five months. In May, Opel added the more practical, less-expensive Karl minicar, which is sold as the Vauxhall Viva in the UK.

“Very few manufacturers have a lineup in the A-B [minicar-subcompact] segment that’s so fresh and able to cater to different subsegments,” Vauxhall Managing Director Tim Tozer told Automotive News Europe. Opel also recently launched the new-generation Corsa subcompact.

Minicars are currently Europe’s third-largest segment and while small SUVs are stealing some sales from the sector, IHS predicts minicar volumes will remain steady at about 1.2 million until 2018. As Citroen CEO Jackson says: “There’s always room for a good cheap small vehicle at the bottom.”