European minicar sales forecast to dip this year, remain steady until 2020

Automakers are increasing technology levels and phasing out a weak-selling body style in Europe's minicar segment to maintain consumer interest and cut costs.

The moves come as brands such as Fiat, Volkswagen and Toyota battle in a sector that is forecast to decline for a second consecutive year in 2017 and remain at about 1.23 million units until 2020, according to LMC Automotive.

Despite the predicted slowdown and expected stagnation, minicars still accounted for 8.3 percent of the total European car market during the first quarter and ranked as the fifth-largest segment of the 24 that Automotive News Europe tracks with help from market researcher JATO Dynamics. The sector is expected to retain its share of the total market. "Minicars don't face direct competition from small SUVs, so their registrations should remain stable over the next few years," Felipe Munoz, global analyst for JATO Dynamics, told ANE.

Fiat in first

For a decade, the segment has been dominated by two Fiat models: the Panda and 500. The Panda edged the 500 during the first quarter, according to data from JATO. European sales of the Panda rose 4.4 percent in the first three months of the year, helping it outsell the third-placed Volkswagen Up by a 2-to-1 margin.

The most important model in the segment to be replaced this year is the Kia Picanto, which arrives at dealers in Europe this summer. Despite the pending model changeover, the current-generation Picanto ranked ninth in the segment during the first three months after year-on-year sales jumped 13 percent. To maintain that level of success Kia will offer the Picanto with a new trim level called GT Line, giving the entry car a sportier look with bigger wheels and red detailing on the bodywork. Equipment available in the new Picanto includes a 7-inch touchscreen with satellite navigation and smartphone pairing software from Apple CarPlay. Safety equipment available includes autonomous emergency braking, which brings the Picanto in line with the VW Up in offering the semi-autonomous technology.

Sporty, more SUV-esque

The Picanto will also be sold with a new, more sophisticated 1.0-liter turbocharged three-cylinder engine available on higher grades.

Kia is following automakers such as Renault and VW in betting that consumers will pay more in this budget sector for more upscale specifications, following the lead of Fiat, which has one of the widest ranges of options and engine choices when the sporty Abarth versions of the 500 are included.

Renault has recently added a sport-themed Twingo GT to its lineup featuring a 110-hp three-cylinder turbocharged engine, which will rival a new 115-hp GTI version of the VW Up planned for next year. VW's variant also will have a three-cylinder turbo. In addition, VW has started selling a crossover style version called the Cross Up, which rides 15mm higher and features black cladding on the sides to give it a more rugged look. Fiat started the trend with the higher-riding, SUV-esque Panda 4X4 and Panda Cross. Suzuki has joined the competition after giving an SUV-like look to the new Ignis, which accounted for 11,806 sales in the first quarter, beating both the Seat Mii and the Skoda Citigo during the period.

Bye-bye, 3 doors

At the same time that manufacturers are increasing engine and technology options in the segment, they are also reducing body choice by eliminating three-door variants. Kia is the latest manufacturer to do so, responding to falling sales of the three-door derivatives of the current-generation Picanto, which accounted for about 10 percent of the model's overall sales during its life cycle. JATO data shows three-door sales within the segment fell to 26 percent last year from 44 percent in 2012 as buyers moved to the more practical five-door models. Automakers that have already dropped the three-door model include Renault with the Twingo and Hyundai with the i10.

The minicars still available in a three-door configuration include the VW Up and its sister models, the Seat Mii and Skoda Citigo, as well as the Toyota Aygo and its platform mates, the Peugeot 108 and Citroen C1. However, sales of those derivatives are tiny. The bulk of the sector’s three-door volume comes from the 500 and Smart ForTwo, neither of which is available in a five-door configuration (the related Smart ForFour competes in the subcompact segment).

Automakers have gradually moved minicar production to Central and Eastern Europe as they try to cut costs on the low-margin models. One of the rare moves back into Western Europe came in 2011 when Fiat shifted Panda production from Tychy, Poland, where it still builds the 500, to Italy to fill capacity in its plant in Pomigliano, near Naples. However, FCA could reverse that decision for the next model, Bloomberg reported in March.

The move would increase production at Tychy after the loss of the Ford Ka, which used to share its platform with the 500. Ford has left the segment after repositioning the Ka's replacement, the Ka+, as an entry-level subcompact rather than a minicar.

The new model measures 3929mm long, compared with the new Picanto at 3595mm. Ford sold 14,833 units of the Ka+ in the first quarter of this year, which would have put it 12th in the minicar charts after the Opel Karl/Vauxhall Viva. The Ka+ is built in Sanand, India, and was developed by Ford's Brazilian unit.

Ford might have left the segment, but most volume automakers remain committed to the sector. It remains popular not just in Italy, but also in countries with higher taxation, such as the Netherlands and Denmark. The two northern European countries had the highest minicar penetration in Europe at 19 percent each in the first quarter of the year, with the Netherlands finishing fifth in overall sales (22,760) behind Italy (107,334), the UK (67,388), Germany (54,685) and France (39,840). Denmark (11,322) was seventh behind Spain (13,172).

When ranking minicar sales by group in the first quarter, Fiat was tops followed by PSA Group (including Opel/Vauxhall), with Hyundai-Kia rounding out the top three. Opel dragged down PSA's ranking because of the poor performance of the Opel Karl/Vauxhall Viva, which suffered a 22 percent sales drop in the first quarter.