The increasingly difficult challenge of selling minicars profitably will likely force more automakers to cut models in the segment over the next five years. Volkswagen Group and PSA Group, two of the biggest players in the segment, have expressed concerns about staying in the sector, while this year Opel/Vauxhall will end sales of the Adam and Karl/Viva minicars.
The fallout will cause minicar sales to drop to below 1 million by 2021 from 1.14 million in 2017, analyst firm LMC Automotive forecasts. “Margins are thin on these type of cars and that is why manufacturers often collaborate when producing them,” said Justin Cox, LMC’s director for global production.
One such collaboration is between PSA and Toyota to build three minicars -- the Toyota Aygo, Peugeot 108 and Citroen C1 -- in a jointly owned factory in the Czech Republic (making the country the largest supplier of minicars to Europe). Last November, however, the automakers announced that Toyota would take over the factory starting in 2021, leading to reports that PSA would exit the segment.
“The ability of any carmaker to make a profit in that segment is under pressure because of all the technology we have to add,” Maxime Picat, PSA’s operational director for Europe, told journalists in January without revealing the company’s long-term plans for the segment.
Picat also referenced previous statements by VW Group saying largely the same thing. “We have heard VW Group will stop development on that segment,” he said.
VW Group CEO Herbert Diess has previously complained that minicars are in danger of no longer making a positive CO2 contribution, one of their big selling points to companies facing potential fines for exceeding tougher pollution limits that start to take effect in 2020. In addition, Diess said during last month’s Detroit auto show that prices for a minicar such as the Up, which currently emits 95 grams of CO2 per kilometer, the targeted level that automakers need to reach in Europe by 2021, could grow by about 3,500 euros to be compliant with pollution rules in 2030. The Up currently retails for about 11,000 euros. “I am not sure how many customers could still afford our entry-level models,” Diess said.