VW Golf-led segment declines further on SUV shift

The compact car segment has slipped to the fourth largest in Europe from second as volume automakers facing restricted supplies because of the semiconductor shortage prioritize sales of their more profitable SUVs.

The segment that encompasses European favorites such as Volkswagen Golf and Ford Focus was passed by both small SUVs and compact SUVs in the first eight months, according to data from JATO Dynamics.

The sector is forecast to account for 13 percent of overall sales in Europe this year, down from 14 percent last year, as the chip squeeze continues.

"We expect more profitable, larger vehicles to take some priority within the chip-shortage situation," Sammy Chan senior analyst at LMC Automotive said.

The segment's share will return to 14 percent next year as new models such the Opel/Vauxhall Astra and Peugeot 308 make an impact, LMC expects, but it predicts that volume will dip again in 2024 and 2025.

The Golf, also Europe's best-selling model through August, remains on top of the compact segment, but there have been several changes to the rest of the top 10.

The worst hit model has been the Ford Focus, which has fallen to No. 6, down from second in 2019 and third last year, because of a 49 percent sales decline.

Ford lost 60 percent of its European production in the second quarter because of the chip shortage. The Focus still can't be ordered from Ford's factory in Saarlouis, the company's consumer website in Germany says.

The Focus for years was Ford's No. 2 seller in Europe behind the Fiesta small car. Now it ranks fourth behind the Fiesta, Puma small SUV and Kuga compact SUV.

The Golf and the segment's No. 2-seller, the Octavia from VW Group subsidiary Skoda, were down by smaller amounts than the Focus (see chart, below) compared with the same period last year, when sales were negatively affected by COVID-19 lockdowns.

Other automakers, however, increased sales as they either avoided the worst of the chip crisis or diverted precious supplies toward models in the segment.
 
Sales of the Toyota Corolla hatchback and wagon rose 17 percent, boosting it to No. 3 in the segment, up from fourth last year and seventh in 2019.

More than 90 percent of the Corollas sold in Europe this year were hybrids, Toyota said in its half-year sales report.

Kia was another big winner as Niro sales climbed 28 percent and the Ceed rose 29 percent.

Brands offering electric or electrified models also gained, with the VW ID3 becoming the first full-electric model to enter the segment's top 10. The new Citroen C4, which is also offered with a full-electric drivetrain, entered the ranking at No. 10.

Full-electric models claimed 8.5 percent of sales through eight months, compared with 5.7 percent for the first nine months of 2020, according to JATO figures.

Diesels accounted for a quarter of sales, gasoline 48 percent, full hybrids 10 percent and plug-in hybrids 8.6 percent (see chart, below).
 

The choice of full-electric models in the segment remains limited to the ID3, Kia e-Niro, Nissan Leaf, Hyundai Ioniq Electric and Citroen e-C4.

More models are on the way, including a battery-powered version of the next-generation Opel/Vauxhall Astra, due in 2023. Gasoline, diesel and plug-in hybrid versions of the model, which will have Opel's new Pure Panel digital display, have just gone on sale.

The Astra fell out of the top 10 in the first eight months due to the model changeover. It ranked ninth in 2020.

Another key model transitioning to a new-generation version is the Peugeot 308, which shares parent Stellantis' EMP2 platform with the Astra. Like the Astra the 308 will be offered with gasoline, diesel and plug-in hybrid powertrains ahead of the arrival of the full-electric e-308 model due in 2023. Also like the Astra, the 308's model family with continue to include a wagon variant.

Wagons remain an important body style, accounting for 36 percent of compact sales in the first eight months. The share has declined slightly from 2020, when wagons accounted for 38 percent. The body type is expected to get a boost after sales of Astra and 308 wagons start.

The 308 has been expressly designed to avoid SUV cues and keep a strong differentiation between the car and taller riding models in Peugeot's range, but on other models in the segment the line is blurring.

The Citroen C4, for example, straddles the two with a shape reminiscent of a coupe-styled SUV.

The Renault Megane E-Tech full-electric car, due in the first quarter next year, is another model that will have SUV styling elements

"With the new Megane, we think we have reinvented the classic European hatchback in an emotional way," Renault CEO Luca de Meo said at the IAA Mobility show in Munich last month.

The Kia Niro already sits somewhere between a hatchback and SUV, but the next model, expected go on sale in 2022, will further push the SUV connections in its design, media reports say. The car will borrow styling cues from the HabaNiro concept, Autocar said, citing spy pictures.

This shift will define the segment in the coming years, LMC's Chan believes, as automakers look to increase margins in what is sometimes a tough arena to make money.

"In the midterm, we do not expect any players to bow out, we expect more of a change in segments toward 2030," he said. "Most likely, this will result in traditionally compact segment models adopting more SUV-like characteristics."