Prices of volume cars are rising as the recession drives more and more consumers to opt for smaller, cheaper-to-run cars, a report has found.
At the same time, however, many models are now offering buyers greater value for money as competition in the volume sector hots up, according automotive industry consultancy Jato.
The company says a detailed analysis of consumer buying trends and vehicle pricing suggests a strong shift towards smaller cars.
The report studied a number of social and economic factors and the effect these have had on the new car market, car pricing and buying behaviour in the five largest European car markets, France, Germany, Italy, Spain and the UK.
Jato says the findings suggest a general shift towards smaller cars driven by consumers wanting to purchase cars at a lower initial price while also taking advantage of lower CO2, taxation and lower overall running costs such as fuel and maintenance.
Scrappage incentive schemes introduced across Europe are adding momentum in the small car market by reducing prices and improving accessibility.
“Our report comes at an interesting time,” said David Di Girolamo, head of Jato Consult. “There are so many factors influencing consumer behaviour within the new car market across Europe.
“Taxation, incentives and European legislation are all affecting model specifications and buying habits, whilst the economic crisis is putting more pressure than ever on both company and household budgets.”
However, Jato pointed out that while lower-priced small cars are winning market share from the larger more expensive segments, buyers who are prepared to downsize are still looking for well-specified, fashionable products.
Likewise, manufacturers are seeking to maintain profitable margins by selling higher specification cars.
“The likes of Mini and Fiat are the leading examples of how manufacturers can take advantage of market trends,” Mr Di Girolamo.
“They have both made small, cheaper-to-run cars into desirable fashion accessories, and consumers are spending considerable sums of money buying high-specification versions.
“These cars satisfy the need for consumers to be buying smaller, more economic cars, yet still deliver the manufacturers a healthy profit, which hasn’t always been possible with small cars. Larger cars have historically delivered the greater profit.”
Jato’s report highlights BMW as a manufacturer that has “responded admirably” to changing market conditions.
Significant emissions-saving technology introduced across its model range have made its larger premium models more acceptable to a greater number of buyers, whilst the introduction of the 1-series range has opened the brand up to a new group of consumers.
In the value sector, Dacia has won significant new market share by offering honest, no-frills value for money at an affordable price point.
Although official list prices have risen in real terms since 2003, the Jato report concludes that new cars offering more space, better quality, greater safety and higher specifications represent better overall value for money than they did then.