20 August 2016

Brand Series - Mainstream

One of the casualties

Mainstream cars are the biggest selling due to their affordability and acceptably good quality. For this reason there are more brands participating in this area. It should be reasonably profitable, but not as much as you would imagine. Chasing volume over profit - especially in Europe - has eroded margins. The gap between mainstream and premium has got closer too. On top of that not enough co-operation, and therefore too much duplication of cost.

All of the above has meant that mainstream car producers have often struggled to be profitable. Factories have been closed and production moved to lower wage countries. Brands have been lost in the carnage; recently Pontiac, Oldsmobile, Saturn, Rover now Scion. Years earlier it was the likes of Plymouth, Mercury, Hillman and Simca. Brands such as Citro├źn and Mitsubishi have been saved by being taken over while the likes of SEAT has been propped up for years.

It all looks rather poorly managed and I would say that is exactly what has happened. Short term thinking, chasing volume over sustainability has hurt US and European car makers. The Japanese have a system named keiretsu that provides security for car companies. They wouldn't have so many brands otherwise. However, Japanese car makers have become too conservative and most of what they make reflects that. In that sense they have failed too.

The future will surely see more working together in the industry to reduce costs and improve the bottom line. The Japanese already do it quite well but the others should be better at it, if they are smart. The cost of meeting emissions targets and the move in direction toward alternative fuels is horrendously expensive. The industry burns too much money and mainstream car makers cannot afford that. Sharing is the way forward, so is longer term planning.

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