More models and fewer cars

Until the beginning of the 1990s, the world of cars was quite a manageable affair, seeing that back then, there were something like 100 different vehicle variants. But then things took off. Less than 25 years later, more than 3,000 vehicle types were on offer in Germany – spread across various models, styles and engine types. But many of them have the same technical basis. With more and more new derivatives, entirely new segments suddenly emerged. The reason for that is competition. Once a manufacturer had occupied a new niche, the others had to follow suit. Hardly anyone wanted to leave a market segment to the competition. In addition to that, the market was relatively saturated. Because nothing has changed in terms of increasing diversification, new vehicle variants are to this day supposed to offer new incentives to buy. But has this diversity also led to more sales? Or are manufacturers perhaps even selling fewer vehicles today? JATO Dynamics has taken a closer look at the figures.

In recent years, one type of vehicle has been the clear favorite among European manufacturers and customers: SUVs, or sports utility vehicles, have dominated the market for several years now. However, the towering vehicles with off-road looks have gained traction not only in Europe but worldwide, accounting for around 45 percent of global passenger car sales last year. In Europe, SUVs also accounted for 45 percent of total registrations this year through August. But is the boom enough to cushion the significant sales declines in other segments?

Sales have increased by just 11 percent in almost 30 years

From 2000 to 2007, new passenger car registrations in Europe were 15 to 16 million units annually. From 2008, the economic and financial crisis caused the first dip; sales fell to an average of 13.7 million vehicles per year until 2016. After that, the European market somewhat recovered, with registrations ranging between 15.5 and 15.7 million units. Then came Covid. And dragged the whole car market down. To date, the level of 20 years ago has not been surpassed again – between 1991 and 2019, total sales increased by only eleven percent. Meanwhile, Europe’s new car market, like North America’s and Japan’s, is relatively saturated. For manufacturers, this means finding new ways to cut costs or capture new customers from other brands.

With only a limited number of new customers coming in each year, manufacturers have created new segments to capture the attention of their clients. That’s where the SUV wave came in handy that started in the U.S. in the late 1990s. Catching up at a rapid pace, they quickly became a popular alternative to the traditional hatchbacks, station wagons and vans that had dominated Europe’s roads for decades. SUVs not only allowed manufacturers to expand their model lineup, but also to charge more for vehicles that are technically largely identical to their hatchback counterparts.

People voluntarily pay more for SUVs

And no end is in sight for the success: Customers are still apparently willing to pay more for an SUV than for a car with a classic shape. For manufacturers, who have struggled to meet their targets over the past decade, SUVs are a welcome cash cow. However, the boom also has its downside: mainly the higher CO2 emissions. In addition, the popularity of the pseudo-off-road vehicles is coming at the expense of the traditional segments. The abundant supply of SUVs has a direct influence on customer behavior, as these vehicles are usually considered safer and generally more attractive.

The only astonishing thing is that although SUVs have caused manufacturers’ profits to bubble up, this has had almost no effect at all on overall registrations. In fact, they continue to stagnate. On the contrary, total sales of the seven European car brands offering SUVs plummeted between 2001 and 2021 in both the B and C segments.

In 2001*, the Peugeot 206 was the best-selling model in the B segment in Europe, with nearly 443,000 units. It was the only Peugeot model in the small car segment. Then in 2016*, the Peugeot 2008 was launched as the SUV counterpart to the 208 – and immediately became the second best-selling SUV in the B-segment in Europe. But so far this year, Peugeot has sold only 287,000 units of both models combined, two-thirds of the 206’s 2001 sales. However, this is not an isolated case: other manufacturers, such as Opel/Vauxhall, Renault and Ford, are also struggling with the same problems.

More sales of one model 20 years ago than of six models today

The same trend can be observed in the C segment. In 2001*, the VW Golf topped the segment and the entire market with 466,000 units. Five years later, the bestseller was also available as the Golf Plus large sedan. And registrations rose to 474,000 units. Between 2011 and 2016, the total volume increased even further thanks to the newly launched Tiguan. But this year*, Volkswagen’s Golf, Golf Sportsvan, Tiguan and Tiguan Allspace derivatives have sold just 314,300 units combined. 390,600 if you add ID.3 and ID.4. This means that a single model had more customers in 2001 than six models in 2021, and there is not much to suggest that this will change in the short term. But maybe the manufacturers just need to remember the 1990s, when the car world was still so wonderfully manageable.

* January-August period

More information on JATO can be found here.

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