Europe’s Budget Car Brands Keep Gaining
Customers Trading down to Cheap Dacias and Skodas Help Region’s Sales Recover
This article talks about European customers shift from prestige brands to more economy brands. Due to the worldwide economic crisis and European economic conditions consumers in European region lacks the caliber to buy prestige cars or normal sedan cars to replace their old vehicles. Instead they are simply waiting and for those customers Renault SA -owned Dacia and Volkswagen AG -owned Skoda seem to be providing feasible options. Those two brands are offering budget cars at a significant lower cost. Due to this low switching cost created by budget cars, despite the adverse economic conditions sales of cars are picking up.

Lacks of security, assurance and reliability of these cars have vastly improved during the last decade because both Renault and Volkswagen invested heavily on improving budget cars. Despite the lack of facilities European customers are following the trend of buying these budget cars and today they have become significant profit earning products for respective companies. Both the companies have expanded their market share despite the contraction in the industry. Volkswagen’s Skoda has doubled its market share since 2007 and Renault’s Dacia has reached to 2.9 % from 0.5 % for the same period.

Having traditional cars for consumers is becoming expensive with the rise of oil prices and labor costs. On the other hand these budget cars offer greater fuel efficiency and have very less maintenance expenses. The manufacturing plants of those cars are in low cost European countries where labor costs are much lower. So the car companies are also seeking economic ways to reduce costs and pass that benefit to customers in order to retain them for longer period. General motors’ are also trying to release budget car at lower price soon and they have realize the potential of growth in this market segment.

Even though the profit margin per unit is low in budget cars, due to the sheer volumes of sales, budget cars becoming significant portion of profits earned by car companies. However the market creating by these budget cars is not affecting traditional high end established markets. This is enabling and encouraging companies to manipulate more on the cost and to offer budget cars more frequently.

Quality of the economic brands of cars is improving at a rapid rate. Customers’ mind sets are shifting towards economy brands due to the cost advantage. We can see how economy brands contributing to the resurgence of economy while providing satisfaction for consumers. The sheer number increase of repetitive customers is showing that Economy brands are becoming major part of the economy that provides a cover from economic crisis.