In the last couple of weeks, we’ve been blinded by the huge profits being enjoyed in the car industry.
JLR (mostly LR, admittedly) is making unheard-of margins of 20 per cent, Daimler made record profits, Ferrari posted all-time high revenues and even General Motors – bankrupt a couple of years ago – made £4.8bn profit, despite dropping a hefty £358m loss in Europe.
But it’s GM’s European woes that should remind us that today’s car industry is split very starkly between those brands and companies on a roll and the rest. There seems to be no middle ground: either you are well-regarded brand, sales are increasing and you are banking cash, or you are middle-market plankton, sales are plunging and you are deep in the red.
The European new car market sales figures for January make the extent of this divergence starkly clear. Audi was up 6.3 per cent month-on-month, along with Mercedes (+7), Skoda (+9), Jeep (+53), Hyundai (+18), Kia (+31), Land Rover (+47).
Out-of favour Peugeot was down 16 per cent, along with Citroën (-13), Renault (-29), Opel/Vauxhall (-21), Fiat (-19), Honda (-24) and Mazda (-36).
OK, there were a few premium surprises (BMW fell 8.7 per cent, but that was probably caused by the switch-over to the new 3-series), but the figures certainly seem to show that the less fashionable half of the industry is in a nose dive from which it is unlikely to recover.
The contrast between the figures for Opel/Vauxhall and Chevrolet show how the established brands are in the firing line. The former’s sales of 56,068 were down 21.3 percent, while GM sister brand Chevrolet was up 27 per cent to 15,719 units.
(With Opel/Vauxhall losses piling up, and the GM management ready to swing the axe, if I was a union or management boss at Ellesmere Port, I’d be lobbying hard to build the new Chevy Cruze range…)
There is only one way out of this terminal decline for the mass-market brands. Serious mergers, which see factory capacity reduced and shared platforms and component sets that will be churned out at a rate north of three or four million per year.