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Market Trends: Get cute or face a flop

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Review

Given that 2003 turned out to be a far healthier year for new car registrations than expected, forecasters are being a lot more cautious about 2004. This time last year most people (including ourselves) anticipated a decline of 200,000-300,000 units for 2003. We are now forecasting a small drop to 2.5m for 2004.

British consumers continue to spend – indeed, it is our propensity to take on debt that kept the economy growing by more than 2% last year. Low (or zero) rate interest offers and falling car prices (down 15% in real terms since 1999) has made new cars more affordable. Ironically, given that cars are made so much better these days, the average 'on-road' age is getting younger: 6.9 years today against 7.3 years in 1997. Cars are going the same way as domestic appliances: when an eight-year-old fridge breaks down, most of us simply buy a new one. Similarly, many abandoned cars could be repaired.

So what cars will we be buying in 2004? An interesting way of analysing prospects was mentioned in a recent AM article: Smart is measuring the “emotional Celsius” of competitors to its forthcoming Forfour supermini. The Mini came top with 70 degrees, the Forfour was second with 65. What makes this more than just another piece of marketing claptrap is that it ties in with wider market trends.

As cars become cheaper and more people live in multi-car households, there is scope for emotional purchase decisions. All cars are expected to be reliable and dependable, so there are fewer safety-first decisions.

Mini and Smart hit the bullseye. They are cute, trendy and the quality of the engineering (smart gearbox aside) delivers on carmakers' promises. Both have limited space, but nowadays there is quite likely to be another car in the household for family/load carrying duties. Mind you, the engineering has to deliver: the VW Beetle just looked like a cynical marketing ploy once people realised it was a Golf in an expensive frock.

So when you hear that a new model will “meet the needs of our buyers”, ask exactly what needs are being referred to. If it means those practical requirements customers say they want, then handle with care – new cars need a compelling USP.

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