Niche marketing -- autos

[Paul Rollins <psroll@domain.elided>]

<<<<<Scott wrote: "What is wrong with being a successful niche
manufacturer?"

Bob responds.... Nothing, if that's what you aspire to be.  I see no
evidence
that Fiat wants to, or intends to be a niche automobile manufacturer.

To that end, I personally feel a lot worse about not being able to buy a

Lotus Elise, or a Pugeot 205GTI in the US than I do a new Alfa.  (I know
the
Lotus, at least, is able to be bought here, but I'm not ready to plunk
down
$50k).  >>>>>
We will probably see fewer and fewer "niche"cars. The major problem of
"niche marketing" automobiles (and a lot of other things) is economics.
Small production runs are expensive, because design, development,
federalizing, tooling and other costs must be amortized by a small
number of units. Many of these costs are the same whether they produce
25,000 or 250,000 units per year. At the low production number, the cost
per car can be ten times as much as for the high number. Marketing costs
are similarly high per unit. The threshold levels for advertising
(minimum reach and frequency) may be just as high for an audience to
communicate about a car that will sell 25,000 units as for one that
sells 250,000.  The incremental benefits -- each added hp, lb-ft of
torque, .01 g of cornering force, etc. carry disproportionately high
costs . Consequently, niche cars are relatively expensive, as noted in
the above posting referring to the Lotus Elise. However, the vicious
tradeoff of pricing to market to achieve sales and making no profit,
versus pricing for profit and selling no cars, is becoming tougher to
rationalize for major car companies.

Current auto companies prosper on economies of scale. They use every
component in as many brands as possible. The extreme example was when
General Mumblers, in the 80's, tried to rationalize all their sedans
into one body/engine/transmission series -- the Chevoldsponbucad
(Remember the Lincoln TV spots that exposed Cadillac as a Chevy?).
Although producers try to achieve more differentiation in visual cues,
underneath there is a lot of commonality. Niche cars just don't fit this
formula, and this is the formula of the survivors -- Ford, GM, DC,
Toyota, Honda. The bigger they get, the more efficient an lower-cost
they become. This makes it even harder for other, higher-cost producers,
like FIAT to compete, and less likely the h-c producers will offer
lower-profit, niche cars.

A current example is reverse-evolution of the Jag-U-Aren't into a
Lincoln wearing a sports jacket. From a niche car to p&l entry.

Paul Rollins
USA

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