Is Dacia going upmarket, a threat to Renault`s products?

Transcription

Is Dacia going upmarket, a threat
to Renault’s products?
Areski Dehloum
Working Paper
MBA Institute
Summary
ABSTRACT ............................................................................................................... 2
I. RENAULT & DACIA: TWO DISTINCT BRANDS....................................................... 3
A.
RENAULT’S RANGE ............................................................................................. 3
1.
2.
B.
Several segments ......................................................................................................... 3
Differentiating.............................................................................................................. 4
DACIA’S RANGE ................................................................................................. 5
1.
2.
The original range ........................................................................................................ 5
The expansion .............................................................................................................. 6
II. DACIA A STRONG IDENTITY ................................................................................ 8
A.
B.
DACIA RISES FROM THE ASHES ............................................................................... 8
DACIA GATHERS PEOPLE AROUND ITS BRAND ........................................................... 11
III. HOW LOW-COST BECAME A VIABLE BUSINESS MODEL ..................................... 13
A.
THE APPEARANCE OF LOW COST IN THE AIRLINE INDUSTRY ........................................... 13
1.
2.
3.
B.
A growing need .......................................................................................................... 13
A sustainable model .................................................................................................. 14
Mentalities evolve ..................................................................................................... 15
LOW-COST, A THREAT TO THE SECOND-HAND CAR MARKET .......................................... 16
1.
2.
Dacia changes sides? ................................................................................................. 16
A proven threat.......................................................................................................... 18
IV. PERCEPTION OF LOW-COST AUTOMOBILES ...................................................... 20
A.
AFFORDABILITY ............................................................................................... 20
1.
2.
B.
Perception du low-cost .............................................................................................. 20
The image of low-cost ............................................................................................... 23
CONSEQUENCES ON THE PURCHASE BEHAVIOUR ....................................................... 24
1.
2.
Consumers feel like low-cost cars do not mean a loss in quality .............................. 24
Dacia’s brand image .................................................................................................. 26
V. CONCLUSION ................................................................................................... 29
BIBLIOGRAPHY ...................................................................................................... 33
NETOGRAPHY ....................................................................................................... 33
ABSTRACT
Is Dacia going upmarket, a
threat to Renault’s products?
At a time of economic crisis, the basic consumer needs change. One returns to a pricedriven consumption. Indeed, consumers are much more careful about what they buy
and especially how much it costs. Many companies in different areas surfed on this
consumer trend and proposed low-cost products. This is the case with Renault's Dacia
brand in the automotive sector, which entered the market in 2005 with the Logan. The
brand has managed to demonstrate that low-price does not mean low-quality and
sales took off. As a result, the range of Dacia vehicles has grown; there are now six cars
to reach a maximum of clients. Dacia happens even today to recover market shares of
leaders of the automotive industry. Should the Renault group he see this as a threat to
its bottom-of-the-range products, or should it consider Dacia as a valuable asset to the
group?
Keywords :
-
Automotive market
-
Dacia
-
Low-cost
-
Brandd image
-
Renault Group
-
Community
-
Basic needs
-
Cannibalization
-
Cost-cutting
-
Threat
-
Asset
I.
Renault & Dacia: two distinct brands
A.
Renault’s range
1. Several segments
Renault has existed for over 110
years, its fame is worldwide and
some
products
have
become
"timeless" or models of the French
automotive industry.
In 2011 the Renault range has
continued
change.
to
The
modernize
range
is
and
very
comprehensive and can reach a large segment of the population: from the people who want
a practical and functional car, to professionals with very specific needs.
The classification of the Renault range is done by segments. Indeed, there are five segments:
- I (Twingo, Clio, Wind, Modus / Grand Modus)
- M1 (range Megane Scenic / Grand Scenic)
- M2 / S and Electric Vehicles (Range Laguna, Espace / Grand Espace, Latitude, Koleos,
Fluence)
- Motor Vehicle (CMV) (Kangoo, Master, Traffic)
- And RST (Renault Sport Technology Series: Clio Megane Twingo)
Areski Dehloum
Working Paper
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The cars are thus classified according to their size / budget / engine. It is easier to make a
classification by segment also to make sales forecasts. For example, a strong demand for the
segment I is predictable because of the economic crisis. Conversely, a rise in demand of the
segment CMV may occur if the social climate of the country is conducive to
entrepreneurship. Favorable economic conditions may also promote a decrease in sales of
minivans segments M1 and S in favor of SUVs and Cross-Over.
2. Differentiating
Every year, even several times a year, Renault launches limited edition vehicles. These
editions can be achieved in partnership with brands, in honor of the great names of the car,
or provide equipment unpublished. This year many limited editions came out of the Renault
factory:
- Miss Sixty Twingo: feminine car design (pink), crafted
exclusively for women. The car also bears the logo "Miss
Sixty" on one of the doors while the interior design
(materials, fabrics, colors) was created by the designers
of the Italian brand.
- Gordini Range: created in tribute to the "Sorcier"
Amédé Gordini: mechanic, driver and trainer of genius
and finally automaker racing with Simca, Renault and
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finally Gordini. This range (Twingo, Clio, Wind) is the color of the man: blue Gordini with
white stripes.
- Range Bose: the international leader in the audio equipment is available for vehicles of the
Renault range (Scenic, Megane, Koleos, Laguna, Espace)
B.
Dacia’s range
1. The original range
Between 1999 and 2004, Renault invested nearly 500 million euros to modernize Dacia and
its plant of Pitesti, and launch new models: Supernova in 2000, transformed into Solenza in
2003, itself replaced by Logan in 2004. The site is then devoted to the production of cars
developed by Renault.
In 2009, Dacia sold 311,332 vehicles, including 269,470 for export - to over 50 countries
worldwide. Its market share in Romania was 29%.
The Dacia range is expanding (See figure underneath)
- Logan: since its launch in 2004, Logan
became the iconic model of the brand, with
its family car identity, cheap and of quality.
The enthusiasms generated by the launch of
the car lead Renault Logan to expand its
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market beyond the emerging markets, for which it was originally scheduled. In 2008, it was
deeply revisited, while its range is expanding, the Logan MCV (VP), the van Logan Van and
Logan Pick-up (CMV).
- Sandero: in 2007, Dacia took another step in its growth with the launch of this compact
sedan, combining attractive design and low price. There are also Stepway versions of the
vehicle, with and adventurer design. Sandero is produced and marketed primarily to
Mercosur under the Renault brand, and came into production in Pitesti in 2008 for the
European and North-African markets.
- Duster: in 2009, the plant houses the all-terrain-oriented world. With this vehicle, Dacia
creates a Crossover accessible and equipped with true off-road capability. It is marketed in
2010 in 4x2 and 4x4 versions.
2. The expansion
Dacia eco ², the signature based on the protection of the environment, was launched in
2008.
The Dacia range is marketed in France since 2005. Initially the brand was aimed at emerging
markets for people who cannot afford a car. This brand offers low-cost cars at reduced
prices, aiming to return to the basics of the car, that is to say a vehicle that does not include
the design and multiple options. After successful trials in emerging countries, Renault (which
owns the brand since 1999) decided to launch the Logan in French territory.
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After more than six years of commercialization of the Dacia brand in France, the teams are
trying to expand the product range to offer a real range of low-cost vehicles to the French
population and the world. Dacia became the main asset of Renault by selling vehicles to a
category of people who had been set aside so far. With Dacia, Renault opens itself to low
cost while a new segment is created to classify Dacia products:
- ENTRY (full range Dacia: Logan, Logan MCV, Logan Pick-up Van Logan, Sandero
Sandero Stepway, and Duster)
With all these products, Dacia has a complete range of vehicles, which may correspond to
many needs, from Logan: very basic car with few options and electronics, to Duster the last
born of the range that changes completely the whole brand image with this low-cost crossover concept. The brand is more dynamic and younger.
The main advantage of the Dacia range is obviously the price (78% purchase intent of
customers) which is the main strength of the brand. At Dacia everything is based on a price
well below the competition. The cars do not lose their reliability and security, because for
some time, the brand has been in the top rankings in terms of quality vehicles, sometimes
even exceeding the German brands. In the annual survey of the French magazine Que
Choisir, published in January 2010, the Dacia brand accessed for the first time the third rank
of the most reliable cars among 34 brands on the European automotive market. The survey,
identifying the views of 26,277 European drivers, particularly highlights the remarkable
reliability of Dacia Logan MCV. (Appendix 9)
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Dacia also gets the title of the cheapest brand for its maintenance and repair costs. More
and more rave reviews have appeared in highly specialized car magazines:
"When it was released in spring 2005, our testers had found the Logan spacious,
convenient, safe and fun to drive. Today, our reliability-quality results underscore its
strength, seriousness of manufacture, mechanical and electronic reliability and
limited maintenance costs. " - Automobile Magazine.
Dacia focuses on the basic strengths of the car: the low cost and safety. And this approach is
now paying for the brand sales are soaring.
II.
Dacia a strong identity
A.
Dacia rises from the ashes
In 2011, the Dacia brand no longer has to prove itself. Indeed, after more than 10 years in
the Renault group, the brand has managed to create its own identity while enjoying the
reputation of Renault. Dacia is a separate entity in the Renault group and working Dacia
does not mean working for Renault and vice versa.
Dacia has managed to create its own identity and for a brand, nothing is more important.
The brand has managed to get out of the low-cost compartment and found its way out of
the influence of Renault.
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While it enjoys the expertise of the “marque au losange” (how Renault is called in France),
its plants, some of the same car parts and the reputation of the brand for its launch, Dacia
now has its own factories, its own sales force, its own range and its own communication
quite different from that of Renault. Indeed, the communication budget is less than
Renault’s, the brand wants to give a different image than of a multinational company, it is
more sober in its advertising campaigns and its only goal is to defend its attractive prices. For
Dacia communication is by word of mouth. A satisfied customer will speak more easily of the
brand. Moreover, the following table shows that clients get in a Dacia showroom mainly
after consulting the website. Dacia knows how to play with its fame and with young Medias:
television remains important but today, updating a website and communicating with the
web surfers themselves did most of the work.
Source of information
Print advertising
TV advertising
Automobile magazines
Dealership visit
Blogs/Internet forums
Already knew the product
Word of mouth
Seen the vehicle in the street
TV report
Newspaper report
Automaker’s website
Internet report
Market
12.0
17.1
33.4
58.0
5.1
17.6
14.6
20.4
7.9
19.2
42.8
11.2
Renault
9.8
15.2
33.5
57.4
4.3
24.1
12.4
17.4
6.6
17.9
41.9
9.6
Dacia
16.2
28.9
32.5
50.9
9.4
3.2
26.7
26.5
18.9
24.7
52.9
16.7
(Source: Internal note of Renault, 2010)
In addition, in showrooms one can now see a real Dacia universe. A dedicated space for the
brand is now implemented in each sales-facility. The color code (blue and white) is observed
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and the universe is much more refined, natural than the Renault universe. Dacia has now its
own retail space, vendors are dedicated to this space, and they do not have the same
training, the same objectives as Renault vendor, simply because cannot be sold the same
way a Renault is sold. These are two distinct and different products that address to two
different targets.
Dacia has created its own universe, its own followers; in fact it is hard to say that Renault
buyers like Dacia. It is not made the same customers. But today one can say that people
come in retail shops only for Dacia and not by mistake while walking around the Renault
dealership. Dacia also creates its own events: indeed every 2 months Renault does what is
called the Open Days: days dedicated to the automobile where people come to learn in
dealerships. These operations often brightened with small animations are an opportunity for
the brand to create a link between sellers and customers and to communicate about new
products and current discounts. Recently one has seen the Dacia Open Days, special days for
the brand and the range to meet fans and people seeking information about this brand that
still intrigues. In addition to these dedicated days, Dacia picnics have appeared. The
opportunity to bring together owners of Dacia in France, all gathered for one day around a
common passion. During this event, participants talk about their cars, strengths and
weaknesses of vehicles. This day is a symbol that there is now a Dacia community in France:
people that love this brand and that want to convey their passion.
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But even if Dacia has a growing desire to stand out from Renault, the links are yet very
tenuous. Indeed the brand would probably not have developed as much and as well without
the auto giant. Renault teams are still working on new joint projects with Dacia. Renault
factories are sometimes used for low-cost products, but especially Renault knows how to
profit from mistakes of the past not to reproduce them with this new brand. Dacia therefore
benefits of seniority, experience and expertise of Renault while having its own identity. In
addition the brand has found an independent position on the French and European markets.
But if we take the example of Argentina, the Logan is sold very well too, but under the
Renault brand. Indeed it was difficult to insert a new automotive brand on the South
American market, yet the potential buyers for the Logan were there, it seemed logical to
market the Dacia Logan under the Renault brand.
These two brands are closely intertwined and especially complementary. Dacia and Renault
would not exist and without the current crisis it seems difficult for Renault to give up the
Romanian brand, as it currently generates excellent sales and seems to be a real alternative
to the crisis for the brand.
B.
Dacia gathers people around its brand
With Dacia pioneering, many major European carmakers evaluate the potential of producing
a “low-cost” car, while measuring the impact of such an operation on their brand image. The
crisis has set up a new way to produce and buy, to the delight of the smallest budgets which,
so far, found no offers on the automotive market to match their expectations.
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Evolution of sales volume of the Dacia Logan in
Europe since 2004
2004
2 080
2005
2006
20 511
28 620
2007
2008
80 042
84 290
Source: L'Observatoire Cetelem/BIPE dafter automakers data
Originally created for emerging countries requiring new cars affordable for the rising middle
class, low-cost vehicles have met an unexpected enthusiasm in Western markets. Sleek
design, quality finishes basic but accurate, robust and equipment reduced to its pure
essence, the recipe for low-cost is not for everyone. While no one would bet on the success
of Dacia during the introduction of its Logan on the French market in 2004, the crisis has
been through it and changed attitudes unexpectedly. Driven by the network of production
and distribution of Renault (Dacia models were introduced at Renault dealerships), sales
continued to grow phenomenally. For example, Dacia recorded for the year 2009 an increase
of 39.5% in a jaded automotive market whose growth does not exceed 11% (helped by the
scrapping [prime à la casse: a policy instituted by the French government to help the
automotive industry]).
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In 2010, taking advantage of favorable market conditions, Dacia has even demonstrated the
ability to take market shares from manufacturers such as Volkswagen and Fiat. Dacia's
commercial strategy to reduce development costs by simplifying the vehicles and options
available has paid off: the new models for Dacia Sandero (± € 8000) and Duster (12 ± € 000)
are by half less expensive than similar models of its competitors in terms of capacity and
power. In addition to the purchase price defying any competition, the vehicles in the Dacia
range also benefit from a minimum maintenance cost, a network of repairers incomparable
(Dacia vehicles can be repaired in any garage approved by Renault), a reduced fuel
consumption and a proven reliability.
III.
How low-cost became a viable business model
A.
The appearance of low cost in the airline industry
1. A growing need
While many products and services were created to meet the growing needs of consumers of
all social and economic category, the market of low cost appeared relatively late, while a
growing need was felt on the part of a neglected segment of society so far.
In the 70s, a pattern emerged in the air-travel sector: flying at low cost at the expense of
services now considered redundant because of changing attitudes, but considered necessary
before. While some companies had tried to implement such a model before, they had
received a lukewarm reception from consumers because at that time then a low price was
synonymous with poor quality. In a society where longevity was the watchword of a
purchase, the low cost could not make its appearance yet.
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While society produces, sells, improves the production processes, reduces costs and creates
short-lived trends, we are witnessing the emergence of a change in mentality, giving less
importance to the durable, while a culture of instantaneity appears and the proliferation of
experience at the expense of other things takes a prominent place. The low cost may make
its appearance in an environment ready to welcome it.
2. A sustainable model
While players of different markets did not predict a great future to low cost, which they
believed was the answer to a temporary problem resulting from the various economic crises,
this business model has managed to work its way up to carve out the lion's share in markets
sometimes half-mast. The major players in the airline market have had to go to the obvious:
the low cost is not a trend but a business model, and moreover, it is a business model very
capable to compete with the way they work and thus their profits were directly threatened.
But this business model was quickly out of his shackles in the airline industry to settle
gradually in all sectors with varying degrees of success.
While thousands of solutions had emerged to cut costs, consumer mentalities and behavior
had changed too.
Today, low-cost model is a democratized model which can be found in the goods industry
but also in the services one. The low cost has lost that image of poor quality to fit into that of
an average quality, if not equal to the so-called traditional products. The example is IKEA,
which has built its business model on this principle. Although the birth of IKEA and its
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development has been prior to that wave of low-cost airlines, Inkvar Kamprad was a pioneer
of this way of consuming and implemented the model in mentalities as a viable alternative
and not only as a last resort option. IKEA, because of its flat packaging that consumers
consult in stores/displays and carry themselves to their homes, is now a preferred
alternative by the people while other brands like Roche Bobois, saw traffic to its stores
decrease dramatically. Consumers now prefer to spend less in an interior made "to live"
since the furniture will age one day anyway, exposed to the elements of life. In addition, an
interior, like a car, goes out of style and cannot be the work of a lifetime as it was before.
Interior lives and therefore must be renewed from time to time, all should not prevent the
owner to live but to allow him to feel good at home while allowing him to have the financial
means to get out to enjoy leisure and holiday trips, without making $150k a month.
3. Mentalities evolve
While this model is sustaining, different industries have adopted it in times of crisis or even
to meet a growing demand from middle-class wanting to offer "a little bit of affordable
luxury." The best example of our society and that has become a standard for low-cost is the
Swedish giant Hennes and Mauritz, better known as H&M. Whereas before the seasonal
mode was reserved to luxury, given the high price that represents the act of changing
clothes every three months, H&M has succeeded in imposing as a standard, clothes of
average quality, which can be machine washed, but do not persist over time due to their low
resistance, due to their lower cost of production and therefore lower sales price. Others
have obviously taken the course by adapting their ways to vacancies remaining on the
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market. Zara has therefore placed itself on a segment slightly higher-end (although still
affordable ready-to-wear) while in the UK, Primark is the reference low-cost store, but the
products will not last long either because of their extremely low prices and therefore the
quality that results from it.
Some services offer low-cost and break all the codes pre-set by the companies: we have for
example seen a hair salon offering €10 haircuts in 10min. This type of services required, as it
was for Ryanair in its infancy, some adjustments to make the best payback. For example, in
this case the shampoo is the responsibility of the client, since he is asked to come for haircut
with clean hair. Does this model have limits? Is Dacia a precursor surfing on a temporary
wave, a new alternative model or a reference which will ultimately dethrone the existing
models?
B.
Low-cost, a threat to the second-hand car market
1. Dacia changes sides?
After analyzing the fact that Dacia has become a real asset for the Renault group, we can
deduce this that allows it to position itself as market leader on the European low-cost
market or even be in a monopolistic situation. Dacia is not just a segment of Renault; it is
strength of the group. Two opposing theories may, however, say that Dacia as seen above
does not take market share from Renault, as the two brands do not play in the same court.
But this theory only takes into account the market of NV (New Vehicles). Indeed, it is unlikely
that any future buyer of a Renault car finally picks a Logan or a Duster. Indeed, Renault
customers are not looking for the same vehicle than a Dacia potential buyer. When one
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comes to a “Dacia Box” (this is how Dacia areas are called in Renault dealerships), on is
looking for an advantageous price; whereas when one goes to a Renault dealership, one is
looking for prestige, options and comfort. If one thinks only of the main asset of the Dacia
brand, which is its price, cars that can compete with the brand are not the NV but the VO
(second-hand vehicles). Indeed, these cars have certainly suffered from a few thousand
kilometers they have traveled, but what draws the customer is the price.
The second-hand-cars market is not confined to cars aged over 10 years and obsolete parts.
But it is a market where vehicles can still be used for a long time at a price defying any
competition. The second-hand market and especially the vehicles present in the Renault
dealerships, for most of them, are cars that left the factory a few years ago. The sellers are
looking for used Renault cars, with different options, and engines in order to offer customers
a wide choice. The second hand market is not strictly the same as new but with a wider
choice than most other brands, Renault is trying to compete. Customers once again are not
the same as the new-cars market. These clients wish to have the opportunity to buy at a
lower cost or those that regularly change cars and have no specific requirements for the
vehicle. In this market, the demand is like for Dacia, a simple request. Customers are less
demanding because they know they have less room to maneuver. Indeed, they have the
choice of model, but the color, options, interior and exterior and the engine may not match
their expectations. A second-hand-car client will necessarily be less demanding and will
revise his expectations downward. He knows that his vehicle may have some defects due to
the fact it has already been used before.
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So there is always competition between second-hand vehicles that Renault offers and the
Dacia vehicles. Indeed, customers of the two markets are driven by the same demand, the
price. The purchase will depend on the motivation of the client. The client may be wanting
multiple options to his car and select the occasion, and then look for a new car with a
guarantee and will pick Dacia. The temptation for people who always bought used vehicles
to purchase for the first time a new vehicle is very strong. Customers find it very rewarding
to finally be able to finance a new car with a budget that previously only allowed them to get
second-hand cars. It is very interesting to note that psychologically, people will be more
pleased to have purchased a new car, even if it is less beautiful or prestigious, than a seconhand car. There is the feeling to finally have one’s own vehicle, which "resembles" the
owner, the satisfaction of being the first to drive the car and of having chosen some options
or the color and not being the passive victim of the choice of the first person to have owned
the car.
2. A proven threat
The fact that the Dacia products cannibalize the second hand market is proven. There is now
consumer surveys that highlight the fact that 36% of customers were hesitating to buy a
second-hand vehicle before opting for a vehicle of the Dacia range. While only 25% of
customers have hesitating with a second-hand car. The data are from the questionnaire
NCBS France-January 2011. (See table beneath)
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Hesitation with a secondhand car
Yes
No
Renault
Dacia
25.3
73.3
36.0
61.6
Logan
Berlina
44.9
54.2
Sandero
Duster
36.9
62.5
24.5
56.1
(Source: Internal note of Renault, 2010)
It becomes clear that the price argument is the argument that predominates in the act of
purchase for these two types of vehicles. While the Dacia products have cannibalized used
vehicles for a few years, the difference will be made by the intentions of the client and the
speech of the seller. Second-hand vehicles vendors will not hesitate to downgrade a Dacia
car playing on the low-end appearance of low-cost, unlike the seller dedicated Dacia will
make the client understand that a second-hand is not the answer and having one’s own car
is very rewarding, and especially that the Dacia products are very reliable and getting better
each year.
Let’s take the example of Logan, the first car in the Dacia range to be out on the French
market. The Logan is the emblem of Dacia, its trademark, the epitome of low-cost car that
triumphs. It is a car with an unenviable design but convenient, reliable and cheap. Logan
now stands in the face of used cars such as Peugeot 307, the Renault Megane, Citroen C4,
Opel Astra and Ford Focus. Indeed on the market, when a client is hesitating between Dacia
and another brand, these are frequently Citroen and Renault. But only if the two models
(second-hand/Dacia) are equivalent. Certainly, a Citroen or Renault will have a level of
equipment much more generous, more pleasant design, but it will also be an older car with
an engine that will probably have suffered from a few thousand miles already traveled with
the previous owner, and above all that is out of warranty. While a Dacia will guarantee 3
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years or 100,000 kilometers and a reliability (Dacia occupied in recent years the leadership in
terms of reliability in all categories) recognized in the whole automotive world.
With another example, the Logan MCV, the station-wagon of the range up to seven seats,
which is Dacia’s family car. It faces competition on the station-wagon car market such as:
Peugeot 307 SW 7 seater, Renault Megane Estate ... but also MPVs: Renault Scenic, Citroen
Picasso, Ford C-Max, Opel Zafira 7 seater, Volkswagen Touran 7 seater ... But this time the
price argument will have its importance! Indeed, it is now difficult for €10,000, to have a
model aged of five or less, especially with a diesel engine.
The dilemma is entire, an opportunity between a second-hand car with a level of equipment
superior to a low-cost model but that has been driven for thousands of kilometers, and a
new car of which the customer will be the first owner. The choice is therefore the clients’
and will be taken in accordance with his desire to buy his own car.
IV.
Perception of low-cost automobiles
A.
Affordability
1. Perception du low-cost
According to the study by Cetelem, 29% of consumers surveyed say they are ready to move
on and purchase a low-cost car.
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Could you consider buying a low-cost
vehicle?
In % of Total
18%
France
15%
Germany
39%
United-…
24%
Italy
36%
Spain
40%
Portugal
29%
Average
Source: L'Observatoire Cetelem 2010
This attitude can be explained by a misunderstanding on the part of consumers for higher
prices. Indeed, to the question “The car prices increase is mainly due to...”, consumers
respond to the first position with “the price of raw material”, but the second answer is
“there is no reason to have prices still increasing” They are not willing to pay more for a
product for which they do not understand the high cost.
The mains reasons for the automobile price increase (in %)
Increase in price of
raw materials and oil
There is no reasons
for prices to rocket
To depollution efforts
France
Germany
UK
Italy
Spain
Portugal
Average
46
49
46
40
39
51
44
24
29
31
31
33
23
29
29
32
31
20
21
34
28
(Source: L’Observatoire Cetelem)
Buying a car has become a purchase of reason more than a purchase of passion, as only 20%
of respondents are prepared to act illogically while buying a car. In addition, 79% of
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respondents see the automobile as a constraint and not as a pleasure. The success of Dacia
is the best example to confirm the success of low-cost.
Perception of the increase in the price
of autos in Europe
64%
Average
73%
Portugal
Spain
57%
65%
Italy
UK
Germa…
France
56%
63%
68%
Answer to the question : "These last years, the retail price of automobiles has
increased faster than the one of goods and services"
Percentage of reponses "Totally agree" and "Agree"
Logan and Sandero were big successes, proving that consumers are ready for this kind of
offers. Moreover, even if Dacia is virtually alone on the low-cost market now, one out of two
consumers do not think the low-cost car will be reserved to one specific brand. Minds are
still open and the brand will not be an obstacle nor a determining factor in the development
of low-cost cars.
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products? Institute
2. The image of low-cost
“A vehicle built and sold at low-cost must be less efficient in terms of…”
France
Germany
UK
Italy
Spain
Portugal
Average
Image
41
37
50
40
35
35
40
Elegance
45
32
40
41
36
34
38
Interior comfort
47
39
34
37
26
34
36
Modernity
32
15
25
28
24
26
34
Life-length
18
26
20
24
26
30
24
Reliability
14
21
18
22
19
22
19
Consumers do not consider low-cost as a byproduct. Thus, of the six countries interrogated,
56% of the respondents did not think low-cost is an offer for the poorest households and
65% think that low-cost and environmental protection and are not inconsistent. For
consumers, the low-cost rather represents a decline in image, quality, elegance and design.
By cons, respondents do not expect the low-cost cars to provide inferior performance in
terms of consumption, environmental friendliness, durability and guarantees (only 20%
believe that the vehicle low-cost will be less efficient on these points). The low cost is a bid
that is meant to meet basic needs without superfluous elements. The consumer is willing to
give up superior equipment (56%), image (56%), services (42%) and design (36%) when
buying a low-cost car. The purchase can be described as smart, responsible for, but not
resigned.
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products? Institute
B.
Consequences on the purchase behaviour
1. Consumers feel like low-cost cars do not mean a loss in quality
Would you be willing to buy a Chinese or
Indian car?
41%
France
49%
Germany
58%
UK
Italy
67%
Spain
67%
61%
Portugal
57%
Average
In % of responses "Probably" & "Sure"
Source: L’Observatoire Cetelem
In terms of foreign vehicles, consumers do not seem reluctant to buy vehicles from
developing countries. For example, 57% of respondents say they are willing to buy Chinese
or Indian cars, even though countries where the automotive industry is still very important
(France and Germany) are more reluctant than others. Finally, regarding prices, the average
minimum psychological price of the 6 countries surveyed is €8,330, which means that
consumers are on average willing to buy with confidence a new car for €8,330. Portugal and
the UK are less reluctant to buy at low prices.
By cons, buying intentions are different: whereas 47% of Europeans are willing to buy a car
which is less than 8000 euros, only 30% intend to do so. This lower portion is probably due
to the poverty of the offer to less than € 8,000.
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How much would you be willing to pay to buy in all confidence, a new car? (in % and in €):
Between €8,000 and
10,000 (%)
8,000 (%)
5,000 (%)
Less than €4,000
Average limit price in
€
France
Germany
UK
Italy
Spain
Portugal
Average
40
60
38
58
69
51
53
34
27
30
28
20
22
28
10
6
15
9
5
13
9
7
7
17
5
6
14
10
8,300
8,602
7,494
8,621
8,992
7,965
8330
Consumers think more and weigh their choices, and this, in order to save money. Thus, the
useful lives of vehicles tend to be elongated, and car travel is reduced. The low-cost seems
to be a good response to these current behaviors, offering consumers the bulk at reduced
prices.
“In order to benefit from a discount, on which criteria would you be ready to lower your
expectations in terms of service?” (in % of responses)
France
Germany
UK
Italy
Spain
Portugal
Average
Navigation equipment (GPS,
sono, handfree set…)
55
52
57
51
53
69
56
Image, reputation
57
55
51
58
52
60
56
Services while buying
(welcoming, disponibility,
waiting time…)
46
33
52
44
37
40
42
Design, shape of the car
39
39
25
36
39
36
36
The choice of low cost is not a sign of resignation though, since the requirements in terms of
reliability and security are still present on vehicles at low prices. Consumers do not yet have
a priori about the low-cost and remain open to vehicles from different countries and
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products? Institute
different brands. It is therefore necessary for competitors to give a suitable offer,
particularly in terms of psychological price, while waiting for hybrid and electric cars that will
be the next growth possibilities.
2. Dacia’s brand image
Unlike Renault, Dacia cannot rely on seniority to sell. The brand is known in France since
2005 and over the past, Romanian cars and even Easter-European cars in general (ie: the
Russian Lada) have not given the best image. For some people, Dacia remains "the car for
poor people" and especially of poor quality. The challenge for Renault when allying with
Dacia was to make the Romanian brand enjoy their reputation or dynamism. The gamble
paid off; today Dacia has its own brand image and its own customer base.
In March 2008, Dacia asserted its brand identity and signed it: "Dacia. Think Big." This new
motto was revealed in Geneva in March 2008. Dacia has become a modern and competitive
belligerent on the international automotive competition, like the great success of Logan and
more recently those of Sandero and Duster show it.
The Dacia brand values are simplicity, modernity and robustness combined with a
price/performance ratio never seen before. Dacia is a generous brand: accessible, caring and
whose products are fit to live. It is also an ingenious brand with inventive spirit, which takes
the lead and is intuitive to listening people.
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products? Institute
Buying a Dacia is a bargain but should not be a rationalized choice by default. Tomorrow’s c
customers must believe that a huge
amount of money should not have
to be spent to buy a new car and
that Dacia cars are robust, reliable
and fit to live at an unbeatable price,
they are comfortable and nice and
there's no shame in owning Dacia!
Dacia must instead represent the
future of the automobile.
(Pyramid of needs established by Renault – Source: Atlas Renault 2009)
Dacia is a vector of development of the Renault group in Central and Eastern Europe.
If today Dacia has become a brand in its own right, it is of course thanks to its original
products, its dedicated vendors and the Dacia Box (parts of the showroom dedicated
exclusively to Dacia cars). But it is also thanks to its customer base which, after recognizing
itself in a car they bought, also recognized themselves as a true community. It is the Dacia
Style.
As an illustration of the customer community: the Dacia picnic. Launched just two years ago,
knows this event met an exponential success. Organized on a site with 4,000 people the first
year, two sites last year bringing together 7,500 people, this year the picnic was held on
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products? Institute
three sites. "Every year we improve our system to be closer to customers. The success of this
event shows that customers love to meet up, because beyond the car, Dacia is a way of
consumption that developed bonds" said Alain Lehmann. Other signs: when two Dacia cross
each other on the road, drivers call lighthouse in sign of recognition, as do the bikers. For the
members of this new community, the picnic is the perfect opportunity to meet up
extraordinarily. The parking areas filled with Dacia cars, customers come with their families
and organize activities, picnic ... all these factors of cohesion, which demonstrate, if
necessary, the pride of belonging to the brand.
The main publicity of the brand is not done like Renault on the traditional media means.
Besides the communication budget of Dacia is very limited. Dacia advertises much less than
Renault. The brand communication is mainly done by its own customers. Ones talk about
“Dacia attitude”, simply because satisfied customers talk easily of their car to their
surroundings. Word of mouth works very well for Dacia (as seen previously) and it is its
strength because it is a proof of the reliability of vehicles. Also in times of crisis within the
Renault group (accusation of spying in March), Dacia kept its own image intact. Indeed, the
fact that Dacia has from the beginning managed to get his own identity in its favor today.
The brand is not hidden in the shadow of Renault’s; on the contrary Dacia draws up the
company in times of crisis. Indeed, between the shortage of cars and the poor image of the
group, Renault’s sales fell largely in favor of those of Dacia. The Romanian brand has not
been affected by the tsunami just because its cars have no electronic parts. Seen as a failure
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products? Institute
for some, this lack of electronic components is now the strength of the brand that allows it
to sell more than some of its competitors.
In six years, Dacia has stood out of Renault, shown its capacity to evolve and modernize.
Today it brings together many followers who are its strength, its advertising and still allows it
to sell more vehicles.
V.
Conclusion
Ten years ago nobody would have bet on Dacia. This Romanian brand crafted for lowincome people, vehicles with a little prepossessing design. Today the brand is marketed as a
benchmark for quality and customer loyalty. The brand impresses with its ability to evolve so
quickly and especially to attract a wider audience. It manages to forget its shameful history,
to gather customers from all horizons ready to return to a simpler vehicle for a lower price.
Renault can now be proud to have introduced this brand on the French market and thus to
have changed its mind. The brand enables the group to significantly increase sales and thus
to be the number one car retailer in France, and to have an even more international
dimension. The group can thus conquer countries previously reluctant to welcome Renault
on their soil. Dacia happens to get what Renault could not get before. The brand with its
own image, which today is much healthier than Renault’s, meets a real "Dacia community"
proudly claiming membership to the group and liking to say they drive a Dacia and get
together.
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products? Institute
The brand is also now more easily placed on the front of the stage especially in sports.
Indeed, the Dacia Duster is now the vehicle in which Alain Prost participated to the Andros
Trophy in 2011 which was held at the Stade de France on March 5th. Alain Prost, second on
the podium at the end of seven innings scheduled this winter, took revenge against JeanPhilippe Dayraut (BMW), triple winner of the Trophy. During this event Dacia was put
forward and once again overshadowed its competitors, including Renault, which was not
even present at the event. In addition, the Dacia brand is once again associated with a
sporting event: the Rallye des Gazelles. For this 21th edition, four crews Women@Renault
committed with the Dacia Duster. And ultimately for the Crossover category, a team of
Duster finished second only 30km apart from the winning crew. Dacia lost some of its lowcost style with the baby of the range: the Duster. It managed to overshadow Renault, yet a
brand largely associated with sporting events.
But a better brand image and market share gained on second-hand vehicles do not mean
that Dacia is cannibalizing Renault. In fact, Renault knows how to use Dacia as an asset and
not as an attack. It tries to mount a Dacia as a new range of Renault. Its strategy today is to
try to reach all segments of the automotive industry. It is even today working on the range
of concept cars with the recent arrival of DeZir and Capture: two vehicles with very futuristic
shapes and designs and that are part of Renault's strategy to foresee and be in constant
innovation.
Dacia is a very distinct part from the Renault range but especially what makes that Dacia
sales do not threaten Renault’s is simply the customer base. Indeed they do not
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communicate to the same targets. It is very rare that a person coming to buy a Renault ends
up buying a Dacia and vice-versa.
The Sandero that could cannibalize Renault’s flagship product: the Clio is not ready to
compete yet. Indeed, Dacia models have very few options and yet a very simplistic design.
Renault customers are ready to pay a higher price for a car simply because of the brand’s
reputation and especially all the different options attract them. Customers love the fact that
they can actually choose the car model and have a "unique" one. While Dacia customer with
a tight budget, will not have the same expectations. Customers will be for most customers
that buy a new vehicle for the first time and will be less demanding.
It is clear that when Dacia goes upmarket, it would reach a new target, the Clio was affected
but it was the price to pay to reach a fringe of customers that Renault could not reach
before. But Renault's core customers do not even consider today buying a Dacia; there are
still psychological barriers for the customers to overcome. The brand has nothing more to
prove to professionals but clients remain somewhat reluctant and sometimes question the
reliability of low-cost.
The effect of cannibalization is very low and is not felt within the group simply because it
was expected. The impact of Dacia on the market is certainly very strong and Renault did not
expect such a success. But if Dacia continues to broaden its range and provide ever more
varied and attractive product for customers, while Renault does not improve its image, it is
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possible that a few years from now, Renault’s loyal customers turn themselves towards
Dacia after years of weariness. In addition, the explosion of low-cost gives ideas to
competitors and it is very likely that within two years, Peugeot and Toyota release their own
low-cost brands or products, it will be necessary that Renault also competes with its
competitors and not just its subsidiary.
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products? Institute
BIBLIOGRAPHY
« Mes années Renault » - Louis Schweitzer
« L’observatoire Cetelem 2010 - Automobile : La low-cost attitude »
« L’Atlas Renault » – March 2011
« Synchro, le magazine du réseau Renault » - May –June 2011 n° 142
« Communiqué de presse – Dacia un succès mondial » - September 30th
« Renault’s Financial Annual Report » - April 2010
NETOGRAPHY
www.renault.fr
www .renaultparis.fr
www.daciaparis.fr
http://www.paruvendu.fr/auto-moto/I/Voitures-low-cost-ou-occasion
The Dacia Case :
http://www.casparcas.com/Cas%20gratuits/CAS_DACIA_2009.pdf
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Is Dacia going upmarket, a threat to Renault`s products?

Transcription

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