Late and Never – Jaguar and Alfa Romeo Face the Hard Road

With recent reports suggesting the sector is stagnating, have Alfa Romeo and Jaguar left it too late to prosper in a compact premium market now utterly dominated by the German big three?

The new kids and the big boys they have to beat. Image via fiatgroupworld
The new kids and the big boys they have to beat. Image: fiatgroupworld

The German premium trio’s stranglehold on the European compact saloon segment is virtually complete, with car sales data for Jan-Sept revealing just how dominant Audi, BMW and Mercedes-Benz have become. This is an exclusive club comprising eight models – seven if you combine Volvo’s saloon and estate offerings. The combined sector posted January-September sales of 397,134, of which a sobering 341,339 consisted of either Audi, BMW or Mercedes. That’s 86% of the market, since you asked.

I’ve prepared a table showing 2015 volumes against the same period last year. The breakdown by model looks something like this:*

Untitled-1
* Data source: Left-lane.com.

On the face of it, the C-Class’ upswing vindicates Daimler’s styling direction – the new model’s expressive appearance clearly resonating with customers. Nevertheless, it’s worth reminding ourselves the 3-Series was facelifted earlier this year, so customers may have held back to await the refreshed model. Similarly Audi was running out the previous generation A4 before the new model became available.

Creases ahoy! The current sector champion. Image via zombdrive
Creases ahoy! The current sector champion. Image: zombdrive

But more to the point, Mercedes retailers have been offering aggressive lease deals to business and private customers throughout the year. Some might call this buying market share; something one would imagine beneath the mighty Stuttgart-Untertürkheim leviathan, but if you’re going to look that cheap, you may as well act the part.

Estate car champ. Image via automotorundsport
Estate car champ. Image: automotorundsport

Beyond the top three, the numbers fall off a cliff – the remaining contenders slugging it out over an increasingly arid patch of ground. What’s interesting here is the vast gulf volume-wise between Volvo’s S60 saloon and V60 estate; the latter proving over four times as popular with customers than the saloon. Nice to see Volvo holding true to their heritage, even if the V60 bears scant resemblance to most people’s notion of a traditional Volvo estate. These volumes really do call into question the viability of a Volvo saloon in this category – in the EU at least.

Lexus’ 24% loss appears to be Infiniti’s gain, both marques cancelling each other out, pegged at volumes unlikely to trouble the German trio – or the European duo above them for that matter. However, should sales momentum throughout Europe begin to shift towards hybrids – especially in the wake of the VW scandal, they both could be well placed to capitalise.

Lexfiniti Q50. Image via LA Times
Lexfiniti Q50. Image via LA Times

It’s really too soon to comment much on brand-Jaguar’s performance – the XE only posting sales from March of this year. Availability appears to be more of a factor than demand at present, the acid test for JLR being where XE finishes in 2016. Nevertheless, analysts appear satisfied with early sales for Jaguar’s new contender.

But for JLR and (should the Giulia see the light of day) FCA, the challenge lies not so much in carving a niche for themselves in the lower reaches of the segment, but in making any significant inroads into the top four. Given the fact that Volvo; despite fielding a dated model, sells almost four times as many cars in Europe than Jaguar, says volumes about the task the leaping cat faces.

Contender or one way ticket to Palookaville? Image via motoringresearch
Contender or one way ticket to Palookaville? Image: motoringresearch

If anything, the mountain Alfa Romeo faces looks more precipitous still. With Giulia now delayed until (most likely) mid-2016 at the earliest, volumes for the coming year will be of little consequence – especially if the standard models are held back further.

JLR at least are up and running – the XE already on sale on the back of decent reviews and a respected sales/service infrastructure. But Jaguar’s sales gains can only come at the expense of their bottom-end rivals unless they can convince significant numbers of customers from the German trio to defect.

JLR’s European head, Bob Grace told Automotive News in September; “I think there’s still opportunity for modest growth, but I don’t think there will be substantial growth. We just want to carve out a niche for ourselves.” How big a niche? Certainly, much less than 25,000 cars a year would have to be viewed as failure. But with analysts predicting best case sales of 22,000 per annum for the Giulia, is there room for both Jaguar and Alfa Romeo in what analysts now believe is a stagnant pool?

A digital render of the standard Giulia model. Image via carscoops
A digital render of the standard Giulia model. Image: carscoops

With the sector as a whole posting a modest 7% increase in the year to September, it remains to be seen whether it will show any significant growth for the year as a whole. The advent of two significant new models to the segment of course, could precipitate a spurt of growth, allowing both new cars space to make their mark, but with industry soothsayers predicting ultimate contraction in the coming years as upmarket SUV’s and crossover models become ever more popular across Europe, the chances of success for the sector’s new entrants looks problematic at best.

For FCA however, they look worse than that – facing the prospect of a fight to the death with a better prepared JLR for the scraps the German trio let fall. Better late than never, the old saying goes, but delaying that Giulia is increasingly looking like costing them dear.

Author: Eóin Doyle

Founding Editor. Content Provider.

17 thoughts on “Late and Never – Jaguar and Alfa Romeo Face the Hard Road”

  1. The problem for the Alfa Giulia is that the german trio is offering more emotional cars too. The Audi A5 or the Mercedes CLA are built to attract people appreciating a non-typical business car with a more sporty or more fashionable style.
    Look at the DS5 – it is hard to combine a premium price-tag with a car not coming from South-Germany (=excluding Ford, Opel and VW) or Sweden.

    BTW: Are the Passat CC or the Mondeo Vignale members of the premium class too? I am sure, VW and Ford want those cars to be regarded as premium.

    1. Alfa must hope to attract customers who may have shopped for another format. The same goes for Jaguar. Some people may have fled the sport-saloon market, bored by what’s on offer. So, how different are the Giulia and XE from the usual three? Enough to win sales from other sectors but not too much to scare off Mr and Mrs Fourth A4? The test is year 2 and 3, after the people who really want a non-German car have satiated their desire.
      The Vignale: is this premium? These days the answer is clouded in relativistic reasoning. The reviews imply it isn’t. I’ve never seen one in reality so I can’t tell. I can say the premium/non-premium label looks worn out. That label meant something when you compared a 1990 320i with a Sierra. Now in comparison a 3 and a Mondeo look much the same quality-wise. Nobody suffers in a Ford or Opel or Mazda from the C-D class.

  2. I’m just going to browse the Jaguar XE configurator and pretend that Eóin’s thought-provoking analysis is actually about how many conquest sales Jaguar and Alfa Romeo will gain from post emissions scandal Audi, disillusioned Munich Mondeo men and people who want to trade-in their Stuttgart taxi-

    -wait, why can’t I get the two-tone sports seats in a Portfolio?

    1. I ended up building an R-Sport and un-deleting the chrome window surround, but you can’t delete the bodykit. It made me wonder if the top selling Giulia in Europe would be some sort of QV-alike with all the shouty visuals and a repmobile engine spec. There is a Giulia configurator on the Alfa Romeo website but there isn’t much to configure beyond exterior colour and wheels.

  3. I suspect the F-Pace will be more of a sales winner for Jaguar than the XE. CUV buyers are neither brand loyal nor brand agnostic; a good contender from someone with a half decent badge can mop up sales.

  4. The number of people who go misty-eyed at the name ‘Giulia’ is declining yearly, but even more critical, the number of people who go mist-eyed over the much admired 156 is declining too. When various of us here first started discussing the Alfa 159 replacement, AKA Giulia, it was on another website, maybe 4 or 5 years ago. If a new car buyer has a purchasing window of, say, 40 years of their life, probably less, that suggests that over 10% of that potential market has disappeared since then, to be replaced by a younger 10%, who have never even considered a mid-sized Alfa, and to whom the name might mean nothing. One school of thought says it was worth waiting for a rear drive version. Another says that front drive never did Audi any harm. But now there is a third school which can claim that the car has been so slow to appear that there would have been time for a whole front-drive model cycle to keep the flame going.

    1. Multiply the annual sales of a good FWD Alfa mid-ranger by five and you see the scale of the missed opportunity. A thorough re-work of the 159 could have worked as a stop-gap. It only needed fettling: revised interior, suspension mods and a few more engines.

    2. I agree. Even though its design was screaming for a RWD chassis (if the exterior had one problem, it was the front overhang), the 159 was hardly an eyesore. Personally, I’d find a RWD 159 considerably more attractive than the new Giulia. And – feeling urged to repeat myself here – a RWD Brera infinitely more appealing than the 8C, which may or may not be one of the most aesthetically overrated cars, like, ever.

  5. The numbers here showing the total dominance of the German brands is astonishing. I think the point about the V60 vs. S60 sales numbers has been true of “outsiders” in this class for quite some time, hence why Subaru stopped selling the Legacy saloon in the UK long before the Estate version also eventually disappeared. . I have not seen any scoop pictures or heard any timeline for an XE Estate, which could well be a better seller than the saloon, and I think it perfectly accurate that the F-Pace will outsell the XE.

    1. As much as I despise the very fact that my beloved maker of elegant saloon and sports cars has no other option but to join the SUV bandwagon, Callum et al have actually done a better job with F-pace than the XE, in my humble opinion. This SUV exudes just the right amount of flamboyance, whereas the XE, attractive proportions, taut sufaces and all, does appear a wee bit too humble for its own good.

      If F-pace doesn’t sell like hotcakes, Tata might just as well close down Jaguar altogether.

    2. I have had much the same thought about Tata losing patience with Jaguar – although I am sure it might take its time in announcing the fact in order to run-off the depreciation on the massive capital investment made in the XE, new XF, F-Pace, etc. The figures in the table amply demonstrate the almost impossible-looking challenge facing the XE (and XF – I am sure the class above has similar dynamics). I wonder what the business case at JLR has as break-even in terms of volumes for the new range built on the aluminium platform introduced (albeit that has at least been shared with LR/ RR). When one considers that Lexus and Infiniti are already chancing their arm in this space, with massive capital resources behind them, is it really believable that FCA will succeed with Alfa and Maserati when there appears to be so little that in real terms is up for grabs?

  6. I know that many of you live in Europe so Eóin’s sales analysis reflects your world but that does leave ‘other than Europe’ to buy these sorts of cars before Tata needs to close Jaguar. I agree that the Efpace will be a bigger deal if cars on stilts remain where the money is these days. But if JLR can convince enough aspirational premium lifestyle types in China, India, America etc to buy an XE then I think they will be ok.

    1. It does appear Jaguar is being prudent in starting XE production slowly – this is an all-new car and rushing into full-scale production could be disastrous. My JLR sources tell me production is now being ramped up with extra shifts starting. This doesn’t necessarily mean all is rosy, but does suggest matters are being handled in a measured way. As I said in the piece, the test for JLR is how XE is doing this time next year – especially in the US and China. And of course whether its sales performance is sustainable.

      The fallout of the VW emissions debacle could actually work in JLR and possibly FCA’s favour. Assuming they remain immune from censure, both could be in a position to benefit from any backlash against Audi – especially in America, now that Ingolstadt is being dragged into the scandal. We should keep a close eye on A4 sales figures during 2016, given its less than rapturous debut.

    2. Here’s a UK market question for you. How much of the German trio’s sales success is down to finance and company car deals? Are things like lease deals, fixed price servicing or the business sales account rep with a generous expense account for entertaining clients more important than the car?

    3. My company car buying activities are restricted to more workaday vehicles, so I don’t know how the Big Three’s deals compare but, if you’re a fleet manager and you get an Audi and it breaks down, everyone says ‘that’s odd, Audis are usually so reliable’.

      If you’re a fleet manager and you get a Jaguar and it breaks down, everyone says ‘why didn’t you get an Audi?’.

      It takes a leap of faith which most FMs won’t make, until they start reading glowing long term reports and residual values. And even then, why not play safe and get an Audi?

    4. It all comes down to finance in the UK market. If your residuals are weak then the monthly will be that much higher. This is where the Germans have fought for and won this market, protecting residuals by keeping most of their cars within their overpriced dealer network. The inflation of German residuals is the truth that cannot be spoken in the finance trade, lest the whole house of cards be kicked over. Best to insist that a Mercedes holds its value better than a Mazda, than acknowledge that both become worthless at effectively the same rate.

  7. Thanks for the replies, that makes things clearer. I think JLR understands that side of the business pretty well and now Jaguar has key products (AWD versions for snow-belt US buyers, small diesels for Europe, small petrols, LWB and local assembly for China and a wagon on stilts for everyone) that address dealbreaker issues in key markets. It’s up to the dealers now.

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