The world has changed a lot in 20 years. Among those changes are those we have discussed here lately concerning BMW’s astonishing expansion.
For this study I have compared the total range and prices of three brands of cars between 1995 and 2014, the last year for which I have the data in one magazine in my living room. (The graph says 2016 though). The prices are inflation adjusted to 2015 values. For example, a 3-series started at £15,000 in 1995 and this is worth £27,000 today. I have selected the base price of the main models and not included options. All of the cheapest cars in standard trim could be specced up and I have omitted this and focused on the lowest standard price.
The figures are remarkable.
Once BMW had a range of 4 cars: the 3, 5, 7 and 8 series. Today they have 20 distinct body shells. For comparison, Ford had six bodyshells in 1995. Peugeot had 5. Today Ford have 11 and Peugeot have 10. Ford’s range has grown 100% while BMW´s has grown by 500%.
What is noticeable first is that Ford’s spread of prices has decreased from £33,000 to £26,000. The difference between a standard Fiesta and a 2.9 litre 24 V Executive Scorpio was £33,000 in 1995. Today the difference between the cheapest and most expensive Ford is £26,000. Further, the most expensive Ford in 2014 cost £30,000. In 1995 it was £45,000. People are less willing to pay for a Ford to the tune of £15,000 and Ford cover less of the market. In the case of Peugeot the spread has reduced from £37,000 to £26,000, or a fall in value of £17,000.
Peugeot also cover less of the market with more different models. That is bad. Ideally you’d have one product at every available price point. In comparison, BMW’s spread in 1995 was £92,000. Today it is £82,000. It has fallen but not by much.
Those price spreads are divided by the number of models. Today, Ford divides their price spread among 11 models, or £2,100 per car. For BMW the number is £4,000 per car. For Peugeot it is £2600 per car. What I take this to mean is that Ford has less room in their price spread to divide up the cost of the cars whereas BMW has a wider range of prices per model and that means more room to attract customers. They have more ability to manoeuvre.
Finally, BMW has reduced the cost of entry of their cars by £10,000. Ford has reduced their cost of the cheapest model by £4,000. The cost of the cheapest Peugeot is now £6,000 less than it was in 1995. Put another way, BMW has expanded markedly into the price spectra of their “mass market” competitors. You can see that on the graph where BMW have a product for roughly two thirds of Ford´s range of prices. And vice versa: in 1995 Ford had more cars at prices offered by BMW than they do now, as did Peugeot.
Looking at this one can see the effect of losing the Granada for Ford. You can also understand the losses Peugeot have incurred by never even having a credible contender in the upper price range.For years Ford could sell a lot of cars with a very large profit margin. They must have been happy days in the 70s and 80s when every Ford Granada was leaving the lot with a hefty profit margin. These days the only way to spend more on a Ford is to buy two of them at once.
The Vignale is an attempt by Ford to find a way to get customers to spend money without Ford having to tool up for another body shell. In a sense Ford are trapped in that there can’t be realistically be a car much bigger than a Mondeo that a lot of people will buy but the Mondeo is still perceived as a middle-range car. That’s why Ford ought to do more to visually distinguish the Vignale: shooting brake? Four-door coupe perhaps?
Ford are hoping that customers will pile onto the Mondeo the luxuries that would have been piled onto a Granada. The problem is that the Mondeo must also function as cheaper car whilst the Scorpio didn’t; in 1995 there were fundamental quality differences between a Scorpio and a Mondeo so that even the cheapest Scorpio felt nicer than a similarly equipped Mondeo. To take an extreme example of this, imagine if Ford had to find a way to sell Fiestas ranging in price from £11,000 to £45,000. As the Aston Martin Cygnet showed, no amount of frills can hide a car engineered for a lower price bracket.
The two points to remember here are that: BMW have a wide spread of prices for their 20 models that Ford and Peugeot don’t have this. And that both Ford and Peugeot have lost value in the range of £15,000. They simply have less ability to match their products to what customers are willing to pay.