Understanding the Market

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.

2016 Market spreads
Changes in BMW, Ford and Peugeot´s range of prices, 1995 and 2014. The red bar on Ford 2016 shows how much overlap there is with BMW´s price range. The vertical axis is price, starting at £8000.

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%.

2016 Table of Market Spreads
Maximum and minimum prices of BMW, Ford and Peugeot 1995 and 2014. Price in UK pounds, thousands.

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.

2016 Ford Vignale - is it contributing to Ford´s bottom line? Image: autoexpress.co.uk
2016 Ford Vignale – is it contributing to Ford´s bottom line? Image: autoexpress.co.uk

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.

Author: richard herriott

I like anchovies. I dislike post-war town planning.

51 thoughts on “Understanding the Market”

  1. All of this is not exactly rocket science but interesting to see the graphs nonetheless. You are spot on with the Vignale line needing different bodies. Have they never heard of the Passat CC? Same car as the Passat but in a “premium” body and higher asking prices, yet minimal extra cost for VAG to produce. Again really not rocket science and if Ford can’t work that one out then let them fail at these prices yet again.

    You been inside any of the Vignale cars yet? They have the most awful seat facings that look like something for the base spec car and never ever something for a top of the range car. Citroën at least did their watch-strap design well and it comes across as different and premium. But this?!!? It looks like the vinyl seating from a Ford Transit work van!

    Good luck with trying to sell that as premium Ford.

    1. Yes: I sat in a Vignale hidden in a shaded area of a Ford dealer. The seats were fine. It was a nice, flashy, roomy broughamtastic interior. The dealer wasn’t working too hard to sell it though. They’ll sell ten in Ireland, as demo cars.

  2. It’s interesting that a base 7 series is effectively over 10% cheaper today than 30 years ago. I wonder how much of that massive sales increase is due to the lower entry price?

    1. Probably a very large amount. BMW invested in a solid name up until the 90s because that´s all they could do. Having consolidated the value of the brand in the public´s eye and accumulated loads of cash they set about expanding from their niche.
      I don´t think the 7-series matters much to BMW in the way the lower half of their model range does. It´s a loss-leader, there to remind people BMW make the ultimate driving machine while customers flock to buy the car equivalent of an Armani t-shirt. I believe sales in this class are not what they once were. The Granada-effect is at play. The 5-series does everything the previous 7s can and the 7 is only bigger and probably not usefully so for many people. Corporate types will like it because they live in a world of reserved parking and hired drivers. Joe Plain-Self-Made will find it´s annoyingly big (I am thinking of a well-off guy who lives in an above-average semi and not Company Director with a runway of gravel out front). The 5 has grown into the 7s size-niche.

    2. … And just as the 5 has grown to 7-size, the Mondeo is bigger than any Granada ever was. With the 508 it’s not different, either. It’s longer than a 605 and only slightly smaller than a 607.

    3. Standard saloons are definitely perceived as boring but have to confess to quite liking the “banana” cls. First 7 was definitely the nicest. It had a lightness and delicacy that has steadily been eroded with each iteration. Soon the standard saloon will be the niche model and like Peugeot maybe 2 saloon models will be replaced by one.

  3. It’s true that the 7 series is now more a limo than a real driver’s car.Even if you accept they aren’t making money from it, it’s pretty amazing less purchasing power is needed now to get your hands on one than before. Even a base 730d is quicker than almost any of it’s 80s predecessors.

    1. True. It´s not that attractive as a real person´s car though. It´s a hotel/executive lounge on wheels that I imagine is simply very bulky in a lot of settings. I wonder how many ever get loaded with a family to go on a holiday or even just a family trip out for lunch. The first 7 is still the nicest of the lot, in my view. Big enough and certainly imposing but not super-carrier large. There´s no getting around this, that above a certain size cars are simply less appealing to most consumers. If this thesis is correct, then Mercedes and BMW ought to be selling a lot of fully loaded E-class and 5-series cars. And what do we find: the banana CLS and 5-series “coupe” and the Audi A5 or A7, all much the same size as the the cars they are based on but costing more. I see a mushroom cloud shape in the car model hierarchy. Above a certain size the only way to get extra money out of customers is to go “sideways” into similar sized but diffterent shapes of the same thing.

  4. Interesting stuff, although as has been said before, you are not really comparing like with like. All cars have grown a class – the Fiesta is the same size (yet much more competent) than a 90’s Escort, a 5 series is now as long as (but wider than) a 90s 7 series, and the Mondeo dwarfs a 90s Scorpio. This makes today’s cars look even better value.

    And while we might lament Peugeot’s failures, you can’t knock BMW’s success. They have expanded because they have made cars that people wanted to buy… not stretched smaller platforms to create a luxury model (the 605) and expected people to pay for it.

  5. The size and competence of the cars has increased across the board. In economic terms this factors cancels out. What’s remaining is that Ford have a smaller price spread and more of it is contested by BMW, Mercedes and Audi. Whether or not a Mondeo is better than a Scorpio is immaterial: what matters is that at the Scorpio price point Ford sell nothing. Another way to look at is that the biggest market for anything is where the price is proportional to the median wage. For a long time BMW’s prices were further away from Ms Everyday and Ford’s were closer. Now BMW sells things priced closer to what most people can afford.

  6. Through all of this people have forgotten the impact of the Euro on the relative prices of the German cars. Had they still been produced and sold in Deutch Marks would they have been so competitive?

    1. That’s a good point but the currency fluctuation is not as great a factor compared to the lowering of BMW’s base price overall.
      If I included Mini then BMW’s price spread would be even greater. They are made in the UK which has had a strong current but they have sold very well anyway.

  7. It is remarkable, BMW is regarded as the most sporty brand of the german premium-trio – but never was able to sell a lot of sports cars. Even their most spectacular sportscars 507, Z1, Z8 or the M1 were produced in very few numbers. And the Z4 and the 6-series did never sell as good as the cars from Stuttgart or Ingolstadt.
    On the other hand they are really successful in selling unsporty cars. Their SUV´s are top-sellers (the X5 is selling better in the states than Cayenne, Q7 and Touareg together) and the Active Tourer did find a surprisingly huge number of buyers (more then the Mercedes B-class).

    So if you want to sell unsporty cars, you first have to achieve a sporty image. Because obviously the owners of such cars want at least a sporty image, So there is hope for the Maserati Levante….

    1. BMW have mastered the art of the halo car: the M-series. To be fair, the 2002 and later 3s were sportier than similar sized cars from Opel, Ford and Audi. I read an interesting comment at TTAC that many of the 70s and early 80s Fives were like a German Buick – some where taut but many variants were rather less so; far from an Olds but also far from being track day champions.
      A cross comparison of a Mk3 Granada, an Opel Rekord and BMW 520 would be really interesting.

    2. There is and always has been something of a misnomer regarding BMW’s ‘driver’s car’ image. It was there if you were prepared to pay for it, but even in the Munich bahnstormer’s 80s heyday, entry-level 3’s and 5’s were rather ponderous devices. In a former existence, I frequently drove a good number of new or nearly new BMW E28 and E30’s for the car leasing business where I worked. Because of Ireland’s tax legislation, small capacity four cylinder models were favoured over the more costly and sophisticated in-line sixes.

      The E28 5-series was a nice car, but the 518i was slothful and inert. Even with the unctuous 2.0litre six, you had to rev the bejesus out of it to get anywhere quickly. But worse again was the E30 318i with BMW’s then new M40 four cylinder – a car priced massively above its ability. It wasn’t particularly powerful, it didn’t steer particularly well, didn’t handle all that well and didn’t ride at all well. An upmarket-specced Sierra was a far nicer device to drive – at least until the dampers went off – which was rather quickly if memory serves. What someone trading up to a four cylinder E30 thought is anyone’s guess.

      I think my feelings about BMW were prejudiced by these cars – I considered them vastly over-rated for what they offered. In fact, I’ve yet to drive a BMW I’d rate above average – although I’m open to offers…

    3. the Z3 M Coupé drives much better than it looks – and it is rare too.

    4. Having been bred on a diet of Bavaria’s finest, I would claim that I’ve found the driving characteristics of most BMWs more pleasing than many other cars’.

      Over the course of time, I’ve piloted the following products of the Petuelring:

      – E38 750i: its 326 hp may sound modest by today’s standards, but the car frightened the living daylights out of my 18-year-old self.

      – Enoidea X5 (the first generation) 4.4i: the pimp’s favourite did handle, but was very prone to tramlining and cross-wind sensitive. The V8 made for swift, but not earth-shattering progress, the car felt its weight, too.

      – E36 318i coupé: seriously underpowered.

      – E46 323i coupé: yet another big-engined car that didn’t feel impressively strong, but I simply loved the small straight six coupled with a manual gear change. I hated having to return this courtesy car.

      – E46 318d: the combination of underpowered diesel engine and auto ‘box made for an awful concoction that almost got me killed when even its ESP couldn’t prevent me from spinning in a hairpin turn – if there had been any traffic coming the other way, all I could’ve done was to hope that the BMW’s active safety systems are more up to scratch than its engine/gearbox combination. A truly awful machine.

      – E85 Z4 3.0: yes, the cabin was Ferrero cheap and the ride Trump harsh, but that engine was pure joy, as was the manual gear change. I like the six-cylindered Mk I Z4s to this day.

      – E60 523i: the obvious lack of torque didn’t really matter in the context of that wonderfully smooth, quick-to-rev straight six coupled to a surprisingly nimble-feeling body. The ride quality was obviously not particularly nice, and neither was the cabin, but equipped with this engine, the harsh, tinny E60 somehow made sense.

      – E34 525i: a glorious machine. Sensational engine, rev-happy engine, delightful engine note, delicate handling and an overall sense of nimbleness, even though it actually doesn’t feel fast by modern standards. Possible, all things considered, the best of the bunch.

      – E60 525d: … which isn’t something I’d say about its diesel stablemate, particularly when equipped with a manual gear change. The nimble handling remained – albeit with a whiff more nose-heaviness – but the turbocharging and relatively low level of revs don’t play to the strengths of BMW’s straight sixes. Suddenly, that rubbish cabin and concrete ride do begin to play a role again.

      – Ewhatever X1 2.0d: its successor is fwd, which may just as well be, for this car was lacking any kind of discernible character. It could’ve been an Audi with a cheaper interior.

      – Fidontknow 218d Active Tourer: three cylinders are enough to haul a small MPV about town. But they’re not enough to render this car an attractive buying proposition in any way. It’s a brand destroyer, as far as I’m concerned.

    5. Unquestionably, Richard. My most recent encounters with the propeller have been uninspiring indeed.

    1. Aber es passierte, leider. Pragmatismus hat gewonnen.
      Enough of that. I am not very good at writing German, alas. One of life´s great regrets.

  8. I wonder how all of this fits in with Wolfgang Reitzle´s career. He left BMW in 1999 and was credited as being a fellow with both engineering and economic expertise. The compact happened on his watch.

    1. I wonder if there is a German expression for ‘Poetic Licence’?

      I need quite a few more lessons before I have a hope of getting mine.

      The Compact needs a whole article of its own. Supposedly devised to give BMW South Africa a Golf competitor, hence the E30 rear suspension and dashboard, with the comically antiquated push-pull lights switch.

      In Europe, or at least gullible Britain, it was promoted as more of a successor to the 1600 / 2000 Touring, and there were stories of post-launch waiting lists so long that oafs would pay the list price of a well-specced E36 coupe to jump the queue for a new Compact.

      In the closing years of the last century, I did a few long journeys in a 318tds Compact with the widely hated M41 IDI turbodiesel, and liked both the car and engine, probably more than the 318i saloon I was running at the time.

      The third-generation Compact was the 1 Series hatch, on a cut-down E90 3 Series platform. Commercially it has been a good move, and BMW could probably do no other, standing where they did, with the A Class and Audi A3 already well established.

      I still can’t stomach the way the hatch looks, but the 1 is a better drive than the E90. What was it old Mies said?

    2. “The Compact needs a whole article of its own. Supposedly devised to give BMW South Africa a Golf competitor, hence the E30 rear suspension and dashboard, with the comically antiquated push-pull lights switch.”

      The above statement is untrue since this car was NEVER built by BMW SA. I just asked a South African friend that works in the car industry and is a supplier to BMW SA.

    3. I’d love to ask the Menjou’d One about his involvement in the decision making process that led to the E65.

      The last automotive nugget I caught of Dr Reitzle after his departure from the industry was that, as CEO of Linde, he indulged in a most unusual choice of company car: a Quattroporte V.

      Most recently, he’s been named by some commentators as one of the very few people capable enough to lead the supervisory board of VAG and clean up the mess there. And as much as I take exception to his aloof persona, I’m very much in agreement with this appraisal.

  9. The sentence does not say the car *was* sold in SA. It suggests that there are unsubstantiated rumours it *may* have been intended for sale. English is great for misleading phrases such as this.
    Try this “It looks a little as if he considered the possibility of thinking about whether he might buy an Aztek”.

    1. That much is true of the English language of course. But even in saying that, the Compact was never developed specially for the SA market either. It was a small BMW hatch they developed and that’s that.

  10. In that case the emphasis falls on the word “supposedly” which can be taken to mean “someone said it was the case but it really wasn´t” as in “Geoff supposedly went out to empty the bin but he was really having a quick smoke.”

    1. I merely corrected him that his “supposedly” was incorrect. So no need to go into the semantics, which I clearly understand, but thanks for the little lesson. 🙂

    2. Wow there, easy. Actually I was just preparing the ground for a dig at the author, for writing a clunky sentence…

    3. Good. 🙂 That spat on CAR is terrible. Anyway I’m not after something like that on here.

    4. Things tend to remain very civilised here – until Richard mentions the Renault Megane MkI Estate that is.

  11. Richard, this is a really revealing piece of analysis and explains the struggle that the likes of PSA, Ford and GM face. It makes me think that FCA should have focussed on one premium/ luxury brand and extended it up and down at potential higher margins than going at 2 or 3.

    1. Thanks. I have heard for years about the expansion of the “premium” marques and the way Ford et al ceded the D-class car. The meaning of that becomes clear when you see how much reduced is Ford´s range of price points. The number of middle-market cars is down to the fact that there were a lot of people in that income range. The target itself is small: a little above or below median income. I might consider another diagram comparing price spreads for a larger number of manufacturers for the same period.
      Are you arguing that Fiat needs only Maserati, selling from 17,000 to 100,000 pounds? That´s what BMW does. Nobody is offended the 7 series has the same badge as the 1-series. Yet the received wisdom was that Granada owners were vomiting at the thought their car same the same badge as a Fiesta.

    2. Richard, yes Maserati would be the logical answer given how hollow and fallow Alfa has become. I know I am writing this on the cusp of the new dawn that is the Giulia – to which I am warming in its less racy forms – but from a purely economic and commercial stance, trying to fill-out and then market two premium ranges, given the starting position of those respective marques, does not make sense for the reasons your very effective analysis expose.

      I think PSA is toast, by the way, unless it becomes fully Chinese owned and has its current assets effectively written down by its new owners (I am thinking on the lines of Volvo).

  12. Johann: let’s ask Robertas what he meant.
    I think “supposedly” can mean “what turned out to be not true”. Who did the supposing or purporting?
    Robertas: help!

    1. My 1987 Collins dictionary gives the following definitions of ‘supposed’: “1.) presumed to be true without certain knowledge. 2.) believed to be true on slight grounds”.

      I’ve devoted some time to finding evidence for the South African story with no success. I’m convinced that I read it in a magazine or newspaper article, probably long since discarded. I don’t have the imagination to make that sort of thing up, but it could still be someone else’s fabrication and speculation.

      On the way, checking available sources, some interesting facts

      Graham Robson’s slim 3 Series volume states “Wild rumours that BMW were trying to match VW’s Golf were wide of the mark, though stories that they were aiming to recapture previous BMW ’02 owners were more accurate.”

      So why were the launch prices in the UK (Oct 94) of £13,650 for the 316i and £15,590 for the 318Ti so close to those of the Mk.3 Golf GTi 8V and 16V respectively?

      Tony Lewin’s massive BMW picture book claims that the motivation for the Compact was the knowledge that VW were going to introduce a version of the Mk.3 Golf with a six cylinder engine. BMW saw this as an incursion into their territory, and the Compact was their chosen weapon of retaliation. He also quotes an unnamed “senior BMW official” as saying that “we wouldn’t have done the Compact at all if we’d known we were buying Rover”.

      Moving on to CAR May 1993 (around six months before the Compact was officially introduced), Georg Kacher reports thus “Coded E36/5. It (the three door Compact) will be based on the four door 316i/318i, and will feature a full-width tailgate and a slightly smaller boot. A five door variant codename E36/3 is expected approximately six months later. It will be another price leader, which will differ from the four door saloon by using more modest trim and a reduced equipment level. The hatchbacks will be given a specific model designation – City is possible – to set them apart from mainstream cars”.

      What became of the five door Compact? I can’t imagine that Big Georg is “one for the romancing”, but perhaps his Milbertshofen informant was having a bit of fun feeding him baloney.

      An earlier mention of E36/5 (Car February 1993) by Big Georg says that the three door is “designed to appeal to hot-hatch customers”, and “according to internal calculations, may find 80,000 takers per year”. In 1995 Compact production peaked at 89,484, with the overall number of 396,122 from 1994-2000, so not wildly off.

  13. Johann: I could barely read the first ten comments in that Fiat thread. That was pretty dreary. That was perhaps one of the incentives to depart from Car on-line. I hadn’t seen Disqus before. I notice it “hides” the end of longer posts which is patronising. Generally that’s not a pleasing format, whatever the content. Have you seen Autocar’s comment format? On my smartphone the replies are reduces to columns a word wide.

  14. Thanks Robertas. So, to conclude, Johann is right about it not being true that SA was involved at all and I was chasing a red herring by focusing on “supposed”.
    The story you tell indicates BMW went downmarket in response to VW going upmarket. BMW found there was money to be made there and carried on to reach base model Mini-land.

  15. The reason for the five door never making it the market is probably the location of that fuel door and the associated pipes having to move. Silly place for it as it would have meant two different fuel tanks for the two versions:

    1. That is a good one. In the end I don´t suppose it could go anywhere else. The fuel tank is under the rear seat so if the aperture was further back they´d have to run a tube forward. There would be packaging and crash-safety implications.

    2. That should not be an unsolveable topic. A lot of manufacturers had 5-door hatchbacks with short rear overhangs, and none of them had the filler cap in the rear door.

    3. Anything in life can be solved if you throw money at it. To then make a profit on that in return is the rub. And that is where I suspect this little problem in the three door’s design, meant the cost of developing the five door was not worth it. None of this based on any facts as to the reason for the non appearance of the five door. Just my view on this of course looking at the evidence.

  16. It would be over the rear wheel on or near the C-pillar but remember the Compact is rear drive so there is less passenger room behind the front bulkhead. This means the boot and rear passenger volumes are fighting it out. Thus there’s less room to route a tube down between the boot and rear seatback.

  17. Johan: agreed. The Compact had a brief to be cheap and I expect a) a carryover fuel tank was required and b) a five door was never on the cards. This vehicle served as a propeller in the water, little more. They wanted to see if it would blow up BMW’s image and how many customers there were.

  18. This is an interesting article touching on how Ford lost it’s eye on the ball relative to Nissan – who were right on the ball with the QQ of course.


    Does making a Vignale Mondeo mean Ford has learnt? Does that runty little EcoSport show they have finally got which way the market is going? Is the Kuga as affordable as the QQ? No and no and no alas. Ford et al have long way to go yet.

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