France's reputation for producing popular cars was once up there with its reputation for fine wine and good food. However, the popularity of its automotive brands is in decline, as UK consumers continue to indulge in promiscuous shopping habits. One of the biggest losers has been the country's best-known manufacturer, Renault, which last year saw a 21% fall in UK sales.
It never used to be like this. For years Renault thrived on producing stylish, well-made cars for the mid-market, its sales made all the more robust by its strength in a variety of markets from saloons and hatchbacks to MPVs. Despite producing popular cars such as the Renault 5 and Clio, though, its more recent innovations such as 2005's Vel Satis executive car have failed to entice upmarket consumers.
In response, chief executive Carlos Ghosn has outlined plans to shift the brand into territory just below executive marques such as Mercedes and Audi. With supply outstripping demand and the imminent European assault of Chinese manufacturers such as Nanjing Automobile, with a rejuvenated MG, a move upmarket into the quality car market alongside companies such as Saab and Volvo makes a lot of sense.
BMW's downward shift into this catchment area has proved highly profitable. It has produced cheaper versions of cars such as the 3-Series, which have sold well. The problem for Renault is that many of its previous attempts to move into the quality car market have failed.
Looking downmarket is unlikely to do Renault much good either. It already has a perfectly good budget brand in its Dacia marque. Made in and designed for the Eastern-European market, it is among Renault's most popular models in terms of volume sales. It has also proved popular in some Western markets, but the company has no plans to launch it in the UK; while it might prove popular, it could devalue the Renault brand and the margins would be too low.
For Ghosn, 2007 is when the fightback starts and foremost in this battle will be the September launch of the sporty Twingo hatchback.
Will it be enough? We asked Chris Westlake, who oversees Mercedes' direct and digital advertising at Zulu, and Peter Cooke, KPMG automotive professor at Nottingham Business School, how they think Renault should restart.
DIAGNOSIS 1 - CHRIS WESTLAKE, CLIENT PARTNER, ZULU NETWORK
The leader that changed the face of MPV thinking more than 10 years ago has lost its way.
Renault's positioning is confused. On the one hand, it is eager to strut its stuff, with the bold derriere design, chic look and a cheeky beat to its commercials. But then we are also served the safety plaudits and NCAP credentials.
Is it the stylish design or safety space that Renault wishes to own? Even the heritage of designer Patrick Le Quement's courageous styling seems to have run ahead of the market, further increasing the polarising effect.
There is also the issue of size. In the late-90s, as the prime mover into compact hatchbacks, Renault shaped our current understanding of the flexible MPV vehicle concept with the Espace and Scenic. Now virtually every manufacturer has a similar model and Renault's competitive edge has been eroded.
In the small car sector, Renault missed the boat in the UK by failing to release the Twingo here early enough when a Citroen Saxo or Peugeot 106 competitor were nowhere to be seen.
REMEDY
- Refocus positioning. It could be around design or its F1 involvement.
- Explode performance. Communicate what it means to different drivers.
- Compete. Kill the run-out Clio Campus quickly and start building a prospect base for the Twingo, which looks great.
- Recover through more considered category management. Start promoting MPVs as a range and find a creative way of helping people navigate it.
DIAGNOSIS 2 - PETER COOKE, AUTOMOTIVE PROFESSOR, NOTTINGHAM BUSINESS SCHOOL
Renault is caught in the middle of the market and any move upmarket is going to take time. The French have not traditionally fared well in this sector and it will have to make difficult decisions in terms of smaller volumes versus bigger profits.
The question is whether it has a logical range. Many manufacturers are likely to split off and specialise. Renault has links with Dacia, its Eastern-European brand, but does it bring that into western Europe - if so, in what volume? While it has sold well where it has been introduced in western Europe, if it was brought out in the UK, it would risk dropping the price mix overall.
Renault has taken the initial benefits of its tie with Nissan and now the two must plan their next steps in terms of bringing out new and better models.
Renault has not done anything wrong, but it hasn't performed as well as it has in the past. Also, there is so much choice in the market - some players have about 25 products coming out in a year - that it is in danger of getting lost. It is furthermore caught in a catch-22 - pulling back on discounting has resulted in fewer sales.
REMEDY
- Review the range to ensure there is a clear hierarchy between the models.
- Build on the Nissan partnership and make sure all benefits and economies have been taken and that strategic developments will be mutually beneficial.
- Ensure there is a marketing balance between discounts and 'indirect discounts' through financial product offerings. Manage production to ensure the market is not flooded.