Breakdown recovery

Fears the car market could not sustain a range of marques were misplaced.

The recent return to UK marketing by smaller automotive brands such as Saab and Chevrolet (Marketing, 7 July) appears to go against a long-held view that the car industry must consolidate to survive falling sales and changing consumer habits.

The collapse of British manufacturer MG Rover in 2005, and the subsequent troubles of US car-makers General Motors (GM) and Chrysler, was taken by some as a sign that the market could no longer sustain a wide range of competing brands.

Ford, under pressure after years of financial under-performance, appeared to reach this conclusion in 2006 with the launch of its 'One Ford' restructure and brand divestment programme, which included the sale of its stakes in Land Rover, Jaguar, Volvo and Mazda.

New ownership

Several marques have bitten the dust. The number of Rovers driving on British roads dwindles with each passing year, while, across the Atlantic, GM agreed to phase out its Pontiac, Saturn and Hummer brands as a condition of its financial bail-out by the US government.

However, a surprising number of brands have been saved from the scrapheap, often by Asian investors. In 2007, Chinese manufacturer Shanghai Automotive Industry Corporation bought the rights to MG, and backed the launch of its TF LE500 model with an ad campaign.

Similarly, Indian conglomerate Tata completed the purchase of Jaguar and Land Rover in 2008, and has supported both with continuing marketing activity. Meanwhile, Sweden's two biggest brands also appear to have weathered the financial storm, with Dutch sports-car manufacturer Spyker acquiring Saab from GM, and Chinese company Geely Automobile buying Volvo from Ford for $1.8bn.

Does this mean that the prevailing view will shift in the face of evidence that the car market can, in fact, support numerous marques? Graham Hales, chief executive at branding consultancy Interbrand London, thinks so.

'Automotive companies, especially the Asian acquirers, recognise the value of brands and have become hesitant to extinguish a marque unless it is absolutely necessary,' he says. 'The strength of a brand gives new entrants easier access and credibility in potentially lucrative markets.'

David Pugh, marketing and PR director at Saab GB, claims the Swedish car-maker can survive by appealing to a niche group of consumers looking for an 'alternative' to more mainstream German premium brands such as Mercedes-Benz, BMW, and Audi.

'We're not aiming to hugely increase market share,' he insists. 'We are happy to remain small, a "niche-premium" brand, and the company is working on lowering its break-even point.'

Jim Prior, chief executive of branding agency The Partners, which created Jaguar's current visual identity, agrees there is room for any number of differentiated brands, but raises questions over the ability of some manufacturers to achieve this.

'There is always space for brands that have a unique personality, but the problem is that car companies are run by engineers rather than marketers,' he says. 'There is not always enough analysis of customer needs.'

Consumer choice

Kia UK marketing director Simon Hetherington agrees that the market can support a range of brands, but has concerns about the commercial viability of some. 'It is less about finding space in consumers' minds, and more about things like having enough shopping space through a dealer network,' he says.

Consolidation of costs and production was unavoidable for automotive companies, but it appears that the industry has only belatedly recognised the importance of brands. Whether all the new owners of established marques will be able to balance the books is another question. Nevertheless, the industry has made a positive step in understanding that consumers are demanding more choice rather than less.

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