Le fait du mois - Jean-Jacques Chanaron

Which consummer ?

October 1995: this is a month of questioning and may be of doubt in looking forward to seeing a real renewal of the French market, and above all, of the European market. Using the occasion of the Equip'Auto exhibition in Paris, the economic magazines and newspapers unanimously asked the question : "and if the consumer's behaviour was durably modified ?". Most experts think that it is now crucial to carry out in-depth research to try to get some understanding about such an important issue, and more particularly, about plausible changes which could modify the volume as well as the structure of the demand for new cars.We all know that economists do prefer researching into the production theory and the analysis of supply and firm's behaviour in a competitive or oligopolistic market place, etc.Economists who specialised into the automotive industry have been preoccupied by issues such as productivity, international strategy of car manufacturers, competitive advantages of the various members of the world-wide oligopoly, vehicle and component makers relationships, economies of scope and scale, profitability, strategic alliances and inter-firm co-operation, introduction of new technologies (product and process), new forms of work organisation, etc.

But only a few of them tried to analyse the car consumer, the new vehicle and second hand markets, and their evolution. That is confirmed by the very small amount of

available literature and its overall weakness dealing with consumerism, distribution, after-market, etc.

Most experts think that we are currently witnessing a dramatic change of car consumer behaviour, at least in Western Europe toward the search for the minimum price for a quality level which is supposed to be perfect.

The car seems to loose its symbolic statute allowing its buyer to show up a real or desired social position and to become a "normal" good which is chosen and bought at a price value for an expected utility or service.

Such a change is translated into operational attitudes: the consumer is no longer attached to a brand name without an ex ante price comparison with the competition. The chase for discount is becoming systematic with an expectation for a ready-to-run vehicle (no options).

The main question is indeed to assess if such changes are structural and long-lasting or purely linked to the current situation provisional.

The price war is already a reality since more than one year and which is generalised. In France, the average rebate is around 10 000 FF., i.e. nearly 10 % of the average price.

Such changes could lead to a lasting decrease of the demand for over-the-average models and more generally of the most sophisticated versions of each model to the benefit of the worst equipped versions. In France and Spain, the government subsidies is clearly used to buy cheap and "simple" versions. In such a trend, there is a need for a new model range strategy, with less variety, less options, but also less equipment and therefore less safety.

But they could also lead to dramatic changes in market shares. The recent surge of Korean car registrations in Western Europe means a move toward the cheapest supply niches (they grew by 57,6 % during the first nine months).

But who could pretend to give a scientific answer to the questions which are giving headache to corporate strategists? Who is the average car consumer in the late nineties? A rational, inconstant, unfaithful Homo Economicus? If yes, which vehicle and at which price? A cheap car but reliable and also nice and useful for any purpose? But, this is a pain in the neck for the R&D and design departments which are not at all prepared to such a situation.