Opel CEO confirms interest in budget car sector, planning EV successor to Ampera

Opel CEO Karl-Thomas Neumann has said that the company is looking at introducing a range of low-cost cars to rival the Dacia brand in Europe and occupy the space left by General Motors' (GM) Chevrolet brand when it withdraws from the region in 2016. Neumann confirmed the news to the Financial Times (FT) and it follows the reorganisation of its corporate structure in Europe as a foundation to return to profitability and to achieve the goals of its DRIVE! 2022 plan. This ambitious strategy has set the goal of a European market share of 8%, increasing profit margin to 5% while at the same time improving product quality and customer retention (see Europe: 22 July 2014: GM announces European reorganisation with formation of Opel Group, company to stop selling Ampera – report). As part of this ambitious plan to boost sales and return GM Europe to profitability for the first time in 15 years, Neumann has said the firm is looking at the low-cost car sector. Speaking to the FT Neumann expressed his enthusiasm for the low-cost European segment. He said, "Dacia is a great thing. [GM] is definitely not Dacia, but this whole budget and entry-level market segment is very interesting. They can be admired. We are definitely looking at the segment." He added that there would be a natural space in the market for Opel and its UK affiliate Vauxhall to move into when Chevrolet is withdrawn from Europe. He said, "We had Chevrolet, which looked like a budget brand, but it was not." He added, "We think there is some possibility for Opel to come up with some entry-level product, specifically now Chevrolet is out of the market." Neumann added that the company is looking at a small sport utility vehicle (SUV), in an obvious nod to the Dacia Duster, and an A-segment city car which is reported by Autocar to be based on the next generation Chevrolet Spark and which has already been undergoing testing around Opel's Rüsselsheim research and development (R&D) base.

In addition Neumann confirmed that the company would stop selling the Opel Ampera when the model it is based on, the Chevrolet Volt, undergoes its mid-life revisions for the US market. Its sales have slowed to a trickle in Europe and Neumann and his team have taken the decision to replace it with a bespoke electric design. In a series of Twitter posts Neumann said, "After the eventual run-out of the current generation Ampera, we'll introduce a successor product in the electric vehicle segment. Our next electric vehicle will be part of our massive product offensive - with 27 new vehicles in the 2014-2018 time frame. We see e-mobility as an important part of the mobility of tomorrow and we will continue to drive down costs and deliver affordability." There are no specific details on what architecture the new EV will be based ion and when it will come to the market.

Outlook and implications

Opel's new strategy to introduce a range of budget cars to compete against offerings from the Dacia brand and potentially the new VW low-cost car brand if and when it is launched in Europe, reinforces that strategy has been changed from previous announcements that it wais planning to move Opel more upmarket (see Europe: 22 June 2012: Opel Changes Premium Strategy, Aims to Make Cars More Affordable While Increasing Product Investment). However, some elements of that previous plan appear to remain in Neumann's plan to launch 27 new models by 2018 (see Germany: 12 December 2013: Opel to build unnamed new model at Rüsselsheim – report) with a coupé that could be based on the Monza concept and could rival the BMW 4-Series and the Audi A5. The company has also made moves in this direction with the launch of the Cascada cabriolet. While Neumann told IHS Automotive at the Geneva Motor Show earlier this year that the company did not want to increase prices, he also wanted to concentrate on avoiding discounting and maintaining sensible transaction prices, while targeting a premium-mainstream feel for its products. Talking about the Cascada, Neumann said, "We don't want to sell cheap cars, we don't want to sell them by price, we want to sell them because they are exciting cars people really want them… but they should still be affordable. The Cascada is one example. It's sized basically of the 3-Series convertible, but it is only 2/3 of the price." The impression given by these contradictory signals is of a somewhat scattergun approach to Opel and Vauxhall's future model plans and recovery strategy, although in fairness Neumann and previous management teams had to try and make Opel distinctive while it shared the market space with Chevrolet. Chevrolet leaving Europe in 2016 opens up new opportunities for Opel in terms of positioning and model strategy. However, the plan to introduce a line of budget cars may not be the way to achieve one of the core aspects of DRIVE! 2022 plan which is a return to profitability. The sector operates on tight margins by definition and the programme will rely on keeping R&D costs to a minimum, although if the planned city car is a lightly reskinned version of the next-generation Spark, this will not be a significant cost. However, the wider model renewal launch programme is likely to put a strain of Opel/Vauxhall's R&D costs, especially if it is developing an all-new EV. The unit has not posted a profit since 1999 and although it is targeting profitability by the middle of the decade it faces a tough task with the cost pressures associated with its accelerated model launch programme.