Back-to-basics trend boosts cut-price brands

Renault's boxy Logan sedan had rear-view mirrors as an option - or so the joke went after its 2005 launch under the low-cost Dacia brand.

Its similarly cheap replacement, unveiled at the Paris auto show, has a chrome dashboard finish and other stylistic flourishes worthy of a mid-market rival. Touch-screen GPS and parking radar feature in all but the simplest versions.

In a brutal auto sales slump, "crisis cars" are coming of age in Europe, narrowing the gap with mainstream brands in everything from esthetics to fuel economy.

"The differences are becoming more subtle," said Renault saleswoman Chloe Gomez as she showed off Dacia's Lodgy minivan.

"We're getting customers who have plenty of money," she said. "They might have owned a (Renault) Scenic, but now they're looking for simplicity, and to save some cash for other things."

Dacia's success echoes a recent survey by Britain's AA motoring association, which found that a sizable majority of drivers would prefer to do without such extras as heated seats, electric parking brakes and rainsensing wipers.

The back-to-basics trend has lifted other cut-price brands, including Volkswagen's Skoda, General Motors' Chevrolet, Hyundai and affiliate Kia. It has also put the squeeze on Fiat, Ford, PSA Peugeot Citroen and GM's Opel at a time when their compact cars are being challenged by a wave of new rivals from luxury makers.

Renault's so-called Entry models were an initial flop in target markets such as India and an accidental hit back home. They have since become the French automaker's biggest earner, with profit margins above six per cent and heading for nine per cent soon, some analysts say.

Wage costs at their assembly plants are 5 euros an hour in Romania and 3 euros in Morocco compared with 30 in France. The factories also use hand-me-down tooling from other Renault plants to save on investment.

"There may have been an element of luck in the success of the Entry strategy," Barclays analyst Kristina Church wrote in a recent note. "But management certainly hasn't been slow to capitalize on it."

Badged as Dacia in Europe and Renault elsewhere, the Logan family has spawned variants including the Lodgy and bestselling Duster 4x4, drawing ripostes from GM, Peugeot and Volkswagen.

Among budget-conscious cars on show in Paris are Chevrolet's Trax compact SUV and refreshed Spark mini, alongside a Peugeot 301 and Citroen C-Elysee - new spartan models from France's larger mass automaker.

Pending a promised lowcost range from VW, the Skoda division is wheeling out its own answer to the Logan: the Rapid sedan, aimed squarely at demand for functional four-doors in Central and Eastern Europe and around the Mediterranean.

In France, where Renault employs about 50,000 workers, the core brand's car sales fell 21 per cent in January-August, cutting market share by 1.8 points to 18.4 per cent. Imported Dacias claimed 4.4 per cent of the market, up half a point.

Global entry range deliveries are set to rise almost a quarter this year to top 1 million vehicles, or 37 per cent of the group total, compared with 15 per cent five years ago.

By 2014, French-built models will dwindle to 20 per cent with Renault's "silent metamorphosis into a low-cost automaker", Morgan Stanley analyst Stuart Pearson predicts.

The original Logan did, in fact, include mirrors - but no power steering or electric windows.

Its engines and fuel economy were a generation behind, and the Soviet-hangover styling imposed a hard, drab interior and black plastic bumpers of the kind last seen more than a decade earlier on mainstream models.