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Market Insight: All eyes on Opel

Back in the fold: Opel will bring the popular Astra nameplate back to Australia in an attempt to take sales from other European brands.

Opel steps out of Holden’s shadow, aiming for strong sales against European rivals

Market Insight logo27 Jul 2012

ALTHOUGH it has cast off several brands while fighting for survival in recent years, General Motors has taken its once-hidden Opel brand out from behind Holden and is sending it onto the streets of Australia.

This is part of a global strategy to turn around the fortunes of GM’s struggling European arm, and is a bold move considering buyers are more familiar with models such as Astra and Corsa (the latter previously sold here as Barina) wearing a Holden badge, with ‘Holden’ prices and all the history and goodwill associated with the lion brand in Australia.

By the same token, Australians have also come to value the European styling and excellent vehicle dynamics inherent in Opel models sold here over the years – particularly Astra and Barina, but also the mid-size Vectra, which was assembled here from 1998-2000, and the Zafira people-mover – before GM resurrected Daewoo and turned it into a global hub for Chevrolet/Holden vehicles that, with each full model redesign, are becoming respected and popular members of the stable.

With no small help from Australian designers and engineers, vehicles such as the reincarnated Barina and the Cruze have built up a strong following here and have far greater profit potential for the company than the European Opel models could manage when sold with Holden badges.

128 center imageFrom top: Opel Corsa Astra hatch Astra GTC Insignia sedan Insignia wagon.

In the case of Astra, Holden management has admitted the previous AH series was sold at a loss in Australia because of the need to position it as a mainstream model against rivals such as the Toyota Corolla and Mazda3.

So despite racking up tens of thousands of sales over many years – including almost 35,000 in 2005 alone – the popular Astra nameplate finally succumbed to tough exchange rates and continued high commodity prices in 2009 and was dropped.

Now it’s back.

Despite having mechanical similarities to Cruze, Astra is set to return under the Opel brand with pricing and equipment that reflects its new-found position as a lower-volume but bona fide European model that lines up not against Corolla & Co but the Volkswagen Golf and other Euro small cars such as the Peugeot 308, Renault Megane/Fluence and Citroen C4.

Astra is designated Opel’s biggest-selling model line in Australia, and with General Motors hierarchy targeting at least 15,000 annual sales for the brand by 2015, the small hatch and wagon will be expected to account for at least 7500 of those.

Company management will be studying carefully the extent to which these sales come from Holden’s customer base, for there is clearly no advantage in that.

Nor is there any desire to position the vehicles too far upmarket, losing sales volume potential in the quest for luxury status and running the risk of overvaluing cars that not so long ago were regular Holdens.

Opel Australia has made it clear that Opel is not a ‘premium brand’ but an ‘accessible German engineering brand’ – one that it claims will be a better-value proposition than its more established European rivals: primarily Volkswagen, but the French marques and Ford’s German engineered and designed models, which have won strong support from buyers at the expense of chart-busting sales volume.

The strategy applies equally to Corsa and Insignia as it does Astra, with the light-sized car facing up to the likes of the VW Polo, Peugeot 207 (and forthcoming 208 replacement), Citroen C3, Fiat 500 and Ford Fiesta, while the mid-sizer will tackle the VW Passat, Peugeot 508, Citroen C5, Renault Latitude and Ford Mondeo, among others.

Astra is entering a booming small-car segment that has risen 5.0 per cent across the board this year to account for 23 per cent of all new-vehicle sales in Australia, with the Golf holding on to a 7.2 per cent share of the segment with 8697 sales to the end of June – down 8.8 per cent on the first half of last year – and the Focus, which from August switches production from Germany to Thailand for this market, has climbed 42 per cent YTD to hit the 9000 mark for a 7.4 per cent share.

Peugeot has found only 642 homes so far this year for its 308 (down 34.8 per cent, with a heavily revised model on our doorstep), Citroen has made 324 C4 sales (up 75.1 per cent), Renault’s Megane is up 35.1 per cent with 481 units while the related Fluence sedan is down 19.5 per cent on 178.

Corsa, meanwhile, enters the marketplace with the light segment overall running lineball with last year on 68,551 sales. Polo is up 5.0 per cent YTD with 2353 sales and a 3.5 per cent share of the segment, while the Fiesta is sitting on 5412 sales for an 8.0 per cent share, despite YTD sales being down 15.4 per cent.

Peugeot’s 207 is down 34.7 per cent YTD on 460 sales, Citroen has sold 58 C3s (down 10.8 per cent), while Fiat has recorded 268 new registrations for its 500 to be slightly ahead of where it was at the 2011 halfway mark.

The medium-car segment is continuing to surge, up 19.9 per cent YTD (on 43,046 sales) largely on the back of a resurgent Toyota Camry. This segment will also see some formidable new mass-market competitors over the next 18 months, including the all-new Holden Malibu and Nissan Altima.

The Insignia will be pitched above these models to be closer to Passat, which currently has a healthy 7.4 per cent share of the segment with 2546 sales YTD (up 92.9 per cent). The Mondeo, on the other hand, is down 24.3 per cent YTD to a similar volume – 2587 YTD for a 7.5 per cent share – while Peugeot’s 508, which is classified by VFACTS as a large car, has found 667 sales so far this year.

Renault’s Latitude is up 31.2 per cent YTD, though only with 101 sales, while Citroen’s C5 is faring only marginally better, up 4.9 per cent YTD on 149 units.

Clearly, Opel’s challenge is to build up enough brand awareness and support for it to lure customers away from its European rivals.

There are no suggestions at this stage that the new German on the block will attempt to emulate Volkswagen with a full model line and sales approaching the 44,740 level it achieved last year – and which it should easily exceed in 2012, with sales up 31.5 per cent in the first half to around 27,000.

But, like any new brand, Opel will have its work cut out to match those brands which are already well established and have found the Australian market a difficult one in which to succeed.

Peugeot recorded 5220 sales last year and Citroen, which as recently revealed by GoAuto will be handled by the same distributor as Peugeot from next year, managed only 1415.

Renault, which relaunched here in 2001 with a long-term target of 20,000 annual sales, improved with 3622 new registrations last year, up from 1907 12 months earlier.

And Fiat, which has just moved to factory distribution, delivered 1544 new vehicles in 2011, mostly commercials.

Although Opel Australia is now describing the 15,000 target General Motors management has in mind as “very aggressive” and longer term than the three years the recently deposed GM Europe chief CEO Karl-Friedrich Stracke identified last September, there are great expectations riding with this brand.

Opel is, after all, struggling for survival and sees new overseas markets like Australia as a key part of its turnaround plan.

Tellingly, GM executives have, when discussing Opel’s prospects in Australia, pointed to the 5000 sales another new market – Israel – achieved in its first eight months of operation in 2011.

Stand by to see if Australia follows suit.

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