European car sales are picking up again, but only the very cheap and very expensive ones

The humble Dacia is conquering Europe.
The humble Dacia is conquering Europe.
Image: Reuters/Bogdan Cristel
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After plunging to historically low depths, European car sales staged a mini-recovery in September, rising 5.4% for the strongest percentage gains so far this year. But not all automakers are reaping equal rewards: The market for high-end and low-end cars is improving, while the moribund middle continues to stagnate.

The low-cost models from Romania’s Dacia have little in common with luxurious sedans by Jaguar, and yet these brands sit atop the European auto league table, each posting impressive sales growth so far this year. Mid-range models from the likes of Volkswagen and Peugeot are notable losers in the rankings, and car sales in the first nine months of the year are still down by 3.9%.

The hollowing-out of the mid-market is a theme not just in the auto industry, but across consumer markets. The worst of the recession may be over in much of Europe, but stagnant wage growth continues to erode consumers’ purchasing power, which explains why the traditional Peugeot buyer is trading down to a Dacia. The wealthy, whose assets shield them from trends in the overall economy, continue to buy high-end models like they always have.

PSA Peugeot Citroen is under extreme pressure this week as it seeks a capital injection and new partners to help it revive its flagging fortunes. To succeed in a difficult European market, it seems the best strategies are to target penny-pinching consumers with bargain-basement models or the recession-proof rich immune to economic ups and downs.

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