Car makers wising up to falling sales
The car-owning honeymoon could be over for Polish drivers as spiraling costs have put the price of this year's model out of reach for most people. Trams and buses may not be the best way to get around for many, but they cost a lot less.
Iza Nowak, an accountant from Krakow, sold her red Ford Fiesta last June. After paying out for it each month, she had hardly enough money to live on. "The costs of maintaining this car were just too high," she said. Since selling her Ford, Nowak has gone back to using trams and buses and she doesn't plan on buying a new car again. "Although public transport is less convenient, it's much cheaper," she said.
The reason for the decline in new car sales is the cost of purchasing and maintaining them, said Wojciech Drzewiecki, president of Samar, an automotive research company. Add to this excise duties, which have risen to 6% from last year's 2%, and the costs of car insurance and loans not forgetting a 20% fuel price hike, he said.
"Sixty to 70% of cars are bought on loan, so the increase (of borrowing costs) is likely to take effect on the market," said Daewoo's Krystyna Danilczyk.
In the first half of 2000, new car sales in Poland dropped 13% compared to the first six months of last year, according to Samar. Up to July this year, 278,147 new cars were registered, 43,000 less than in the same period of 1999. This drop continued in July when Samar recorded a 15.6% fall in sales.
The manufacturers that suffered most were domestic car producers, according to Drzewiecki. In the first half of the year, domestic manufacturers sold 26% fewer cars than during the same period in 1999, while the number of imported cars sold increased 22% for the same period, according to Samar statistics.
But figures can be misleading, said Boguslaw Cieslar of Fiat Auto Poland. He said domestic car manufacturers had to take account of inflation, while foreign suppliers didn't. So prices of imported cars were lower compared to those manufactured by Polish companies, Cieslar said.
However, despite pessimistic sales results, car producers and distributors remain optimistic. "Everybody (in the industry) sees the drop as temporary," Daewoo's Danilczyk said. Representatives of Fiat, one of the major car manufacturers in Poland, are also not worried. "Fiat's drop in sales is neither lower nor higher than the market average," said a source at Fiat who wished to remain anonymous.
The lack of concern over falling sales is evident in most companies' marketing plans for the year and for the moment these are mostly unchanged. Skoda Auto Polska, for example, is continuing with last year's marketing plans. According to Skoda's Maciej Handke, the company hasn't changed its strategy because it's focusing on the promotion of Fabia, a model introduced to the Polish market this May. "We didn't want to concentrate on other marketing activities that would obstruct the perception of Fabia," Handke said. Only in the autumn is the company is going to take a new look at the market, he said.
General Motors Poland, which produces Opels in its factory in Gliwice, has also continued with last year's marketing strategy, according to Przemyslaw Byszewski of General Motors. "There was no need to force people into buying cars with aggressive advertising campaigns," he said. Opel's advertising expenditures were up in the first half of 2000 by zl. 500,000 to zl. 33.4 million ($7.8 million) from zl. 32.7 million ($8.4 million) during the same period in 1999, according to Expert Monitor, a media research company.
Despite its optimism, Fiat has already redrawn its marketing plans for next year with an eye to falling sales, the company said. Fiat's promotion this year includes an advertising campaign for its Fiat Punto (see related story, page 7), car rallies for the Alfa Romeo Cup in Kielce and sponsoring Polish athletes in the Sydney Olympics, Cieslar said.
The promotion focuses on technical innovations, improving brand image and specific target groups, Fiat said. The company spent zl. 39.8 million ($9.3 million) on TV, radio and newspaper advertising in the first half of 2000, compared to zl. 32 million ($8.2 million) during the corresponding period of last year, according to Expert Monitor.
Many car dealers said they would rather change the focus of their campaigns than increase their marketing efforts. Andrzej Kozikowski, a marketing specialist at Warsaw car dealer Carserwis, said he had been spending money, but would rather concentrate more on advertising to the company's target group.
For the Fiat Multipla, that group is well-off, middle-aged men who have a family. Getting across to the right people is the company's main priority this year, Fiat said. The Poznan-based Opel dealership is also focusing its campaigns on target groups such as taxi drivers and doctors by offering them discounts, said Marek Wajer of Opel Szpot.
But the best marketing efforts may come to nothing if people can't afford a new car.
The sales of cheap cars have dropped, said Mikolaj Sepczynski, president of Warsaw-based Renault car dealer Sepczynski. "A man who bought a cheaper car in the past, can't afford it now," he said.
Daewoo is aware of this and is trying to keep prices low. According to Danilczyk, the company intends to hold down prices of its smaller cars such as the Tico or Matiz, while price increases are larger for its luxury models like the Leganza. The price of a Tico increased zl. 800 to zl. 21,300 between January and August, while the price of a Leganza increased zl. 4,000 in the same period to zl. 77,000.
