Why Ford axing the Fiesta doesn’t spell the end for superminis

We say surprising because the supermini’s all-round suitability for the average buyer came at a price for the car maker. The sophistication packed into each one was expensive and, given the demand for scarce chips in recent months, many car makers have been quite open about robbing low-margin segments like superminis to equip much more profitable models such as SUVs.

That impacted production, especially of the Ford Fiesta, whose factory in Cologne, Germany, suffered repeated stoppages for lack of parts.

The availability of the Fiesta has risen in recent weeks but so too have prices. Back in 2018, the cheapest Fiesta was the Style at £13,965. Now the entry Trend model costs from £19,330, a rise of 38%.

In fact, of the top 10 superminis sold in 2022, five – the Mini, the Polo, the Toyota Yaris, Peugeot 208 and Honda Jazz – offer no model under £20,000. Three more – the Fiesta, A1 and the Hyundai i20 – start above £19,000. The Vauxhall Corsa isn’t far behind with an £18,895 entry price.

In fact, the only supermini in the top 10 that could be described as affordable was the Dacia Sandero, a model that has also suffered price rises from its £7995 launch cost in 2020 to reach its current entry point of £12,595.

Pricier though it is, the Dacia is perhaps a useful model for car makers wanting to keep selling superminis for an affordable price while retaining a decent profit margin. We’ve written about how Dacia is so profitable that Renault was actually channelling chips its way, rather than the other way around, in the recent parts crisis.

Dacia’s CEO, Denis le Vot, has spoken about how engineers spent two years taking costs out of the Renault CMF-B platform to make its models as cheaply as possible. Options are restricted and complexity removed to keep production as simple as possible. Building them in low-cost Morocco and Romania also helps reduce the list price.

The scale of Europe-focused groups such as Renault, Stellantis and VW means they are better at this, whereas others – including Ford – aren’t. No matter where your HQ is, pretty much your only market for sophisticated superminis globally is Europe, which means you need to spread your engineering costs as wide as possible across a range of similar models to achieve economies of scale.

Some have sacrificed uniqueness to achieve that. Mazda, for example, has tapped up Toyota for a rebadged version of the Czech-built Yaris to create the Mazda 2 Hybrid supermini, while keeping the old combustion-engine model going, at least for now. The next Nissan Micra EV will be engineered and built by Renault.

The looming barrier for supermini affordability is of course electrification and those brands already selling an electric version alongside combustion-engine models illustrate the wide price differentiation. For example, the Peugeot e-208 costs from £31,290 – over £10,000 more than a like-for-like combustion model. The Mini EV costs from £29,000, compared with a start price of £22,565 for the combustion model. 

Such is the current cost of the battery that, when fitted to a supermini to give an acceptable driving range, it becomes on average 60% of the total build cost, according to recent analysis by the bank Bernstein. However, because of the higher pricing power of cars in the class above, the battery share of the build cost falls to 40%, better hiding the cost.

Car makers obviously try to achieve the same profit margins on EVs as ICE cars, but it’s almost impossible to pass them all on to the buyer of a supermini, Bernstein reckons. Purchasing incentives are making these small cars viable in many countries across Europe, but not in the UK, where all the enticement is aimed at company car drivers, who don’t tend to choose superminis. The only supermini to make the EV top 10 to the end of October in the UK was the electric Mini.

That pricing hump means that affordable EV trailblazer MG won’t switch to an electric powertrain for the replacement for the MG 3, which rivals the Dacia Sandero at the budget end of the market. “Developing a small electric car is only marginally cheaper than developing a bigger car,” UK commercial director Guy Pigounakis said. “Then half the price is battery so it becomes a £25,000 car, which is unaffordable”.

However, electric superminis are in the pipeline. The VW Group is planning a trio of small electric cars for the Volkswagen brand, with Skoda and Cupra variants to follow in 2025 with an entry price target below £22,000. All are expected to be produced in the same Spanish factory to increase the scale effects and they’re likely to use a cheaper iron-based battery chemistry of the type that has helped MG reduce the price of its 4 compact hatchback to less than £26,000.

The trick is of course to persuade the customer to pay more and hope you cover the extra cost of batteries that way. For example, the Spanish-badged version of the small VW Group EV will be an upmarket Cupra, previewed by the Urban Rebel, rather than a budget Seat. 

One or more of the trio is likely to be styled to resemble a small SUV, a trick that has paid dividends for car makers over the past six or more years as they looked to increase the price customers are prepared to pay for combustion-engine superminis. 

It worked: sales of small SUVs overtook superminis across Europe in the first six months, according to figures from Jato Dynamics, making them the second most popular model after compact SUVs in the region.

Or you find another angle, as Renault has done with the forthcoming Renault 5 EV (above), reviving a classic shape of the past to create what should be an attractive-looking model when it arrives in 2025. Even with the extra pricing power, Renault boss Luca de Meo still reckons the new platform and revamped battery tech will enable the firm to sell the 5 for about a third less than a current Zoe, which now costs from £29,995 (up from £26,995 in November 2020).

Stellantis, meanwhile, has high sales ambitions for the ‘access premium’ Jeep Avenger, a small electric SUV arriving next spring that gives a new polish to the eCMP flexible electric platform, which underpins other group small electric cars such as the Peugeot e-208, the DS 3 E-Tense and Vauxhall Mokka-e.

Pushing the premium angle doesn’t help affordability, but when it comes to small cars, it could be that buyers are happy to stretch themselves for the right model. As we have seen, of the top 10 superminis sold this year only the Dacia Sandero truly could be called budget. Models like the Suzuki Swift (from £15,499), the Kia Rio (starting at £16,150) and the Citroën C3 (from £13,995 in an ‘online special’ deal) just aren’t that popular.