Carmakers were supposed to earn huge profits by building more niche vehicles on common platform architectures. But brutal competition is making those profits harder to achieve than most expected.
"So many people are doing it, there is not significant additional profit in it," said John Lawson, industry analyst for SmithBarney in London. "The market is claiming back a lot of the engineering benefits and not giving you the price premiums that were initially hoped for."
Lawson estimates that basic engineering for a new platform costs a manufacturer between $800 million and $1.2 billion (E701 million and E1.05 billion). Investment in the unique engineering - a spin-off variant from that platform - starts around $100 million, he said.
But the complexity of variants can quickly raise the price tag.
"If an SUV is sprung off a particular platform, you'd need to spend more, perhaps in the $300-million range," said Nigel Griffiths of Global Insight Automotive in London.
Most body panels and suspension components have to be unique to convert a platform to four-wheel drive. Land Rover, for example, plans to build an SUV on components from Ford's C1 platform, the basis for the Ford Focus and the forthcoming replacements for the Volvo S40, V40 and Mazda 323.
To accommodate the niche vehicles, automakers are lowering projections for the base models. VW will make fewer new Golfs because it is now making the Touran compact minivan on the Golf platform.
Volkswagen produced 804,000 Golfs in western Europe in 1998, the peak year. Golf production in 2005 will be about 700,000, according to Global Insight. Touran production will be 170,000 the same year.
"It's a kind of internal cannibalization," said Griffiths.
But manufacturers are likely to stick with their strategies because customers want more niche vehicles.