LONDON -- European auto sales keep fragmenting into more segments. Analysts aren't sure when the expensive exercise will end.
Carmakers are chasing incremental sales by creating niche vehicles derived from mainstream products, but they risk draining the volume from big segments and losing manufacturing efficiency, analysts said.
"If the markets continue to fragment, we could have brands that are unique to a certain segment of the market," said Nigel Griffiths, Global Insight Automotive analyst.
The upper-medium car segment has already been reduced by the arrival of medium minivans such as the Renault Scenic, Citroen Picasso and Opel Meriva. Now the lower-medium car segment is under threat from small minivans such as the Opel Meriva, Griffiths said.
The niche game has become costly for manufacturers.
"It's getting tougher for manufacturers to sign off on niche products," said Max Warburton, executive director of global investment research for Goldman Sachs.
Both major French carmakers have outpaced German rivals by being more nimble, he said.
"The French understand cost and pricing," he said. "They have the product development function and they're able to get product into niches quickly. I don't see the Germans being able to do that."