How minicars will survive by electrifying, evolving

European car buyers still want minicars, for their ease of parking, low cost and fuel efficiency. But automakers say new emissions rules that require costly modifications are making them economically unfeasible.

So, how can the key entry-level segment be saved?

In some cases, automakers are offering electric versions of existing models. In others, they are blurring the line between minicars and models one size up. A few players, including some new entrants, believe that limited-range electric quadricycles are the answer.

Minicars -- also known as city cars or A-segment cars -- were Europe's fifth-largest segment in 2019, with more than 1.1 million sales, according to data from JATO Dynamics. Sales fell 3.9 percent from 2018, representing a decline of about 45,000 units.

"It's one of the very few stable car segments," said Felipe Munoz, lead automotive analyst at JATO Dynamics. "It's lost a bit of share because overall sales have grown slightly in Europe."

One reason is that there are no minicar-sized SUVs or crossovers, Munoz said, meaning that sales in the segment are not migrating to those body styles, as they are in the small, midsize and even large segments.

"The smallest SUVs in Europe are still longer than 4 meters. They are not direct competitors to city cars," he said. Another, smaller factor is that many short-term rental programs, also known as car-sharing plans, use minicars, Munoz added.

LMC Automotive is still refining its forecasts for the segment, but Al Bedwell, a powertrain analyst at the research company, said sales were likely to "fall off a cliff" in the next five to seven years -- before starting to creep up again, provided that battery costs fall.

"The recovery could be a model generation away," Bedwell said. "The size benefits are still going to be there," especially for city dwellers, he said. In coming years, price-sensitive minicar buyers might opt for a used car in a higher segment, Bedwell suggested.

"Electric and premium cars could be the mainstay of that segment, and the rest will die off," he said.

Minicars could get a boost this year if governments turn to incentives such as scrapping programs to revive sales after coronavirus restrictions end. The last time such state-sponsored plans were put in place, after the 2008 financial crisis, minicars benefited disproportionately. Among the reasons: Some incentives were aimed at lower-emissions vehicles; many minicars were sold to first-time buyers who might have otherwise bought a used car; and the incentives were a larger proportion of the price of a minicar, making them even more affordable.

As EU fleet CO2 emissions targets fall sharply -- to an expected 59 grams per kilometer in 2030 from 95g/km this year, automakers and analysts expect that by the end of this decade nearly all new cars sold in Europe will be either full-electric or heavily electrified in the form of plug-in or conventional hybrids.

Those technologies are costly and could negatively affect the minicar segment. Allowed particulate levels for internal combustion engines will also be lowered, with the expected introduction of the Euro 7 emissions standard some time after 2025, necessitating technologies such as high-pressure direct injection and gasoline particulate filters.

"The cost of electrification is a problem for every segment," Munoz said, "but the difference is that the A segment is very price sensitive."

According to the International Council on Clean Transportation, or ICCT, the costs of adding technology to internal combustion engines to help automakers meet the EU's 2030 standards range from 1,000 euros to 2,000 euros.

The ICCT says that figure is a rough estimate that does not take into account future technologies, but those numbers would make up at least 10 percent of the price of a Fiat Panda, the current minicar segment leader in Europe.

Bedwell said that even 48-volt mild hybrid systems attached to a typical three-cylinder, 1.0-liter gasoline engine could add considerable costs, about 1,000 euros, some of which would have to be borne by automakers and the rest by consumers.

Bedwell said the particulate issue in the short term could hurt conventional minicars as much as CO2 reduction.

"From a CO2 perspective, these cars can be an asset as they can get to about 100g/km, with the potential for some further reductions," he said, noting that he had looked at the five top-selling minicars and found that the average CO2 emissions of the most-frugal versions was 101g/km.

"After Euro 7, that segment can probably only exist as electric vehicles," Bedwell said, referring to the particulate standard, noting that after 2030 proposed bans on the sale of new internal combustion engine cars will start to take hold.

"In the end, though, the outcome is the same: Whether the issue is CO2 or other emissions, it's probably not worth spending the money on ICE [internal combustion engine] emissions after-treatment systems and engine modifications in this segment," he said. "It's better to spend it on creating battery-electric versions."

Some automakers have already done just that, with a number of electric versions of familiar models coming to market in the next 18 months. Renault is introducing the Twingo Z.E., a version of the electric Smart ForFour developed jointly by Daimler.

Although the Smart electric minicar has not sold in big numbers, Renault believes the Twingo version will do better because it uses newer technology than the Smart, allowing for faster charging and better performance. The electric Twingo will also sell for a lower price. Last year, the Twingo was the No. 4-selling minicar in Europe with a volume of 86,486, nearly the same as in 2018, according to JATO Dynamics.

“This is our response to a segment that is changing,” said Frederic Clermont, global small car marketing director at Renault. He believes the Twingo Z.E. will account for 15 percent to 30 percent of the car’s global sales. He added that many Twingo buyers are willing to pay a higher price because 40 percent currently purchase the car’s highest two trim levels.

Renault Group's budget brand, Dacia, plans to launch an electric version of the Kwid mini-SUV that is sold in India, Brazil and other emerging markets. The car, to be called the Spring, is already sold in China, where it is produced as the Renault City K-ZE (although the Renault brand will leave the Chinese market), and it will be homologated to meet EU safety standards.

The City K-ZE costs just 8,000 euros in China, and while Dacia cannot match that price with its forthcoming variant, executives say that by using the Dacia formula of keeping prices low using proven technology, it will be more affordable than any other electric car.

“We are following the same recipe as our internal combustion cars,” said Philippe Buros, Renault Group’s chairman of the Europe region. “It will be much cheaper than other EVs on the market.”

Another mainstay of the minicar segment, the Fiat 500, is also being reborn as an electric car. The conventional 500, with 175,566 sales in 2019, ranked No. 2 among European minicars behind the Fiat Panda. The launch version of the New 500, as Fiat calls it, will cost 37,900 euros, compared with 16,000 euros for a base gasoline-powered 500.

Although less-expensive versions will be available, Fiat will not position the New 500 as a price leader in the segment because the current 500 is neither a mass-market car nor the cheapest car in its segment, Fiat brand boss Olivier Francois said.

The New 500 is also slightly larger than the current 500, and Fiat says it is blurring the lines between minicars and small cars, the next segment up.

"It is as wide as a small car, but it’s shorter than a classic small car," Francois said. "We are approaching a situation where a new ‘compact’ small segment could emerge, as more crossovers enter the small car segment from above. Segments are fluid. We are reinventing them. The small segment will be more multifaceted."

Fiat may have another segment-blurrer in the wings: The Centoventi concept for an electric hatchback that debuted at the 2019 Geneva auto show. "The Centoventi is a mix of the A- and B-segments," JATO’s Munoz said, "and that's more or less what's going to happen if this experiment of having electric city cars doesn't work."

Honda's first electric car for Europe, the retro-styled Honda e, is another higher-end minicar in the mold of the New 500. The Honda e will start at 33,850 euros. Honda executives believe that packing the Honda e with technology such as voice-activated connectivity will draw premium buyers.

If neither inexpensive nor premium electric minicars lure enough buyers, there is another emerging option: quadricycles, an EU designation that applies to lightweight, low-power vehicles, some of which can be driven by people as young as 14.

The pioneer in the segment, the Renault Twizy, was launched in 2012 but never achieved significant volumes and is now built in South Korea in limited numbers. Despite the Twizy’s struggles, PSA Group’s Citroen brand and some newcomers are betting that the time is right to try again.

Citroen is introducing the Ami, an electric quadricycle with a top speed of 45 kph and a starting price of 6,990 euros in France. The Ami can also be leased for 19.99 euros a month or used as part of a ride-hailing plan for 26 cents a kilometer.

“The A segment as it is today might not be the answer for our customers’ needs,” PSA Group Director of Operations for Europe Maxime Picat said. “People who live in cities don’t want to drive 90 kph or need 300 km of range.”

For those who like their electric mobility with extreme retro flair, there is the Microlino, a quadricycle that echoes the 1950s-era Isetta, with a door that allows users to step in from the front.

The Microlino is from Micro Mobility, a Swiss company that is best known for its kick scooters and electric sidewalk scooters. The Microlino will be developed and produced by Cecomp, an Italian engineering and prototyping company that created the Bollore BlueCar EV.

“I think the time is right for small electric cars that can be used in big cities,” said Merlin Ouboter, a member of the founding family of Micro Mobility. “We are not a real car in terms of speed and range. It’s for someone who doesn’t need 200 km of autonomy.”

With a planned starting price of 12,000 euros when it reaches the market in 2021, Ouboter expects the Microlino to draw buyers who now use scooters or small cars. He also thinks it will appear to young people who are entering the mobility market. Ouboter said Micro Mobility had received 18,000 reservations so far.

JATO’s Munoz said he had observed something of a paradox: Conventional minicars “are probably the first victims of electrification, but in the end city cars are perfect for electrification. They are intended for short-range use and that’s the best way you can use an electric car right now.”