As many in the car industry – most recently Mercedes-Benz – turn their back on smaller models due to wafer-thin profit margins, the news today that Ineos’s second production model after the Ineos Grenadier will be a smaller 4×4 surprises and intrigues on many levels.
Land Rover, never far away from an Ineos comparison (and is it a coincidence that Ineos’s news arrives on the same day as the Land Rover Defender 130 is revealed? I think not), has long looked at making smaller models, but the likely return on investment makes them unviable.
Indeed, when you’ve got year-long-plus waiting lists for the likes of the full-size Range Rover (whose average transaction price is now said to be some £125,000) and the Land Rover Defender, why bother going smaller anyway?
After all, it costs just as much to engineer a small car as a big one, but manufacturers can’t compensate for that with a higher list price, and thus profit margins are reduced.
So what has Ineos seen that others haven’t? Or perhaps more pertinently, what are Ineos’s prospective customers not getting from the Grenadier that this proposed model will give them?
When Ineos set its stall out as a car maker, its mission was very simple: to build a car to fill the gap in the market left by the departure of the original Defender. The Grenadier fulfils that mission.
With today’s news, that core mission moves further away: the new model will not only be smaller but also electric and built on a new platform, too.
Those latter two aspects mean significant investments again need to be made without any obvious economy of scale benefits by deriving it from the Grenadier.
How small is small? That’s still to emerge, but there are about four different sizes of 4×4 that Ineos could slot in below the near five-metre-long Grenadier, which starts at £49,000.
The higher price of electric technology alone might actually make the car more expensive than the Grenadier, too. Smaller, yes, but cheaper is by no means a given. Those margins again…
Ineos will soon start delivering cars – a huge milestone and achievement. It has crossed the hardest valley that many wannabe car makers typically fall into: actually getting a concept into production, due to the huge investments needed, the kinds of safety and legislation requirements that need to be met, the durability and reliability needs, as well as getting thousands or parts, both physical and digital, to work together seamlessly.