http://www.businessweek.

com/articles/2013-01-03/for-european-car-buyerscheap-is-now-chic#r=glo-s Wolfgang Hirschauer, a toolmaker from the Bavarian ski town of GarmischPartenkirchen, last year traded in his Renault Espace minivan for a Dacia Logan, a budget wagon that sells for a quarter the price. I was looking for a car for transportation only, says the father of three. I liked the low cost and the basic features, including easy-to-fix mechanics, which made up for the lack of frills such as power windows. Hirschauers choice reflects a broad back-to-basics thriftiness in crisisstrapped Europe, coupled with a deeper shift in Continental attitudes as cars lose their importance as a status symbol. Automobiles are not a show -off item anymore, says Arnaud Deboeuf, a director at Renault, which owns Dacia. People prefer investing in iPads or smartphones over cars. After acquiring Dacia in 1998, Renault intended to use the Romanian automaker to attract first-time buyers in Eastern Europe and other emerging markets. Following the Logans introduction in 2004, that plan changed as price-conscious Western Europeans began buying the cars in the East and bringing them back home. Due to its no-discount policy, Dacias good fortune is helping Renault weather Europes downturn by providing stable profit margins, says Erich Hauser, an analyst withCredit Suisse (CS) in London. Although Renault doesnt break out Dacias operating profit margin, the French carmaker posted a margin of 2.5 percent in the first half of 2012 even as mass-market rivals struggle with losses in Europe. Sales of low-cost brands such as Dacia, Volkswagens Skoda, and Hyundai Motors Kia have climbed 16 percent since car sales in Europe peaked in 2007. Over the same period, industrywide deliveries have plunged 21 percent, according to researcher IHS Automotive (IHS). It says budget brands will account for 8.3 percent of the market in 2012, compared with 5.7 percent five years ago, as they nab customers from mid-market nameplates like PSA Peugeot Citron, Fiat (F), and General Motors (GM)Opel. The middle class in Europe is shrinking due to the sovereign-debt crisis, reducing demand for cars in the mid-priced segment, says Albrecht Denninghoff, analyst at Silvia Quandt Research in Frankfurt.

To reduce the risk of getting squeezed out of the market, Volkswagen is considering a no-frills line that would harken back to basic vehicles from the 60s and 70s, before cars were ubiquitous in Europe. The cars would be roughly the size of the Golf hatchback and cost less than 8,000 ($10,500), at least 20 percent cheaper than VWs current entry -level Up! city car, Chief Executive Officer Martin Winterkorn said in October. Ford Motor (F) is evaluating its own budget car that might be sold in Europe under a separate name. Such a move could help Ford shore up its flagging European operations as it prepares to shut three of its 13 factories in the region by 2014. I am just not sure if we can do that with our Ford brand, CEO Alan Mulally said at a Nov. 7 conference in Berlin. Incomes in Europe havent grown as fast as the cost of transport. A new car cost an average German worker 16 months pay in 2011, vs. 9.4 months in 1980, according to the Center for Automotive Research at the University of Duisburg-Essen. Cars are now too expensive for many people, a fact that many automakers have ignored, says Juergen Pieper, an analyst at Bankhaus Metzler. VWs Skoda, which attempted to shift upscale with the Superb sedan in 2008, is returning to its roots as a value brand. The Czech carmaker started selling the new Rapid sedan last fall at a base price of 13,990, undercutting the similarly sized Renault Fluence by 7,500 and the Ford Mondeo by 9,960. Still, Skoda cant compete with Dacia on price. Dacias cheapest model, the Sandero, starts at 6,790, thanks to its reliance on cheap labor in Romania and Morocco. The budget label hasnt turned off Tomas Luenser. The industrial mechanic from Berlin swapped his VW Passat for a Dacia Duster SUV in October 2010 because of the price and the ample space for his three kids. Image wasnt part of the equation. Earlier it was important to drive a VW and show that you had something, he says, but now we just want a vehicle that moves. The bottom line: Europes crisis has made car buyers more thrifty. Renault hopes its Dacia line, which starts at about $9,000, will benefit from the shift.