In Italy, the fourth generation of the Lancia Ypsilon is one of the most eagerly awaited new models this year. And the difficult situation in which Lancia has found itself over the last 20 years gives this small car even more significance.

A bit of history

Firstly, we need to take a look at the past. Lancia's history as a car manufacturer is as long as it is turbulent as the brand was founded in 1906. Although it was a benchmark for good taste, luxury and elegance in the 1960s and a symbol of rallying prowess in the 1970s, there is nothing left of it today.

Following heavy losses, the brand became part of the Fiat Group in 1969. In the hands of the Agnellis, Lancia was able to revive thanks to the introduction of some iconic models such as the Stratos, Gamma and Beta.

Business was good for Lancia. Until the 1990s, when the models became mere imitations of traditional Fiats and some reliability problems emerged. These problems were not solved in the 2000s and Lancia carried on as before: chic new editions of Fiat models, regardless of the growing negative perception outside Italy.

Lancia model lineup evolution: number of models available in Italy 1990-2023 - graphic

In 1990, the Lancia range comprised five models: Dedra, Delta, Prisma, the Thema saloon and the Thema estate. In 1996, there were already eight different Lancias. In 2006, there were five models, which increased to six in 2012 when the brand renamed three Chrysler models under FCA.

The situation worsened after Chrysler's reorganisation campaign, which never worked and had a negative impact on Lancia's already tarnished image. Since 2016, the brand has only sold one model: the Ypsilon.

The challenge

The big challenge facing Lancia today is to transform its limited present into a positive future with a broader offering in more markets. The current Ypsilon is an eleven-year-old Polish-built small car based on the Fiat Panda platform. It was the third best-selling car in Italy in 2023, with a 10 per cent increase in sales compared to 2022. It is a car that sells well mainly due to its competitive price and its appeal to female drivers.

Lancia Ypsilon third generation global sales chart - graphic

The average selling price of the versions available in December 2023 was €18,500. And the image that Lancia has created since 2016 is that of the Ypsilon: an affordable small car, ideal for city driving.

The task of the next Ypsilon is to change this perception and become the reference for luxury and high technology in the European B-segment. The Ypsilon will certainly be an interesting car, considering that it is based on two of the most successful small cars in Europe: the Opel/Vauxhall Corsa and the Peugeot 208.

The unknowns

However, there are two problems: As the Ypsilon aims to refresh Lancia's image with lots of technology and powerful engines, the car is unlikely to be as affordable as the current generation. It is therefore unlikely to conquer a large part of the B-segment.

Declining B-segment market share in European new passenger car market

The latter is the second problem: the small car segment is no longer growing. On the contrary: its market share has fallen from 16.4 per cent in 2022 to 15.4 per cent in 2023. In 2014, small cars still accounted for almost 23 per cent of the European new car market.

Is the new Ypsilon competitive enough to gain a satisfactory market share in a shrinking segment?

The author of the article, Juan Felipe Munoz, is Automotive Industry Specialist at JATO Dynamics.