Renault SA will begin selling low- cost cars online to defend its leadership of Europe’s surging budget-vehicle market against rival offerings including a new brand being developed by PSA Peugeot Citroen.

Dacia, Renault’s no-frills badge, will experiment with an Internet sales program in Europe to prepare a wider rollout in the region next year, Gerard Detourbet, head of the company’s low-cost Entry program, said in a telephone interview.

“Internet sales will quickly become a reality,” Detourbet said.

“Many of our customers know what they want before they step into our showrooms, so an online sales channel makes sense.”

Peugeot, the larger of the two French carmakers, is considering an online-only European sales model for vehicles it plans to build with China Changan Automobile Group Co., sales chief Jean-Marc Gales said at the Geneva Motor Show this week. Combined with stripped-down models introduced by Asian rivals, the Peugeot move challenges the Dacia Sandero and other low-cost cars that account for an increasing share of Renault’s deliveries.

“We always assumed Dacia would be left in peace for four or five years at most before the competition got tougher,” Detourbet said. “We knew we wouldn’t have the market to ourselves forever.”

The Dacia brand, purchased with its Romanian factory in 1999 to power a planned emerging-market expansion, proved an unexpected success in western Europe, where it has helped compensate for flagging sales of pricier Renault models.

Renault’s global deliveries of no-frills models jumped 28 percent in 2010, more than triple the growth recorded by pricier models, to claim more than a quarter of the carmaker’s overall volume, compared with a 15 percent share in 2007.

“Renault has always sold Dacia reluctantly in Europe because they knew it would damage the main brand, and to some extent it has,” said Philippe Houchois, a London-based analyst at UBS AG.

“Its success has revealed demand for cheap cars sold as commodities in countries like France where there’s only a minor stigma attached to driving a Dacia,” Houchois said. “It makes sense for Peugeot to take advantage of that.”

Peugeot’s Gales said the Paris-based carmaker can sell low- cost cars more profitably than Renault, Hyundai Motor Co., Volkswagen AG’s Skoda unit or any of the other stripped-down offerings in Europe.

“They’re all selling cars at lower prices through the same high-cost distribution system that hasn’t changed in 90 years,” he said in an interview in Geneva. “What we’re talking about is a radically new approach to car distribution.”

Unlike Renault, which will continue selling low-cost models in showrooms while experimenting with Internet retail, Peugeot’s new brand would be sold exclusively online. The carmaker may negotiate partnerships to offer test-drives through rental firms, a service that could eventually also be used by Peugeot and Citroen dealers to reduce costly showroom stock that ends up being sold as used, Gales said.
  
(Bloomberg)