Wednesday 25 October 2017

VW gets its brands in a twist

The Audi 50, which was to become the VW Polo just six weeks later The Audi 50, which was to become the VW Polo just six weeks later Wikipedia

It's common knowledge that Volkswagen Group likes to mix its brands up. Easily the largest car company in Europe, its brands including Skoda, Seat, Audi and of course VW dominate our roads. Now, however, this family of brands is in trouble

 VW tends to offer cars in one of two forms: either badge-engineered (the Skoda Citigo being the same as the VW Up!, for example) or sharing a common platform and components (VW Golf, Audi A3 and so on). So, although the group tries to position its brands separately, we all know that the cars are either identical, or at least the same under the skin.

Now, this is proving to be a headache.

As reported by Reuters, VW Group CEO Matthias Mueller has said that the company needs to be more efficient - a bitter irony, given the dubious efficiency claims of its diesel engines in the recent past. However, what Mueller wants in this efficiency drive is to achieve a "perfect market coverage with clear territories for the brands", with a new strategy based on reworked customer groupings: in short, which brands fit in which consumer profile.

However, this comes at a time when tensions between the brands are running rather high. Take Skoda, for example, which is sold (at least implicitly) as a quintessential Czech brand; a variety of its Rapid mid-size offering is made in India, badge-engineered from the VW Vento. Such is the success of Skoda over the past 20-or-so years, that VW managers back in Germany are now rather envious of it. They want Skoda to stop eating its parent brand's lunch, and have requested that Skoda pays more for VW-originated technology, and that some of its manufacturing moves from the Czech Republic over to Germany.

Inevitably, Skoda didn't want to play ball; the main union at its Czech car plants considered stopping overtime were VW to actually carry out the threat of its managers.

So, until Mueller sorts this out and the brand/positioning strategy becomes clearer, VW Group has become a victim of its own success. By sharing components across its brands, it might have achieved economies of scale (clearly contributing to its market dominance) but this is now being threatened by the brands, and their products, encroaching each other. After all, why would you want a VW when a Skoda, with exactly the same parts, is cheaper? 

Although VW Group's brand strategy is now looking messy, it's still nowhere near the disasters suffered by British Leyland in the 1970s and 80s. Not only did it create a new BL master brand which it plastered across each brand's collateral, but in some cases (Mini, Princess) it even removed the manufacturing brand entirely, leaving the car literally brandless.

 

To rub salt into this rather open, seeping wound, BL's passenger car division, after rebranding to Austin Rover, did exactly the same thing again in the late 80s, stripping the "Austin" from its cars, leaving the Metro, for example, to be called the... --- Metro. Both weird and crazy.

VW is not at this point of insanity yet, but it could easily be on the journey towards it. Until then, keep buying Skoda, safe in the knowledge that what you're buying is a cut-price VW, Audi and Seat with exactly the same components under the skin.

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