Most Americans don’t know this, but Volkswagen has too many brands. Volkswagen, Audi, Seat, Skoda, Bugatti, Bentley, and Lamborghini. Bugatti, Bentley, and Lamborghini are in their own category. In the mainstream though, VW has four brands competing with each other throughout the European markets. They subsist somehow for three reasons. (1) While the bulk of Audi’s sales come from 4-cylinder A3s and A4s, they are a player in the luxury market. (2) Because of regional favoritism (i.e. the Spanish buy Seats because it was once a Spanish company). (3) Pricing and brand stigma. VWs are more expensive, but a respectable car brand. Seats are unusual outside of Spain and Italy, are priced cheaper than VWs, and tend toward weak interiors. Skodas are still the butt of jokes from when the company cranked out stereotypical Eastern European cars. All good? No. The model isn’t working. Spain’s economy, which has been seriously hurting ever since 1588 they went on the Euro, is getting slammed even worse right now. Sales across Europe are down, and Spain is taking it very hard. “I don’t think the Spanish market will recover, given everything that’s happening,” Seat President Erich Schmitt told Spain’s Expansion newspaper. While Automotive News Europe says VW has no plans to close or sell Seat – down 22% this year – that’s what they always say. Until they close or sell it. TTAC won’t be chronicling this story in close detail, but Seat is on European deathwatch.
As soon as Volkswagen bought into, then bought up, Skoda and started doing cloned Volkswagen technology to replace the antiquated Renault Dauphine cloned rear-engine fiasco-mobiles, I knew Seat’s number would some day, be up.
Seat was fairly popular in the UK when I lived there (1985-1992), before Skoda was bought by VW.
Before VW bought Seat, it had been independent of Fiat for awhile and you could get a vastly updated Fiat bodied car (which didn’t actually rust out in 3 weeks) with a System Porsche (yes, Porsche) designed heron-head four cylinder engine.
In fact, I talked mom-in-law into getting a Seat Malaga* new with 0% interest instead of their usual used Ford Escort, and she bought Seats new every couple of years from then on until she passed on.
As for Seat now, they are too similar to, and priced higher than, equally good or better (believe it!) Skodas. So outside of Spain, who’d be interested in buying one?
* unfortunately for Seat, Malaga means “masturbation” in Greek. Kind of like Buick’s whoopsie with their LaCrosse name – in Quebecois – it means the same thing. Hence, they rename the car for Canada. Don’t these guys have computers to check this stuff?!
Told my boss (2nd job – worked at a Greek restaurant, as well as my main job in insurance) about mom-in-law’s new car and he nearly split a gut laughing…
@menno:
The thing is, I don’t even know if it’s just Skoda that’s killing Seat. Seat isn’t that much cheaper than VW, and just look at those designs! The Toledo is a disaster! The Leon is so so (I loved the Leon based on the MkIV Golf). I do like the new Ibiza, but I think it’s too little too late.
I never understood why VW breathed new life into Bugatti. The Veyron is a remarkable car, but I really don’t see what it will do for the company in the longterm.
At some point they imported Skodas into Canada. Not for long mind you. In terms of other cars I have experienced the only one that compares in sheer, unadultered primitiveness was an early Beetle. I can see why their bad reputation lingers.
Seat is now on “Euro Deathwatch”. Outstanding! It will be just like GM Deathwatch, except thinner and better dressed.
“Spain’s economy, which has been seriously hurting ever since 1588 they went on the Euro, is getting slammed even worse right now.”
Actually, they were doing quite well, until this year. They were serving the same function in Europe that Florida serves in the US — condo speculation.
Both Skoda (Fabia/Octavia) and Seat (Leon) are fairly popular here in the Netherlands. Strangely enough, the pricing of the Leon and Octavia is pretty close to the Golf over here, because VW has of late made efforts to price the Golf competitively, which won’t change with the upcoming Golf VI.
VW sold 10.950 Golfs this year-to-date in the Netherlands (up from 10.500 in total in 2007), Seat sold 3145 Leons this year so far compared to 5006 in the full year in 2007 and for the Skoda Octavia the respective figures are 3536/4749, so almost identical to Seat. Skoda’s marketshare is now 1,91%, about constant over the last 4 years, while Seat’s is 2,54%, also quite constant over the last 4 years but markedly down from 3.73% in 2001.
For the ones who are interested, this is the top 20 most sold brands (jan-sept) in The Netherlands, quite different from the US;
(1st figure= ranking 2008, 2nd figure= ranking 2007)
1 2 Volkswagen 37.140
2 4 Ford 36.213
3 1 Opel 34.685
4 5 Peugeot 34.188
5 3 Toyota 33.242
6 6 Renault 29.990
7 7 Citroen 20.416
8 9 Fiat 18.040
9 10 Hyundai 14.743
10 8 Volvo 13.550
11 12 Audi 13.307
12 13 BMW 13.218
13 14 Suzuki 12.212
14 11 Kia 10.994
15 15 Seat 10.505
16 16 Mercedes-Benz 9.931
17 18 Nissan 8.431
18 17 Skoda 7.890
19 21 Daihatsu 7.615
20 23 Honda 7.327
@Robert Schwartz:
You’re right, and I should have been more specific. What I was getting at is how much money Spanish citizens and full time residents have to spend.
I guess I’ll go with GDP per capita, rather than how much money is in the economy, because a lot of that latter number is transnational. Obviously GDP per capita is also a problem indicator, but even suspending that for a second – Spain is above only Italy and Portugal among countries in Western Europe.
The UK, Ireland, Norway, Belgium, the Netherlands, Sweden, Denmark, Norway, Finland, Iceland, Germany, and Austria all do better.
VW’s brand proliferation is baffling. In key respects it’s less rational than GM’s. You’ll know VW is starting to get its house in order when it gets rid of at least two brands. Bentley makes some sense, but not Lamborghini. (Bugatti? Purely corporate ego.) Either Seat or Skoda need to go; one might argue that neither is needed if VW reverted to its historical position as an entry-level brand. And why not? That would give more breathing room for Audi to be VW’s sole premium-priced brand.
VW, Audi, Bentley. Covers the spectrum nicely. No need for product overlap. Economies of scale maximized. Car buyers less confused. Fewer headaches for VW execs. Win-win-win-win-win. Alas, it will be a cold day in a distant place before that happens.
Skodas are now excellent cars, having been in a few on my trips to Europe. I’d love an Octavia for the states.
Are SEATs still built in Spain? I believe all the Skodas are constructed in the Czech Republic.
Yes, the Spanish economy is based on property sales. Condos on the coast are only part of that. Also, Spanish banks, strangely, are in good shape as they couldn’t overleverage themselves. So, yes, Spain is going to go through a world of hurt in the next 24 months, but then again we all are.
So I don’t see the need for a “SEAT death watch”. Yes, VW has a brand problem. But I don’t see the need to pick on SEAT. They make some, cheap ugly cars for people who don’t have much money. I 100% agree that pushing VW so upmarket makes sense in Euroland when you have SEAT and skoda to take care of the low-end, but it will mostly hurt in overseas sales.
Spaniards don’t like to buy SEAT because they are from Barcelona, and the rest of the country doesn’t like the Catalans whining all the time. They prefer FIATs or VWs.
Volkswagen brandstrategy isn’t that foolish.
Seat for the younger buyers
Volkswagen for the people who can afford it
and Skoda for people who are to cheap to buy an Volkswagen, They are also somewhat older than volkswagen buyers.
Skoda’s are assembled in Czech, but the moters etc. are the same as in a Volkswagen
Spain may not be the richest western European country but it was much poorer in the past. They really grew fast the last decade and when you consider the massive influx of immigrant labour than the native born Spaniard is about as rich as the average Western European
Volkswagen brandstrategy isn’t that foolish.
They cocked it up totally in South Africa.
They introduced Seat here a couple of years ago as a stand-alone brand, i.e. not sold by VW dealers, although they were made in the VW factory on the VW production line.
And they tried to market the Seat as a premium brand, priced higher than the equivalent VW model. Perhaps they didn’t realise that us stupid Japies can see further than the Limpopo River, and we know that the Seat is supposed to be a cheap ‘n cheerful Spanish version of the VW.
The Seats are nice. My neighbour’s got one. But they aren’t a premium product, and the resale value is not as good as a VW.
Some months ago they cut prices, and recently they announced they were discontinuing Seat altogether.
The whole exercise was an expensive fiasco. Why they even want to come to South Africa in the first place is a mystery — we probably have more models per head of population than any country in the world.
Because South Africa is the CDK Detroit of the world. Add the easy registration requirements and you get most models per capita.
I liked SEATS, and drove one when I lived in Spain. They look far better than Volkswagens and are fairly fun to drive- sort of like Spanish Mazda.
@ Martin B
They tried the same “strategy” here in Brazil some years back. LOL!!!! The whole exercise blew up in maybe 3 or 4 model years.
I agree with whoever said VW should be just VW, Audi, and Bentley. The rest we can put up to German arrogance and their beleive that they know better.
Hell! Even here in Brazil VW has been knocked around for years ’cause people ain’t buying their bs that VW are somehow better than the Fiat, Renaults, Peugeots, Fords, Chevys, Hondas of the world. They lost their historical leadership (more than 40 years) to Fiat some 6 or 7 years ago and I wouldn’t bank on them getting it back anytime soon. Sure, they just recently launched their new Gol (single model market leader for 20 plus years) and have got some good press and improved sales. But nothing to challenge Fiat yet. And after the excitement dies down a little and the rush to buy the “newest, bestest just because it the most recentest launch” (sic) excitement dies down, the Gol will still be fighting for its life with the Fiat Palio (which I know for a fact has not become the number 1 model due to Fiat’s lack of production capacity, yeah, down here they’re running 24/7).
“Spain’s economy, which has been seriously hurting ever since they went on the Euro …”
I wonder when Spain, Ireland and some of the other Euro zone countries will decide that they want to have control of their own monetary policy again?
To the main point, VW marketing strategy is clearly messed up in so many places. They missed the whole minivan craze in the US only to finally jump in with a rebadged Chrysler … and this from the company which really DID invent the minivan. The W8 Passat and the Phaeton stick out as supremely stupid moves. A $40k Passat in 2002? A $100k VW Phaeton in 2004? That is Audi territory and the VW brand never should have gone there. Then there is the problem of trying to get premium prices for Mexican made Jettas on the theory that they are a premium vehicle and are inherently German because HQ is in Germany. It is mind boggling that a company so messed up in basic strategic marketing somehow carries on.
Here in Sweden, they were trying to sell Seats to young people, calling it something like the VW equivalence to BMW.
It didn´t work.
Seats are quite rare here.
Most people realise that Seats is 5 yo Volkswagens with “The Emperor’s New Clothes” and a plastic fantastic interior.
The Spanish economy boomed the last 9 years because of the introduction of the Euro and the lower interestrates that accompanied it. Claiming that the Spanish economy has been seriously hurting since the introduction of the Euro doesn’t know what they are talking about.
Spain, Ireland etc except Germany have now much more controle over their own monetary policy than they had before the Euro. Before that it was follow the Germans except when you where in a really big crisis and were forced to do something else.
Problem with VW is that in Europe they are a near luxery brand like Volvo with Skoda and Seat for the cheaper market. So a $40.000 Passat makes sense. (Phaeton is a different story but that is probably something that makes sense internally, just like the luxery Renault/Citroen/Peugeot failures)
@JJ
What’s wrong with Honda and Nissan in the Netherlands? How come their sales numbers are so similar to the lowly Daihatsu???? I can’t believe it.
The sales numbers in a xls file from the Dutch society of car importers.
http://www.raivereniging.nl/nieuws.asp?aid=1&nid=1367
Sonic, the reason is tax which makes cars in Holland expensive. Diahatsu sell much cheaper cars than Honda & Nissan.
For Dutch price including taxes see this site http://www.autoweek.nl/carbasemerkindex.php?jaar=1&merkID=1&serietotaalID=&add=&merkID1=32&cache=no
There was also a change in tax so everybody who wanted to buy a SUV bought one before februari but i think that has died down.
@sonic_bang
First of all, let’s start with saying that Daihatsu just sells a bunch of (very) small cars to the elderly due to taxing reasons. It’s a niche player and it does that well.
Honda on the other hand is a well respected brand in the Netherlands, however, as charly already mentioned, the high taxes do have an influence on the car choices people make, and on top of that, the biggest car segments in terms of volume in the Netherlands are the B (Honda Jazz=Fit) and C segment (Civic), and the D segment (company leases) is important too (Euro-Accord=Acura TSX).
Problem is, eventhough the Jazz and Euro-Civic are nice products by any means, those segments are infinitely more competitive over here compared to the US and moreover, brands that aren’t to good at making bigger cars make very competitive models in the smaller cars market, that appeal more to a younger audience (Peugeot 207, FIAT grande Punto, Renault Clio etc etc).
The same goes for the Civic; in the US you have the Mazda3 and the Rabbit, but in Europe you easily have close to 10 serious options in the C-segment to choose from, with infinite engine and body-style options (which Honda doesn’t do) on top of that.
Then the D-segment is probably a about 90% lease (ie diesel, which for a long time the Japanese didn’t offer)-market, and it’s dominated by the Germans, because eventhough on paper they would be more expensive to buy (and therefore, have more status) the leasing prices are relatively low because they have such good trade-in values. The trade-in values obviously are created by the market, which brings up another point.
In the US; Honda and ToMoCo’s big selling points are reliability. However, in Europe, this is much less the case. It is common knowledge Japanese cars are usually more reliable, however, perceptionwise they are not way better than the Germans (VW still has an image of reliability over here). On top of that, Japanese cars are more expensive to maintain over here, and parts are way more expensive. In other words, operating costs are higher or at least perceived as being higher despite the reliability. Reliability is just generally much less of an issue over here for some reason, except when it is clearly negative (which is why the French and Italians can’t sell huge numbers of bigger cars in other countries than France and Italy) but much more important is image and also very important, interior materials…
@charly and JJ
Thank you very much for your answers.. So, major Japanese manufacturers don’t do well in Europe mainly because they are more expensive to maintain than their European counterparts. Good to know. I guess Asian manfufacturers to be successful in Europe, they better be really good like Toyota or really cheap like Suzuki/Daihatsu and the Koreans.