VW’s 200-Model Empire Competes With Itself as Ford, GM Shrink
Volkswagen AG’s goal to surpass Toyota Motor Corp. in sales and profitability by turning out more models and building cars on shared underbodies is stoking unwanted competition among its own brands.
VW’s strategy allows Europe’s biggest carmaker to build a wider range of across brand lines at a cheaper price by using the same engines and components. It also means customers may opt to spend less money and buy a car from the Skoda and Seat units instead of the more expensive VW brand.
“I specifically came here to look for a VW but Skoda is so much cheaper,” said Manfred Hennerkes, a factory mechanic at Siemens AG, taking a seat in a Skoda Superb at the carmaker’s showroom on Berlin’s Unter den Linden boulevard. “I don’t care about the nameplate, it’s essentially a VW for great money.”
VW, undergoing a merger with Porsche SE, is seeking to overtake Toyota by 2018 by expanding sales and a line-up of about 200 models across its nine . It’s a strategy that contributed to record losses at U.S. rivals General Motors Co. and Ford Motor Co. before they reversed course to reduce the number of brands and shed divisions.
“VW is becoming quite complex,” said Anil Valsan, director of automotive research at London-based Frost & Sullivan. “It remains to be seen to what extent VW can afford some of its brands cannibalizing each other.”
Volkswagen is losing 500 million euros ($681 million) in profit every year as VW brand customers flock to cheaper Skoda and Seat models, according to an estimate by Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen.
The unwanted crossover between Skoda and VW brand contributed to Skoda chief Reinhard Jung losing his position to Winfried Vahland, previously head of VW’s China unit, Dudenhoeffer said.
