Volkswagen's Future (US) Product Strategy Revealed - and what it means for us

[crackingride]

(From Car & Driver Magazine)

"This week, Volkswagen's top U.S. brass revealed to us the company's strategy to nearly triple sales here—to 800,000 vehicles per year—by 2018. In short, the company will produce bigger, cheaper cars in North America while retaining VW's self-identified core brand values of sleek styling, best-in-class interiors, and crisp handling.
VW will be competing in more high-volume segments within the next few years. Imagine a Volkswagen competitor to every mainstream Honda, and you'll be spot-on with the German company’s product road map. Below are the basic strategies that will be utilized to enact Volkswagen's product offensive for the next three years:
Localization – VW plans to manufacture all of its high-volume products for the U.S. market in North America. Because of fluctuating exchange rates, high costs to produce vehicles in Europe, and different market requirements in different world regions, the company does not expect any high-volume vehicle to be imported from Germany to the U.S. When pressed on whether any volume car could be imported to the U.S. from outside North America, VW U.S. CEO Stefan Jacoby says, "It makes no sense."
Cheaper pricing – Volkswagen's current offerings, most of which come from Europe, are priced thousands of dollars above Japanese competitors. Expect VW's future vehicles to cost only one or two percent more than competitive Toyotas and Hondas.
Larger size – To better compete with high-volume sellers in the U.S., the Tiguan, Jetta, Passat, and Touareg will be supplanted by or replaced with vehicles that are slightly larger and more spacious.
Brand values – The company's vehicles will keep the "VW goodies" in all of its cars, according to Jacoby. They will continue to feature German styling, best-in-class interiors, and good handling.
Familiarization – German ergonomic deficiencies (inscrutable HVAC and infotainment controls and arthritis-inducing seat recliners) will be addressed. Expect radios and ventilation systems to work more like those of the Japanese segment leaders.
Fixing what's wrong – VW is painfully aware of its reputation for building cars that cost a lot to maintain. A generation of would-be Volkswagen loyalists abandoned the brand because of the appalling reliability and frustrating dealer experiences associated with the fourth-generation Golf, Jetta, and GTI. Although VW won't offer longer warranties, it claims it has made huge strides in vehicle quality and is close to being on-par with Japanese competitors. Warranty claims have dropped from 1 per car to 0.6, which is within 20 percent of Volkswagen's estimates of warranty claims made on Toyota vehicles. Warranty costs are half what they were a few years ago. VW also is dispatching teams to dealers with low customer satisfaction scores to help them better work with customers. As an example, Jacoby says that an issue currently involving double-clutch transmissions losing their ability to smoothly pull away from a stop will be addressed by the company in a responsible way.
Simplification of offerings – Volkswagen plans eventually to ape Honda's strategy of offering no factory options. A limited number of different trim lines come with specific equipment, and the only choices within each trim line are color, transmission, seat trim, and certain big-ticket packages. Each combination of options will technically be its own trim line. All other add-ons will be installed at the port or by the dealer."

Going by all this, we can see where the crucial aspects of pricing, size vs. cost, and simplification will impact us here in India.

The pricing strategy for the VW Polo ( if true) brings it in line with the Japanese segment leaders, such as the Swift.

It might also account for the lack of factory options due to simplification of offerings, again keeping costs down.

The price differential between perceived Euro quality and the Japanese competition will be reduced, and that is good for us, because we ( like the Americans) pay for perceived size, and not so much for the fine details that the Europeans love about their cars.

The US and India cannot appreciate the finer design elements, and the Europeans are making a conscious decision to pander to our ( and Chinese/ Russian) tastes to become the biggest auto group by 2018. In fact, the Americans are already complaining about being clubbed with the third world!

We will get bigger vehicles, for less money than in the past, but we should expect those little details that made Euro cars what they were to disappear, or become more downmarket.

A true test of this strategy, and whether this is actually going to play out in India, will come first when the VW Polo is actually priced and launched, and next when the next version of the Jetta is announced. We can forget about the Golf ever making it to India, or even to the US for that matter.

In the US, the "New Midsize Sedan" being developed specifically for the US and Chinese markets will probably turn into the new Passat.
The "New Compact Sedan" will probably become the new Jetta for both the US, China and us here in India by 2011-12.

Time will tell, and we might have to get used to the idea that the Euro car we might be buying will not be so different from the Japanese or Koreans after all.

VW Polo at Swift prices? Might make sense, after all!

[GTO]

In short, they are talking about doing everything that a large car manufacturer wants to do? Increasing reliability & cutting costs is easier said than done. I have no doubt that VW will continue to climb up through the world rankings, yet don't see too much of value in the Car & Driver article.

The price differential between perceived Euro quality and the Japanese competition will be reduced, and that is good for us, because we ( like the Americans) pay for perceived size, and not so much for the fine details that the Europeans love about their cars.

VW Polo at Swift prices? Might make sense, after all!

You mean to say that a VW Polo will cost the same as a cut-price basic quality mass production hatch like the Swift? I hope so, as competition is all the better for us consumers, yet the Logan incident has proven the uphill task that it is.

[srishiva]

A while ago, I had read a article on how VW wants to increase the size and lessen the features it provides on its cars in U.S. This is to attract the customer who thinks more on size vis a vis Japanese and doesn't care about the great interior quality, features etc., that VW provides. The article sounded like having a cynical view of the U.S customer.
Hope they can maintain the reliability as well as Japs.

[vasudeva]

See this article from Ward's Auto World Aug 2009 for 2009-16 forecasts. Also has a mention of Tata.

[goacom]

There is of course the danger that in their bid to become more "American", they may lose their distinct personality and differentiation factor viz the Asian competition.

[crackingride]

Originally Posted by goacom

There is of course the danger that in their bid to become more "American", they may lose their distinct personality and differentiation factor viz the Asian competition.

The Americans themselves cannot decide if they want this to happen or not.
Some comments I've seen say that they are glad the prices will come down, others don't understand the logic of growing in size and losing the exclusiveness of the Euro feel.

But if VW want to become number 1, they have to do it with volumes. The US market has to contribute, as must India and China. So, we have to see how this double-edged sword cuts in this country. We might get cheaper products, or the products we get might be cheap!

[srishiva]

Originally Posted by crackingride

The Americans themselves cannot decide if they want this to happen or not.
Some comments I've seen say that they are glad the prices will come down, others don't understand the logic of growing in size and losing the exclusiveness of the Euro feel.

But if VW want to become number 1, they have to do it with volumes. The US market has to contribute, as must India and China. So, we have to see how this double-edged sword cuts in this country. We might get cheaper products, or the products we get might be cheap!

As you said, to have volumes they need to bring down the price but add reliability. VW is confused. They want to be premium and all (remember Phaeton). People know there is a Audi if they want such things.