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Old 30th August 2009, 17:44   #1
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Default Volkswagen's Future (US) Product Strategy Revealed - and what it means for us

(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!
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Old 31st August 2009, 12:21   #2
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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.

Quote:
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.
Quote:
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.
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Old 31st August 2009, 12:30   #3
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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.
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Old 31st August 2009, 13:09   #4
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See this article from Ward's Auto World Aug 2009 for 2009-16 forecasts. Also has a mention of Tata.
Attached Files
File Type: pdf US MARKET FORECAST 200910.pdf (1.87 MB, 771 views)
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Old 1st September 2009, 09:18   #5
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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.
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Old 1st September 2009, 12:42   #6
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Originally Posted by goacom View Post
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!
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Old 1st September 2009, 12:49   #7
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Quote:
Originally Posted by crackingride View Post
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.
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Old 11th September 2012, 09:27   #8
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Default Re: Volkswagen's Future (US) Product Strategy Revealed - and what it means for us

VW is on a mission to dominate sales in almost ever category, with a goal of selling one million Audi's and VWs yearly in the United States by 2018. Projected U.S. sales of both brands for 2012 is only 565,000. To bridge that gap, analysts say the two brands will need to compete in almost every sales category.
VW and Audi have the sedan customers covered, but offerings in the crossover segment are slim.
VW is planning a couple of crossover variants, the most interesting of which concerns a possible greenlight for the Microbus-inspired Bulli concept from the 2011 Geneva Motor Show.

Options:
1.Microbus-type crossover large enough for five adults. We think a retro-themed Veedub bus would look very nice next to the newly restyled Beetle.
Name:  volkswagenbulliconcept631.jpg
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2. VW developing a seven-seat crossover to compete with Ford's Explorer and the Honda Pilot.
3.Sources also say the upcoming Tiguan replacement will be "U.S.-sized" (i.e., larger) for 2014.


http://www.autoblog.com/2012/09/10/v...segment-sales/
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Old 9th October 2012, 17:45   #9
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Default Re: Volkswagen's Future (US) Product Strategy Revealed - and what it means for us

Volkswagen Plans Low Cost Car Brand.

Also they might not market it as Volkswagen, but a new brand altogether.


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Budget cars are the sensation in the automobile world, since long. Volkswagen are considering selling ‘budget cars’ for as low as 5000 euros (USD 6,500) that comes to around Rs. 3,42,160/- at today’s exchange rate. Europe’s biggest car maker is showing interest in emerging markets like India and plans for a cheap car in the range of 5000 and 10,000 euros head of the works council representing the firm’s employees, Bernd Osterloh, told the business daily ‘Handelsblatt’ adding that a model would be ready in 2 years and the company should have a aggressive approach in the growing economies like South-East Asia and Africa.

http://www.motorbeam.com/cars/volksw...ost-car-brand/
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Old 9th October 2012, 21:01   #10
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Default Re: Volkswagen's Future (US) Product Strategy Revealed - and what it means for us

But they have Seat and Skoda, how much lower will they go?
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Old 10th October 2012, 11:17   #11
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Default Re: Volkswagen's Future (US) Product Strategy Revealed - and what it means for us

VW needs to do an introspection and figure out if it is serious about India. Polo should be priced in the range of 4-7 lacs on road, Vento should be priced in the range of 8-10 lacs on road, Jetta should be priced in the range of 13-16 lacs on road, and Passat should be priced in the range of 18-22 lacs on road.

1. Their problem with sales is due to over pricing and under featuring it.
2. Higher cost of spares, they need to make them as affordable and realiable as they're japanese counterparts.
3. Better service experiences.

Also if VW goes to such a pricing strategy Skoda should be lets say not more than a lac cheaper in all models and this would work for them in my opinion.

Once their deliver excellent reliable german cars with great pricing and service people will chuck away their maruti and tata for german build quality.

I also feel Car Manufacturers should try to go smaller and greener for America. I mean its not really fair the whole world pays more for gas because American people dont like small cars. Sometimes children need to be forced fed even if they dont like the food. This upsizing of new models creates a problem for us as when theyre launched here theyre too big and expensive and then they create India specific sub standard quality crap.

Disclaimer: These are just my views and not to attack any one personally.

Last edited by M00M : 10th October 2012 at 11:18.
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Old 10th October 2012, 13:40   #12
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Default Re: Volkswagen's Future (US) Product Strategy Revealed - and what it means for us

Quote:
Originally Posted by M00M View Post
VW needs to do an introspection and figure out if it is serious about India. Polo should be priced in the range of 4-7 lacs on road, Vento should be priced in the range of 8-10 lacs on road, Jetta should be priced in the range of 13-16 lacs on road, and Passat should be priced in the range of 18-22 lacs on road.

This upsizing of new models creates a problem for us as when theyre launched here theyre too big and expensive and then they create India specific sub standard quality crap.
One one hand, you suggest drastically reducing prices and on the other, you complain that we Indians are being sold sub-standard crap. How does that work? If there were no taxes and a large number of Indians could afford to buy 20L+ cars, of course you'd see lots more "quality" cars being sold here. You can't demand cheap cars and then complain that they are of sub-standard quality.

Last edited by bansal98 : 10th October 2012 at 13:44.
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Old 10th October 2012, 13:46   #13
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Originally Posted by crackingride View Post
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.
The key to their success in India lies here.
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Old 10th October 2012, 14:24   #14
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Default Re: Volkswagen's Future (US) Product Strategy Revealed - and what it means for us

Guys,

This means a few things:

1. There will be clear differentiation between the Euro products (where the focus is on quality, features, engineering etc. and Americas (and BRIC countries).
2. We are almost certain to get the American styled things as Indian customer value similar traits as the Americans: Size, Value, Reliability, Cost of ownership, Efficiency. A normal Indian buyer doesn't give a damn about quality control, build quality, material quality etc. Anything acceptable, is great
3. VW quality standards in these cars will DEFINITELY go down. No longer will they have the current traits. No one will say "I have a VW that's built like a tank".
4. They will sell much more cars, that's for sure. Cheaper cars= Volumes.

All I can say is, if you like the VW cars for the typical euro traits of build and material quality, robust engineering etc; if you are a typical customer looking at buying Jetta, Passat and above cars, the best time to buy is right now. Before they become cheapified.

Personally, I wouldn't like VW cars to become more Jap-like. I like some Jap cars for what they offer; I also like VW cars more for what they offer. Ultimately, if most cars have similar traits, where is the product differentiation? Let euro cars be euro cars, Jap cars be Jap cars. Let the customers have the option of choosing cars coming from completely different philosophies. Though I like the part of 'Lower cost of ownership' - Why should a mass market brand (thats what VW is, irrespective of what it thinks of itself), be so expensive to maintain? There is a reason for which have Audi, which is an expensive, luxury brand, isn't it?

Last edited by Abhi_Automobile : 10th October 2012 at 14:29.
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Old 10th October 2012, 15:05   #15
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Default Re: Volkswagen's Future (US) Product Strategy Revealed - and what it means for us

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Originally Posted by ajmat View Post
But they have Seat and Skoda, how much lower will they go?
They do not sell Seat or Skoda in the US as far as I know. But this is a very good question in the Indian context. In Europe Skoda's are the vfm option while VWs are the upmarket ones.

In India with all the overlapping they seem to be loosing the plot. Skoda must be more aggressive with its pricing, pronto.

I understand this american theory of making cars bigger, simpler and effectively cheaper. Thats exactly what the american big 3 have been doing stubbornly for eons and are in the 'state' they are in. This strategy is severely shortsighted and while it will bring vw volumes and profits in the near future it will do the brand more damage than good.

An excellent example is Honda. Their strengths were making the best 4 pot petrol engines, first movers with variable valve timing, well engineered cars, exciting to drive, a great line up filled with plenty of 2 door hatchbacks/sports cars and made a reputation from a successful F1 campaign. Due to all this people were ready to pay a premium for a Honda compared to competitors and were convinced they were buying the better car.

All of a sudden Honda decided that not overtly focusing on R&D saves money, cars can be simpler and not over engineered, why have sports cars if they don't do volumes, who cares about F1 etc...etc....Lets simply make bland cars by the hordes and rake in the moolah. The rest they say was a tragedy.

Recently Honda had its epiphany, decided they will focus on being an engineering prowess again, promised the NSX and Type Rs will be back etc..etc....

If Volkswagen make simple, big, cheap cars then WHY BUY VW??. Why not buy the regular crap that american carmakers churn out?!! Or even better what if Hyundai or Kia can make a much better car for the same price?!!

VW are in a good position at the moment and growing, then why such a move, Why fix something that aint broken?!!

Its really astounding when carmakers decide to abandon their strengths and focus on short sighted goals!!
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