What do you think of the European strategy?

[amit]

I don't know if you guys have noticed the European strategy of selling old and new variants to-gether seems to be spreading across various car makers.

1. Skoda have the worldwide strategy of selling both the Octavia and Octavia II/ Laura variants to-gether.

2. Peugeot will launch the redesigned 206 which has been renamed 207 but both the versions will be sold to-gether in Europe.

3. Fiat announced that it would sell the Punto alongwith the new Grande Punto for a few months post the Grande Punto launch.

4. VW joined the above car makers. VW Canada have decided to relaunch the MK IV Golf and Jetta, rebadge them as Golf City and Jetta City ( Hope they have taken permission from Honda! ) and sell them beginning August. However, the new Golf city will be lowered in price to about CAD 16,000 to take on the Yaris/Fit/Sentra's. The City range will be powered by the 2.0L 115 bhp engine but will come fully equipped with 4 air bags, 4 disc brakes with ABS, Air-con etc.

Question is will this strategy work? Have the Europeans made a smart move or they pushing their luck?

[Mpower]

Good observation Amit. I can think of 3 explanations for this.

1. The new car has gotten so much bigger that its in a all new segment
2. They dont want to mess with the formula,"if it aint broke, dont fix it"
3. Depressed economy and Chinese? competetion mean, that you need to keep prices low low.

But its not only European OEM. Note the the old Chevy Malibu is being sold here even as the new one is out. In India, the Flair lives on after the Fiesta. In South Africa, the 92 gen corolla lives on as the Tazz.

The relaunch of the Mk4 Golf/Jetta is a surprise to me. Are they planning this for Canada only.

[amit]

The relaunch of the Mk4 Golf/Jetta is a surprise to me. Are they planning this for Canada only.

Yes Mpower, the city range will only be avaliable in Canada since this is a more price sensitive market compared to US. All your 3 points are great and do make perfect sense but there are some problems with this strategy. I think Skoda have done a smart move. Keep the Octavia prices the same so that residuals hold and launch the Laura at a higher price. The problem with VW Canada's strategy is residuals of Golf/Jetta MK IV 2.0 L variants will crash when prices are reduced. This will cause dissatisfaction among people who bought the 2.0 L variants a few months before August. I am guessing Peugeot and Fiat are using Skoda's strategy which makes more sense especially when it comes to residuals.

Your point no 1 makes a good case because since the new versions are bigger there is little chance of older gen variants cannibalising sales of new variants.

the old Chevy Malibu is being sold here even as the new one is out.

I didnt know that! Are they doing the same in Canada too?

Not many members have posted their comments on this. I wonder what they feel about this new strategy.

[Mpower]

You're right, I dont see much interest here, but hey........product strategy is my favourite topic and I can talk about it all day.

Regarding the Malibu, I believe its for fleet sales only. A majority of the mid-size sedans from the big-3 end up in fleet sales (rental cars) and these are sold at v.low margins. So I guess GM will feed the old Malibu to the fleets till private sales of the new one cool off and then they switch over. Make a buck while you can. Not sure about Canada though.

Also note that the Grande Punto was never meant to be a replacement for the Punto because the Punto itself is new and came out less than 2 years ago. The Grande Punto came out of the GM alliance and I guess they decided to capitalise on the brand equity of the Punto.

Your point on the residuals is very valid. Things are crazy over here with GM residuals because GM keeps announcing price cuts and rebates and you never know what's the right price to pay.