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Volkswagen Overtakes Ford

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Volkswagen Overtakes Ford as World's Third Largest Automaker

Next up: GM

August 29, 2008 2:00 PM by Clinton Deacon

Filed Under: Corporate/Financial Ford Volkswagen

Volkswagen has a long term plan to become the world's largest automaker and it appears stage one has been completed after the German company overtook Ford to take third place in global vehicle sales rankings.

The VW Group announced that they had sold 3.31 million vehicles in the first six months of 2008 representing an increase of 7.2 percent, it puts them healthily ahead of the their American counterparts who sold 3.22 million vehicles during the same period.

“We are delighted that the Volkswagen Group has made it to the global automobile industry’s top three for the first time. This shows that we are on the right track with our ever-stronger international presence and, above all, our product program. We will systematically push ahead with our growth course even in the present difficult market environment,” Prof. Dr. Martin Winterkorn, Chairman of the Board of Management of Volkswagen Aktiengesellschaft, commented.

Volkswagen will likely have their sights set on their next target – General Motors. The American giants who until recently had held the number 1 spot announced earlier that they had sold 4.54 million vehicles up to the end of June this year, a drop of 3% compared to the previous year. Toyota's strong position at the top of the table continues with a 2.2% increase to bring total sales to 4.8 million.

Source: VW

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Not to mention they have more market coverage than GM with, let's see now:

1. SEAT (let's say Pontiac, although it's not yet a good matchup)

2. Skoda (hmm, Chevrolet)

3. Volkswagen (Vauxhall/Opel/Saturn, and Buick)

4. Audi (Saab/Cadillac)

5. Bentley

6. Lamborghini

7. Bugatti

Of course VW is now owned by Porsche, which more than fills the gap between Audi and Bentley.

It may appear that GM has redundant brands, however Opel, Vauxhall and Saturn (and Holden in Australasia) operate in different markets and even share marketing material as well as vehicles, and VW's attempts to sell larger, more luxurious models (Passat V8, Phaeton) has hardly been a success. Although higher pricing has been successful there is a limit to how far the "peoples' car" can go. It may have been better to revive an old Audi predecessor for VW dealers. Saab fits nicely between Opel and the premium German marques, a role it has moderate success in markets outside North America (Saab may sell more cars in Australia than the US). Pricing Cadillacs at this same level is clearly not optimal, and does nothing for the Cadillac brand.

VW's problem tends to be the opposite of GMNA—while dealers and division marketers in GM are chasing volume at the expense of profit margins and image, VW's brands are all chasing profit margins and a premium image. It has already taken VW too far. How many marques do they need competing for Ausi's bread and butter?

I'm getting off-topic, but guy's please, remember Sloan? Each brand should be a step up from the one below it. Offering the similar vehicles at the same price in different "flavors" is not the way to go, for either VW or GM.

Chevrolet --> Saturn/Opel --> Pontiac/GMC --> Buick --> Saab -->Cadillac -->Fleetwood Cadillac

In some markets you may skip a brand if pricing is too close, or reposition them. In Europe I would obviously keep out Buick and Pontiac, with the bargain brands priced much higher and little demand for larger cars like the LaCrosse and Lucerne. In another market you may want to position Buick at a level equal to Saab, but with the larger sedans for Buick and the smaller for Saab. In China I would drop Opel and have Buick absorb the mid-level compact and midsize cars and sport sedans. A local brand such as Vauxhall, Daewoo or Holden may substitute for one or more brands (although this as gone too far in some markets such as Mexico and Australia); but the principal remains the same. Let's not keep criticizing a strategy as unsuccessful because it is not being used. That is like deciding to cut a line for low sales when no-one can actually buy one in the first place.

Edited by thegriffon
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