For the past 12 years, Renault has enjoyed an incredible worldwide success with its line-up of low-cost models, which are marketed under the Dacia brand in Europe and North Africa, and under the Renault brand in most other markets like Russia, South America, Arabia and India. In fact, these low-cost models currently comprise as much as 46% of worldwide sales for the combined Renault and Dacia brands. In India, the Duster had been the most successful Renault model so far, but the French carmaker has really shaken up the Indian car market when it launched the Kwid small car there last year. The Kwid is slightly larger than the European Twingo, and has a higher ride height, giving it a sort of mini-crossover look. Initially only produced in India and launched there, the Kwid has become an instant hit, with 70.000 orders in the first two months of sales, while Renault’s previous sales record in India stood at less than 45.000 sales in 2014. Production capacity was quickly upgraded to 10.000 units a month and so far Renault has sold every Kwid it could build in India, helping the French brand to a record 4th place in April, ahead of local manufacturer Tata. The model itself has stormed up the Indian sales charts as well, rising quickly to the segment 2nd place, ahead of the Hyundai Eon and unsuccessful Tata Nano, and closing in quickly on the perennial overall sales leader in India: the Maruti (Suzuki) Alto, which suffered a drop of 23% in dealer orders in April, possibly as dealers expect the Alto to suffer from competition from the Kwid in coming months.
The recent acquisition of Italy’s tire manufacturer Pirelli by the Chinese state-owned chemical company ChemChina is the latest in a string of Chinese and Indian investments in worldwide known European brands, not limited to the automotive industry. Do European countries and consumers have to worry about this phenomenon? Does this spell danger for our crown jewels and will the manufacturing jobs be moved to China or India, where labor is much cheaper? History proves us we should embrace the Asians as excellent caretakers of “our” brands, better than the Americans have been in the last few decades.
The Asians understand the value of a brand, because in their domestic markets there’s a huge difference in perception between local brands, which are considered low-value and can only compete on price, and foreign import brands, which are considered high-end and therefore are able to demand higher transaction prices, resulting in high profits.
The American way
As a result, when an Asian company takes over a Western brand, it will do anything to preserve the brand image, because that is what makes a brand valuable and leads to those higher profit margins. This view is contrasting with the way American companies used to handle their takeovers of European brands in the relatively near past. [Read more…]
A few days ago, Bloomberg reported that Nissan’s recently relaunched low-cost Datsun brand was failing in India, as consumers would be reluctant to spend their money on cars that have an image of being cheap, a similar problem that has plagued the Tata Nano. I think this article is a bit of an easy shot at Carlos Ghosn, CEO of the Renault-Nissan Group, who’s known for his bold and ambitious goals, but who hardly fails to deliver on his targets. This makes him a sitting duck for journalists as soon as they can smell even a hiccup in his plans.
Focus on India
For one, the article focuses exclusively on India, which is the hardest market to crack, something Volkswagen has experienced as well. Local producer Maruti controls over 45% of the car market and therefore achieves great economies of scale and excellent brand recognition. Hyundai locks in another 16% of the market, which leaves the remaining 12 automakers, among which two other local brands Mahindra and Tata, to divide a pie of less than 800.000 annual sales among each other. Introducing a new brand in any market is not a short-term project, perhaps even less so in India, and Ghosn has understood that. With average car ownership still extremely low in India, Ghosn has been quoted to say “the risk is to do nothing” and to miss out on the enormous growth potential of this market in the future. [Read more…]
VW has been a stockholder of Seat since 1986 and full owner since 1990, with the Spanish brand supposedly being the sporty brand of the now 11-brand group. However, the model strategy did not always support this. And after sales peaked at over 520.000 units in 2000, the brand has seen sales drop to just over 300.000 units in 2009 and 2012, the lowest number since at least 1998. It’s sister brand Skoda meanwhile, has seen sales rise every year since 2002, passing Seat in 2005 and peaking in 2012 at almost 950.000 units, more than triple those of Seat. In 1999, Seat was ahead of Skoda by 134.000 units.
With VW Group boss Ferdinand Piech openly courting Alfa Romeo, another troubled Mediterranean sporty brand, the future of Seat seems to hang by a thread, even though Fiat CEO Sergio Marchionne has taken every opportunity to deny Alfa Romeo is for sale or will be in the near future. But what if struggling Fiat needs some of those billions of Euros in VW Groups war chest to buy the remaining stake of Chrysler or just to pay off some of its huge debt? With Alfa Romeo in the hands of the Germans, what value would Seat hold in the Group’s brand portfolio? Especially with the brand reporting operating losses since 2008, adding up to over € 1 billion.