Bart and Kriss couldn’t agree on whether the US is ready for a true low-cost car brand, and now they’re locking horns again on whether Volkswagen would benefit from following the highly successful Dacia strategy that has been raking in the profits at Renault.
I just don’t understand why they haven’t done this already. Like with crossovers, Volkswagen has waited too long to follow this trend and has squandered the opportunity to gain a huge volume boost. Not only from the newly-created, low-cost brand itself, but also from sharing the platforms and cost-saving technologies to some of the existing VW Group brands, most notably Skoda and VW itself in regions like South America and China, where it still sold decades-old models under the VW brand until recently. As our reader M. Hoffman commented earlier, last year 46% of worldwide sales of the Renault and Dacia brands combined were Dacia-based models, so they gained huge economies of scale without the need to launch an additional brand in every single market. In markets where Renault was an established brand, like Europe and Mediterranean Africa, Dacia filled the open slot below it, and in markets where Renault was still trying to gain a foothold, like Russia, Asia and South America, the models helped establish Renault as a top player, not necessarily with a budget-brand image.
My big worry is brand-overload over at VW Group. They already have some 12 brands in their portfolio (counting trucks and motorcycles), plus their mainstream offerings (VW, Seat, Škoda) are already rather close and the company seems unable to give them truly different characters. In a sense, the success of Dacia stems from Renault being OK with the cars being no more than acceptable by European standards, at least at first. Somehow, with German perfectionism I don’t see how they could do that – I’m afraid is that they would be unable to position the new brand low enough for it to truly remain a different offering. After all, Škoda started off as a budget offering, but quickly caught up with Seat in terms of quality and is now a mainstream brand that offers good value for money, rather than being a true value brand. [Read more…]