Volkswagen Group provides a case study in combining industrial strength through scale with adept brand management. Platforms and key components have long been leveraged across the group’s brands for high volume and lower unit costs. The emphasis has now moved to fuel efficiency and a modular strategy (most notably through the transverse MQB architecture) to enable the sharing of more key technologies across group model ranges and across more segments.
The brands in the family are also key to the strategy because they permit the volume to grow. Basic market geography alone would support that, but if you’re clever enough with brand positioning and management, then a brand can be boosted and contribute even more to the group bottom line. Skoda’s sales growth over the past ten years presents a very good example.
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Loss-making Seat has been a continuing worry though. The loft talk of reinventing it as ‘VW’s Alfa’ with a bit of Latin flair hasn’t quite been achieved despite the occasional design flourish at a motor show. The production models launched haven’t quite fitted that brief and Seat is still, in essence, a value-driven brand from Spain that sells in a crowded European market in segments where making money is tough. There are no easy answers there, but the market geography hasn’t been too helpful lately either as the home Spanish market has collapsed with that country’s economic crisis.
Is Seat simply a volume brand too far for VW Group? Is it too crowded in the volume area with VW, Skoda and Seat? Possibly, but the experience with Skoda shows that brand perceptions can be transformed in time (and Skoda and VW are also arguably co-existing successfully in very similar market segments, avoiding excessive cannibalisation). And the Spanish car market will eventually recover to support Seat volume.
Fixing Seat will clearly take some more fine tuning from VW Group in terms of costs, the product strategy and brand management. However, it’s big enough to take the Seat losses while other parts of the group more than compensate. In seven years’ time, it could look very different, Seat positioned distinctly as a successful brand alongside the others and with good dovetailing market geography. Anyone else but VW might give up, but it’s hard to see VW throwing in the towel with Seat after all the sunk investment.
Brand transformation is not proving anything like as easy with Seat as it was with Skoda though and VW shareholders will, naturally, be unsettled by the continuing losses. Taking Seat to the world, as VW did so successfully with Skoda, is surely part of the answer and could turn out to be key to VW Group’s future volume aims. But to do that you need to have the right models and brand image, a clear idea of what makes Seat different and gives it a unique proposition, albeit one underpinned by VW family strengths.
