I have just had an interesting discussion with an investment analyst over the different manufacturer strategies in terms of how they approach auto markets across the world from a product development perspective.
I opened up this subject in this week’s weekly newsletter with reference to the global approach being taken with the new Ford Focus contrasting with VW’s ‘horses for courses’ approach in developing a de-contented Passat (albeit a bigger car than the European one) for the US market. I guess the question is, what is the best strategy ultimately?
That’s not an easy one. First off, when you step back and look at all its models, Ford isn’t quite treating the world as one market; it still makes some models for certain markets only (I can’t go to my Ford dealer and order a Ford Flex) and engine/body style variations as well as suspension tweaks are also commonplace in model ranges sold across multiple markets. Buy a Fiesta in the US and you just get the one engine option – the 1.6 gasoline. Buy a Fiesta in China and the suspension will have been tweaked for local road conditions. You get the point. ‘Same car’, but not 100% the same offering.
VW has long been taking a hammering on the dollar exchange rate, so it sets up a plant to make a version of the VW Passat in the US. Good move. And what else can it do on cost? Well, what does the American consumer value that is different to the European one? Maybe some of the fancy stuff that enhances the driving experience in Europe isn’t required for the US? Oh, and another thing. Maybe make the US Passat a little bit bigger? Done. And, hey presto, you have a vehicle that suits the local market and can work at a lower price point than if you ship in from Europe. Does it cost much to make it bigger for the US? I’m hearing no.
Anyway, I’d be interested to hear other views. Just how standard will the Ford Focus be this time around? And what’s the best route to higher profitability? Build a brand premium around standard products for the world – in the Ford Focus’ case, imbued with a little high-end European development DNA? Or recognise deeply ingrained market differences with differentiated product line-ups?
Ironically, the Mondeo – despite its name – never became a world car because it suited Europe, but not North America (and some of us remember the failed attempt with the Escort in the 1980s). Will Focus make it? Is it too tough a nut to crack in volume segments? Will there always be some smoke and mirrors so that variants in an ostensibly standard range are actually almost different models? In any case, is it more a question of how you define ‘model’, given shared (sometimes flexible) platforms/engineering architectures/powertrains?
Does the question I pose add up to the same thing, in reality, just approached from different ends of the same product development spectrum?