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Wall Street Journal article re: Audi/VW sales strategy (LONG)


Old 10-25-1999, 07:49 AM
Greg W
Posts: n/a
Default Wall Street Journal article re: Audi/VW sales strategy (LONG)

I don't know if this has been reported yet or not, but there was an interesting article in today's Wall Street Journal regarding VW's model strategy-- particulary the balance that VW has to strike between sharing parts and platforms among brands, while attempting to maintain separate brands in consumer's minds.
The article indicates that VW has been more successful at this kind of sharing than other automakers, but largely casts doubt on the strategy's effects over time. The tone of the article is that VW runs the risk of in effect competing with itself as different models and brands become too similar in consumer's minds.
VW's response to this is that they would rather be competing with themselves than with other automakers.
The article points out that there is some evidence, however, that the strategy is beginning to negatively impact VW's sales-- particularly AUDI SALES. The article notes that it becomes harder for VW to demand a premium for Audi's when very similar models are available for less from VW, Seat, or Skoda. It notes that A4 production has been down recently, and seemingly attributes the decline to an increase in Passat sales.
It also notes that BMW has declined to follow this strategy with the new Rover, for fear of dilution of brand image.

My take on this is that I share many of the WSJ's concerns-- I think that VW's strategy can only hurt Audi in the long run. When there is so much part and platform sharing, you've got to wonder when compromises have been made to ensure low cost and ease of transferability. If you say that no compromises have or will be made, then it doesn't make a lot of sense to spend more for an Audi when VW's share many of the same parts.
Frankly, I much prefer BMW's strategy. There seems to be more devotion to designing and engineering a particular car-- rather than looking for a collection of compatible parts to be shared across brands and models.

Any thoughts on this?

Greg W

98 1.8T
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Old 10-25-1999, 08:36 AM
Posts: n/a
Default Important Legal Issue

The article also mentions that EU anti-trust officials are investigating VW's strategy as an illegal price-fixing cartel.

I believe VW will not have a problem proving product differentiation. Ultimately the market will decide if it is a sound strategy. Share holders need not be worried, just patient.
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Old 10-25-1999, 09:15 AM
Posts: n/a
Default I think it may be good for consumer in long-run....(more)

Intersting take....

As an Audi owner of an '00 A4 1.8T, I'm less skeptical today, than I was several years ago regarding the reliability and durability of an Audi automobile.

It may sound strange, but the moment I learned that the A4 shared most engine components with that of the Passat, I was more keen on considering an Audi as a viable new car option.
I think VW brings a lot to the 'Audi Table'.

I also think the strategy will work, as long as Audi continues to promote, earn and maintain it's competitive 'performance edge'.

Superior ' Performance' and interior luxury 'Appointments' has to continue being Audi's advertised advantages. I think that the ' cross-polination ' of the 1.8T and V6 engines between Audis and VW's is just the beginning of a trend, that will ultimately benefit the consumer; as it will undoubtedly keep production costs down, and reliability up.

It's the exact same concept as Acura/Honda, Lexus/Toyota and Nissan/Infinity back in the 80's. I think German automakers have seen exactly how successfull the Japanese have managed to offer essentially the same car(s) under different brand names. Germans are following suit........

just my observations......
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Old 10-25-1999, 10:22 AM
Posts: n/a
Default In my humble opinions.....(more)

I own both A4 platform VW Bora (Jetta IV) and B5 platform Audi A4, my mom is ordering a New Beetle A4 platform and my dad wants an A4 platform Audi TT.
New Beetle, VW Jetta IV (Bora), Golf/GTI, Audi TT, Audi A3 and some Seat and Skoda products are feel completely different. You won't feel you are driving a GTI if you own a TT Quattro. VW has it own VR5, VR6 or coming VR4 engine while Audi has unique 180/210/225hp on A4, S3 and TTs.
Passat and A4 are in different class even though they share platform, same for A6. Passat is family car class, A4 is sports sedan while A6 is luxury car class. In European markets there are lots of market overlapping. A6 has the same 1.8T as A4 and A3. E-Class has the same 2.4 liter as C240. Bimmer has 520 as well as 320.
The only cannablization with Passat and A4 here in North America market is base A4 1.8T vs VW Passat GLX 2.8, IMHO.
Even the Acura 3.2TL has the same parts/platform as the Honda Accord but they seem to appeal to different customers except TL cannabalizes V6 Accord sedan side because just few thousands more or less. I30 may cannabalizes Maxima as well as Canadian Acura 1.6EL cannabalizes Civic EX sedan; however, I personally think they target different customer base without cannabalizations (except EL Premium Civic EX and TL Accord V6)
Just my humble marketing target market opinions!
97 A4 1.8TQMS
99 BORA GLS 2.0
98.5 A4 1.8TQAS WETTED
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Old 10-25-1999, 10:27 AM
Posts: n/a
Default It's a strategy that makes sense only if the model differences are distinct enough.

At the moment I think it's working, but I do have some concerns that people will not perceive distinctions between the A4 and the Passat, even though they're there.

I don't understand people saying they'd get a Passat or Jetta if the Audi didn't have Quattro, because I think the Audi design & construction are superior and worth the extra money. If the buying public isn't convinced to see it this way, the VW company has to try harder to make that happen.

We don't want people saying about the Audi what one GM official said when asked about the difference between a Cavalier and a Cimmaron --"About $3000."
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Old 10-25-1999, 10:38 AM
Posts: n/a
Default Re: Wall Street Journal article re: Audi/VW sales strategy (LONG)

It seems to me that the strategy is sound, but not without risks, which VW seesms to be adept at mitigating. Look at the A4 Passat and A6 for example. All are the same basic platform and even engine choices, but all very different personalities. i think that when you have different brands there will always be competition between the high end of one and he low end of the other {the A4 and Passat} for example. And there are people that will opt for the Passat because they feel that it is basically an A4. But I'm sure VW would rather sell the Passat to a would be A4 buyer looking to save some money than to have that buyer purchase a Honda.
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Old 10-25-1999, 03:43 PM
Bobby Kinstle
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Default Re: A4 vs. Passat

Having been through the classic A4 vs. Passat argument many times, I may be able to offer some insight. Audi/VW as a company want to reduce the number of different parts they have to keep track of. Having 5 billion different parts to track is very expensive for a company, and makes service much more difficult when dealing with limited inventory repair centers. After an endless pounding from my roomate I finally looked up the specs of the two cars on edmund's web site and found them to be somewhat different. The Passat is actually a bigger vehicle with more leg room in front and back and a bigger trunk. The Passat is also quite a bit lighter than the A4 and gets better milage. Those things aside, the A4 comes standard with a list of creature comforts as long as my arm, most of which you have to pay extra for, and some of which aren't available at all on the Passat. I think Audi/VW should make more of an effort to differentiate their models in the public minds though.
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Old 10-25-1999, 04:28 PM
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Default This is one of the reasons BMWs cost more

You pointed out that VW/Audi has a lot of parts and platform sharing. That means lower costs. But many people would rather not buy an Audi A4, Lexus ES300, Acura TL, or Infiniti I30, because they all have "little brothers." With these cars, you get to deal with people that think the brandmates are exactly the same car except for a few luxury features. (And the resale market can reflect this to some degree also). With BMW (and Mercedes) you don't have another brand that shares the parts in what is essentially the same car. So, you have to pay your money and make your choice.
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Old 10-25-1999, 06:06 PM
Posts: n/a
Default BMW does a little platform sharing itself...

My understanding is that the Z3/MCoupe use the same platform as the 318ti. A relation I am sure many Z3/MCoupe owners would not relish :>
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Old 10-25-1999, 07:29 PM
Posts: n/a
Default True, but there's no "other cheaper brand"

All manufacturers share parts to a reasonable extent. (Why invent a new alternator with the same basic technology, for example, if the current one will work?) And I'm sure BMW and everyone else (there's always an exception, I guess, and small specialty companies obviously wouldn't do much of this) share chassis components. (The new BMW X5 SUV shares lots of chassis components with the 5-series, I believe.) But I was referring mostly to the practice of sharing essentially the whole car between different brands. GM is famous for this.

The 318ti is apparently gone from the US market, at least for now. (Maybe it will be back in E46 form).

Now that BMW owns Rover, who knows what the future holds. (And if BMW gets bought out....)

Many times I really wish there was MORE parts sharing. Just how many different air and oil filter designs does the world really need????? Why do there have to be hundreds of them with many of them specific to one car model for only a few year run? Why not about 5 standard choices of each? (A big square air filter, a medium square one, a big round one, and a small round one should about do it. Need more capacity? Design your car to use two of the square ones!)

I do realize that some of the corporate "twins" really do have major differences. A Lexus ES300 really is quite a bit different than a Camry in the way it drives. Not all parts are identical, and the cars end up with their own feel. I'm sure the A4 and Passat feel quite a bit different. (Yes, the Passat is related to the A6 as well as the A4).
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