Is building new brands better?
Newswheel staff :: 11 September 2005 :: Filed under Bentley, Ford, Lamborghini, Land Rover, Mercedes Benz, Seat, Skoda, Toyota, Volkswagen, Volvo, Europe & UK, US
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Why building Bugattis is bonkers
Car companies are terrified of building new premium brands. That’s the only possible explanation for the billions they’ve burnt attempting to resurrect rusty relics such as Jaguar and Saab and desecrating the graves of dead brands like Bugatti.
But as The Economist newspaper points out in a recent article on how the motor industry merger mania and brand buying bonanza has bummed-out, the most successful new brand in recent years is none other than Toyota’s luxury division, Lexus. It has no history or heritage, but it’s now the leading luxury brand in North America.
What a bummer
Compare that with the disastrous fact that Jaguar, owned by Ford and steeped in ancient glories, remains a dog despite a $5 billion investment. Or that Saab has been reduced to knocking out piss-poor rebodied Opel’s thanks to long term neglect by GM. And though the world is a more interesting place thanks to Ford’s efforts with Aston Martin and VW’s with Lamborghini, the sensible money says those firms will never turn a profit. VW’s success with Bentley is probably the exception which proves the rule.
So, what else can we learn from the Economist article? The general gist is this: don’t be bamboozled by brands. The Daimler-Chrysler experiment has crashed and burned (the combined company is now worth less than Daimler-Benz was alone before the merger). Ferdinand Piech’s masterplan for VW, meanwhile, is looking increasingly ludicrous with the Volkswagen, SEAT and Skoda brands cannibalising each other in the middle market. And the widespread underestimation of the difficulty of making real returns from rusty or resurrected premium brands by Ford (Jaguar, Volvo, Land Rover and Aston Martin), GM (Saab) and VW (Bugatti and Lamborghini) is obvious.
The future’s bright
But it’s not all gloom and doom. Another significant trend in recent years has been the move towards greater variety in the form of niche vehicles. And that’s exactly how The Economist sees the future: the winners will be small and nimble companies with a diversified product range who build cars that customers actually want (novel idea, that). And the losers? Lumbering leviathans with grand strategies but stale products. Cheerio, then, Ford, GM and perhaps VW.
Linkage:
Economist article (subscription required)
Posted 17 December 2005, by Anthony Frausto
Then my idea that the Swedish Government buy back Saab and maybe Volvo too is smart. Let them stay small and nible and build cars that their core customers actually want. Why do Saab owners like myself need to have 7 different models to choose from?
The answer: we don't. GM thinks they need seven Saab models so they can expand market share. If you only think about that, then of course your cars are doing to do poorly.