The Truth About Cars » Strategy The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. Mon, 28 Jul 2014 21:27:46 +0000 en-US hourly 1 The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars no The Truth About Cars (The Truth About Cars) 2006-2009 The Truth About Cars The Truth About Cars is dedicated to providing candid, unbiased automobile reviews and the latest in auto industry news. The Truth About Cars » Strategy Volkswagen Needs a New Lineup to Reach Its Goals Tue, 10 Sep 2013 11:00:05 +0000 Screen Shot 2013-09-05 at 12.18.20 PM

It’s time to talk about Volkswagen. You know Volkswagen: they make the Jetta, which is possibly today’s most adept compact sedan at churning out lifelong Toyota customers.

I bring up Volkswagen because I wrote a column earlier this week about Volvo, and both of those brands share something in common. Is it that they’re the only car companies that start with “V”? No, not at all. You’re forgetting about Venturi, a sports car maker that somehow went bust despite being located in the global industrial manufacturing powerhouse of Monaco.

No, the thing Volvo and Volkswagen have in common is that both automakers saw a decline in sales last month compared to August 2012. That’s bad news if you’re Volkswagen or Volvo, because the entire rest of the auto industry was up. That’s right: every other brand saw an increase. Even Rolls-Royce had a banner month, eclipsing last August’s total by a whopping five vehicles.

Anyway: the reason I bring this up is that it would seem Volkswagen is in trouble. You see, we already know Volvo is going down. That article a few months ago that said they wouldn’t live to see 2015 proves their demise is imminent, no matter how many LEDs they cram on to the front of the next XC90. So Volvo was down, and we expect them to keep being down until they wither away, leaving people in the Pacific Northwest with nothing to drive. (Don’t worry: they will find a solution that involves hemp.)

But why was Volkswagen down?

Volkswagen, for those of you who don’t know, is the world’s most sales-obsessed corporation. I know this because I’ve read perhaps 4,000 articles about Volkswagen’s obsession with some pie-in-the-sky volume goal for 2018, and I’ve never read a single article that covers any concerns they might have about, oh I don’t know, profitability. In fact, I’ve read so many stories about Volkswagen’s volume goals that you’d think they were punching each article as a retail delivery.

Because of this, I’m going to assume they don’t care about profitability, only volume, which leads me to the point of this column: Volkswagen is desperately in need of a new lineup.

I discovered this on a recent visit to Volkswagen’s website, which I highly recommend visiting if you get excited about the Futura font. Listed there, on Volkswagen’s website, in Futura Light and Future Medium and Futura Bold, is a lineup that does not, under any circumstances, represent a full-line automaker in the United States.

To understand what I mean, let’s turn to SUVs, and let’s turn to Toyota. Toyota sells, at last count, seven different sport-utility vehicles, all of which compete in different segments. I have no idea how Toyota managed to do this. Really, they created micro-segments, skillfully convincing customers that the RAV4, the Highlander, and the Venza are very different cars, purchased by very different people, and you should buy this one because it has the most dealer markup!

Screen Shot 2013-09-05 at 12.19.59 PM

Meanwhile, Volkswagen sells two SUVs. You have the Tiguan, which starts at a reasonable price until you discover it comes standard with a stick shift. Throw some options on and the Tiguan can climb to nearly $40,000, a figure also defined as “roughly 1.5 times what anyone in this segment wants to pay for a car.”

There’s also the Touareg, which starts – starts – at $45,000. Mind you, this is supposed to be Volkswagen’s competitor in the high-volume midsize SUV segment. So how does it compete? Last year, Toyota sold 121,000 Highlanders. Ford sold 128,000 Edges. Chevrolet sold 219,000 Equinoxes. And Volkswagen sold 10,553 Touaregs. Ten thousand five hundred. The Porsche Cayenne, its own sister vehicle, outsold the Touareg by roughly 50 percent.

Things aren’t very different if you turn to VW’s car lineup. Yes, they still sell the Jetta, which competes with glitter for the top spot on the “annual spending by sorority girls” list. And they sell the Passat, which is slowly becoming an acceptable midsize sedan thanks to offers like: Zero percent interest for the rest of your life!

But aside from those two, we have the Golf, which very few people buy; the CC, which even fewer people buy; and the Eos, which – this is entirely true – now starts at $36,000 without any options.

If we go back to Toyota, Volkswagen is missing out in several segments. Scion may not be a force, but it sold 74,000 units last year. The full-size Toyota Avalon accounted for 30,000 sales. And the subcompact Yaris was 31,000. But Volkswagen’s biggest loss to Toyota comes in the world of hybrids. Last year’s Prius sales? 237,000. Last year’s Jetta Hybrid sales? 162. Not thousand. One hundred and sixty two. In fairness, the Jetta Hybrid may not have been on sale the whole year – but I wouldn’t know, because I’ve never actually seen one.

And so, I repeat my point: if Volkswagen plans to hit these crazy volume goals, it’s time to get a new lineup. A few more cars; a few more SUVs. A hybrid. And maybe something made from hemp. After all, someone has to cater to those Pacific Northwest buyers once Volvo leaves.

@DougDeMuro is the author of Plays With Cars and the operator of He’s owned an E63 AMG wagon, road-tripped across the US in a Lotus without air conditioning, and posted a six-minute lap time on the Circuit de Monaco in a rented Ford Fiesta. One year after becoming Porsche Cars North America’s youngest manager, he quit to become a writer. His parents are very disappointed.

]]> 167
Blind Spot: Catching Up With Chrysler Tue, 27 Mar 2012 22:26:30 +0000

With the government still waiting to see how much it will get out of its equity in General Motors, The General seems to be attracting more of the media commentary than Chrysler these days. And not without good reason: GM saw the greatest drop in market share last month of any Detroit automaker, its government-hyped Volt is flopping, Opel continues to be an open sore and it can’t help but flaunt its cluelessness about youth marketing. But interest in GM’s shortcomings seems to be driven by little more than election-year political implications, which Chrysler was able to avoid by borrowing cash and misleadingly claiming to have squared up with the American taxpayer. After all, Chrysler is facing just as many challenges as GM, if not more. And despite having formally closed the bailout chapter of its history, Chrysler’s performance still bears on the decision to rescue America’s weakest major automaker.

Evidence that Chrysler is receiving something of a free pass from the media is not difficult to find, with Sunday’s CBS interview with CEO Sergio Marchionne serving as Exhibit A. A fluffy profile of the Fiat/Chrysler boss, the CBS piece is so lacking in journalistic rigor that ends up providing more misinformation than verifiable facts. The “paid back the loans with interest” line makes an appearance, without any qualifications that might have explained the full truth of Chrysler’s “payback.” Another straight-up whopper: Sergio’s assessment that Chrysler can “afford” to screw up on a single car. Chrysler only has one new post-Fiat car on the immediate horizon, the 2013 Dodge Dart… if Chrysler has “screwed up” that car, it will be a PR disaster that the company might not survive. Besides, with Fiat 500s piling up on dealer lots (82 days supply as of 3/1, down from 132 days supply on 2/1) despite $500 rebates or 0% financing, it seems that Fiat/Chrysler has already used up the one “screw up” that Marchionne says it can afford.

Speaking of the Dart, Marchionne claims that the crucial compact is “mechanically outstanding” and has “nothing to apologize for”… and yet, it appears that it’s already facing some challenges. Earlier this month, Marchionne said he was bumping the Dart’s rollout from April 1 to “avoid being jinxed” by April Fool’s day (Allpar notes that the April 1 launch was a “delay” from the planned January launch). That excuse is flimsy on face value, but the fact that Mopar will only build 2,000 Darts in May and that full dealer availability won’t finalize until June shows that there are probably bigger problems under the surface than mere superstition. And Dodge boss Reid Bigland seems to already be turning down the wick on expectations, saying the delay is

“not a concern. Given the size of the segment throughout North America and the enthusiasm for the Dart, we think it’s going to go OK.”

What Bigland leaves out is that, although the segment is large, the competition among compact sedans is fierce. And the Dart is likely not as well-positioned as CBS implies when it claims its “base price just under $16,000 with 40 miles to the gallon.” The EPA doesn’t have fuel economy numbers for the Dart, but with an efficient 1.4 Turbo engine listed as an option, it seems highly unlikely that a 40 MPG highway version of the Dart will be available at the base price (at least until a 9-speed transmission becomes available next year). Oh, and the government’s condition that Fiat build a 40 MPG Chrysler only requires 40 MPG combined unadjusted, a benchmark that is far less than 40 MPG EPA, and barely competitive with compact sedans already on the market. And with only 120,000 or so units of production planned at Belvidere, and exports planned from there to 40 different markets, it seems that Chrysler isn’t banking on competitive sales figures (Focus and Cruze have been selling over 20k units per month).

But if you dig deeper, you find that the mainstream media’s breathless boosterism is sharply contradicted in the online press, where rumors of trouble in Auburn Hills are starting to pile up. Over at Autoextremist, the auto industry insider’s outsider is posting emails from sources like “Anonymous in Auburn Hills,” which indicate that there are either a few truly bad apples at Chrysler or (as the Autoextremist himself concludes) the Fiat-Chrysler marriage is facing serious issues. “Anonymous” writes

All you need to do is work at CTC [Chrysler Technical Center] and you will see just how correct AE [Autoextremist] is on this Fiat issue.

In that building resides a morass of poor decisions, poor planning, poor time management, and ass backwards 80′s era engineering think…

…They want to build good cars but can’t make a decision to save their live.

My God, they can’t even get their CAD system figured out! I mean who is stupid enough to introduce a new CAD system on a whim?? did they not think you need time to integrate all of the other computer related systems?

It is a joke of epic proportions.

Another AE reader adds:

Arrogant. Irrational. Belligerent. Such a perfect description of Fiat management, [Autoextremist] must be moonlighting within the walls of CTC somewhere…

…Fiat practices finger-snap management as its true core philosophy. Cut product development time in half! How? Just cut it in half, easy! What testing should be eliminated? What efficiencies should/will allow this? No answer. Build a new production line but with half the capital funding! How? Easy, just spend half as much! You get the picture.

In an industry that so closely controls its PR, this burst of leaks is evidence enough that some serious dissatisfaction is brewing at Fiat/Chrysler. Add the Dart’s delay to this, and the emerging picture at Chrysler is not of a company bound for great things. More troubling still is the counterpoint between these worrying signs and the dizzying ambition of Fiat/Chrysler’s new product development plans. The Dart is built on a widened version of Fiat’s C-EVO platform, but according to Allpar, that platform will be stretched further and converted to rear-drive to accommodate the forthcoming midsized Alfa Giulia and Dodge Avenger replacement. Oh, and the LX platform also has a front/rear-drive replacement under development as well, the E-EVO, which will underpin everything from minivans to an Alfa sports sedan. According to an Allpar source,

This new D architecture is a joint project, but it’s being developed in Detroit with Fiat engineers who have been flown over to be embedded permanently in the project. … This decision (having a RWD D-segment architecture) was a costly proposition, and they took a good two years of tinkering between finance and marketing before they finally reached the decision to go ahead with this. … E-Evo was discarded [for this purpose] last year, when it became obvious that if you shorten it too much you can’t produce an aerodynamic, sexy looking D-segment car, on that huge beast.

So, an apparently-dysfunctional, trans-Atlantic team is developing expensive, complex D- and an E-segment platforms that are convertible between front-drive, rear-drive and all-wheel-drive, and will underpin mass-market offerings as well as premium cars. If this sounds oddly familiar, it should: it’s like a worst-of mashup of the cross-cultural issues of the DCX days and the engineering overreach of the early LH platform development (which Bob Lutz describes as having been “trapped in the classical ‘more is more’ planning maze”). And at the root of this mind-boggling complexity is yet another unsolved issue: Fiat/Chrysler’s bloated brand portfolio, which demands this ultimate (and expensive) platform flexibility.

Meanwhile, the context for all this is even worse, as Fiat faces a crushing downturn in the European market, made worse by the fact that Fiat is dependent on the Mediterranean markets that are being hit the hardest. Fiat lost half a billion dollars last year, its stock is on a 12-month downward spiral, it has frozen European investments, and it is grappling with numerous union issues (including a hauler strike that could cost it 10% market share in Italy). And with essentially no presence in China to offset European contraction, Marchionne’s solution is another alliance with yet another struggling automaker, like Mazda or Suzuki. But the “tying two rocks together to see if they float” plan clearly isn’t a path forward, and more merging will only wreak further havoc on Fiat/Chrysler’s troubled culture. Meanwhile, Fiat is only just starting [sub] its third attempt at a Chinese production JV (building Fiat-branded Darts), and it’s moving into Russia just as that market’s growth slows.

With huge losses likely to come out of Europe, and giant outlays likely on both Chinese and Russian expansion as well as investments in complex, multi-purpose platforms, Fiat-Chrysler has a seriously tough row to hoe over the next year or so. Successes will have to come from its stronghold in Brazil, which is seeing disappointing sales numbers so far this year, or from the US. With only the Dart coming down the pike, one hopes that its delays yielded serious results and that it makes an unequivocal case for Chrysler’s Fiat-led future. Otherwise, we could easily find ourselves here a year from now, wondering once again if Fiat/Chrysler is going to make it through another 12 months.

]]> 68
Blind Spot: The Twilight Of The Volt Mon, 05 Mar 2012 00:44:30 +0000

 “Do you want to accompany? or go on ahead? or go off alone? … One must know what one wants and that one wants”

Friedrich Nietzsche, Twilight Of The Idols

This week’s news that GM would stop production of the Chevrolet Volt for the third time in its brief lifespan came roaring out of the proverbial blind spot. Having watched the Volt’s progress closely from gestation through each month’s sales results, it was no secret to me that the Volt was seriously underperforming to expectations. But in the current media environment, anything that happens three times is a trend, and the latest shutdown (and, even more ominously, the accompanying layoffs) was unmistakeable. Not since succumbing to government-organized bankruptcy and bailout has GM so publicly cried “uncle” to the forces of the market, and I genuinely expected The General to continue to signal optimism for the Volt’s long-term prospects. After all, sales in February were up dramatically, finally breaking the 1,000 unit per month barrier. With gasoline prices on the march, this latest shutdown was far from inevitable.

And yet, here we are. Now that GM is undeniably signaling that the Volt is a Corvette-style halo car, with similar production and sales levels, my long-standing skepticism about the Volt’s chances seems to be validated. But in the years since GM announced its intention to build the Volt, this singular car has become woven into the history and yes, the mythology of the bailout era. Now, at the apparent end of its mass-market ambitions, I am struck not with a sense of schadenfreude, but of bewilderment. If the five year voyage of Volt hype is over, we have a lot of baggage to unpack.

When a history of the Volt is written, it will be difficult not to conclude that the Volt has been the single most politicized automobile since the Corvair. Seemingly due to timing alone, GM’s first serious environmental halo car became an icon of government intervention in private industry, a perception that is as true as it is false. I hoped to capture this tension in a July 2010 Op-Ed in the New York Times, in which I argued that

the Volt appears to be exactly the kind of green-at-all-costs car that some opponents of the bailout feared the government might order G.M. to build. Unfortunately for this theory, G.M. was already committed to the Volt when it entered bankruptcy.

But by that time, the Volt was already so completely transformed into a political football, the second sentence of this quote was entirely ignored by political critics on the right. The culture of partisanship being what it is in this country, any nuance to my argument was lost in the selective quoting on one side and the mockery of my last name on the other. One could argue that that this politicization was unnecessary or counter-productive, but it was also inevitable.

The Volt began life as a blast from GM’s Motorama past: a futuristic four-place coupe concept with a unique drivetrain (which still defies apples-to-apples efficiency comparisons with other cars), a fast development schedule and constantly-changing specifications, price points and sales expectations. It’s important to remember that the Volt was controversial as a car practically from the moment GM announced (and then began changing) production plans, becoming even more so when the production version emerged looking nothing like the concept. But it wasn’t until President Obama’s auto task force concluded that the Volt seemed doomed to lose money, and yet made no effort to suspend its development as a condition for the bailout, that a car-guy controversy began to morph into a mainstream political issue.

At that point, most of the car’s fundamental controversies were well known, namely its price, size, elusive efficiency rating, and competition. Well before the car was launched, it was not difficult to predict its challenges on the market, even without the added headwinds of ideological objections (which should have been mitigated by the fact that they were actually calling for government intervention in GM’s product plans while decrying the same). But GM’s relentless hype, combined with Obama’s regular rhetorical references to the Volt, fueled the furor. Then, just two months after Volt sales began trickle in, Obama’s Department of Energy released a still-unrepudiated document, claiming that 505,000 Volts would be sold in the US by 2015 (including 120,000 this year). By making the Volt’s unrealistic sales goals the centerpiece of a plan to put a million plug-in-vehicles on the road, the Obama Administration cemented the Volt’s political cross-branding.

When GM continued to revise its 2012 US sales expectations to the recent (and apparently still wildly-unrealistic) 45,000 units, I asked several high-level GM executives why the DOE didn’t adjust its estimates as well. But rather than definitively re-calibrate the DOE’s expectations, they refused to touch the subject. The government, they implied, could believe what it wanted. Having seen its CEO removed by the President, GM’s timid executive culture was resigned to the Volt’s politicized status, and would never make things awkward for its salesman-in-chief. And even now, with production of the Volt halted for the third time, GM continues to play into the Volt’s politicized narrative: does anyone think it is coincidence that The General waited until three days after the Michigan Republican primary (and a bailout-touting Obama speech) to cut Volt production for the third time?

Of course, having used the Volt as a political prop itself from the moment CEO Rick Wagoner drove a development mule version to congressional hearings as penance for traveling to the previous hearing in a private jet, GM is now trying to portray the Volt as a martyr at the hands of out-of-control partisanship. And the Volt’s father Bob Lutz  certainly does have a point when he argues that the recent Volt fire controversy was blown out of proportion by political hacks. But blaming the Volt’s failures on political pundits gives them far too much credit, ignores GM’s own politicization of the Volt, and misses the real causes of the Volt’s current, unenviable image.

The basic problem with the Volt isn’t that it’s a bad car that nobody could ever want; it is, in fact, quite an engineering achievement and a rather impressive drive. And if GM had said all along that it would serve as an “anti-Corvette,” selling in low volumes at a high price, nobody could now accuse it of failure. Instead, GM fueled totally unrealistic expectations for Volt, equating it with a symbol of its rebirth even before collapsing into bailout. The Obama administration simply took GM’s hype at face value, and saw it as a way to protect against the (flawed) environmentalist argument that GM deserved to die because of “SUV addiction” alone. And in the transition from corporate sales/image hype to corporatist political hype, the Volt’s expectations were driven to ever more unrealistic heights, from which they are now tumbling. Beyond the mere sales disappointment, the Volt has clearly failed to embody any cultural changes GM might have undergone in its dark night of the soul, instead carrying on The General’s not-so-proud tradition of moving from one overhyped short-term savior to the next.

Now, as in the Summer of 2010, I can’t help but compare the Volt with its nemesis and inspiration, the Toyota Prius. When the Toyota hybrid went on sale in the US back in 2000, it was priced nearly the same as it is today (in non-inflation-adjusted dollars), and was not hyped as a savior. Instead, Toyota accepted losses on early sales, and committed itself to building the Prius’s technology and brand over the long term. With this approach, GM could have avoided the Volt’s greatest criticism (its price) and embarrassment (sales shortfalls), and presented the extended-range-electric concept as a long-term investment.

Even now, GM can still redefine the Volt as a long-term play that will eventually be worth its development and PR costs… but only as long as it candidly takes ownership of its shortcomings thus far and re-sets expectations to a credible level. And whether The General will defy and embarrass its political patrons by destroying the “million EVs by 2015″ house of cards in order to do so, remains very much to be seen. One thing is certain: as long as it puts PR and political considerations before the long-term development of healthy technology and brands,  GM will struggle with a negative and politicized image. And the Volt will be seen not as a symbol of GM’s long-term vision and commitment, but of its weakness, desperation, inconstancy and self-delusion.

]]> 238
Dodge Brand Phase-Out Watch: There Will Be No Dodge Viper Tue, 27 Dec 2011 19:08:52 +0000

Once upon a time, the Dodge brand was brimming with pride. In the mid-to-late 1990s, Dodge had it all: affordable compacts, big front-drive cruisers, the hottest trucks on the market, and of course, the Viper. And when the times were good, all of those part melded into one brash, exciting, quintessentially American brand. From Neons and Intrepids, from Rams to Vipers, Dodge could do it all, as long as “it all” included a healthy dash of in-your-face attitude. But over the years, as Dodge’s shining moment faded into memory, the brand has managed to become both less viscerally appealing and less well-rounded. And when Fiat’s leadership stripped Dodge of the Ram “brand,” shucked its designs of their truckish cues, and repositioned Dodge as a more “youthful” and “refined” sporting brand, it seemed as if Dodge as we knew it was dying. Since hearing of Fiat’s plans to bring Alfa stateside, and with Dodge appearing to have lost out in brand alignment product battles, we’ve been wondering for some time now if Dodge isn’t headed out to pasture. Now there’s even more evidence that Dodge is being hollowed out en route to replacement with Alfa, as Automotive News [sub] reports

Absent from the redesigned SRT Viper will be the name Dodge… Viper has been linked to Dodge since the Dodge Viper RT/10 concept debuted in 1989. The first Dodge Viper SRT-10 went on sale in 1992, and over the years 28,056 Vipers were produced, according to Chrysler.

Not any more. Essentially, SRT becomes a brand with its own vehicle, in this case the SRT Viper.

That’s right, Dodge won’t have a Viper or a Ram (or, more prosaically, an Avenger or Caravan). Some might argue that, absent these components, the Dodge name doesn’t mean much of anything anymore. Certainly it doesn’t seem that Dodge can have a particularly bright future without any links to its last moment of glory.

Chrysler Group insists that the branding shift has nothing, NOTHING, to do with any elimination of the Dodge brand. In the words of a Chrysler Group spokesman,

SRT is the high-performance end of the company. The whole brand philosophy and the branding separation between Dodge and SRT will evolve over time. This is kind of that first step establishing what SRT means to the company and what that car means to the brand.

The other side of the company’s argument: the Dodge brand has “baggage” in some global markets, and by branding it as an SRT, the Viper can have a unified global brand and be sold (theoretically) at Alfa and Maserati stores. On the downside, these kinds of sleight-of-brand moves don’t tend to fool anybody, and more to the point, how many consumers know anything about the SRT “brand”? But all that aside, the mere existence of an SRT brand seems to trade off directly with Dodge’s continued success. After all, without trucks or performance halos, what exactly is Dodge again? And with Dodge’s post-Fiat-takeover brand boss Ralph Gilles jumping from Dodge to SRT, it seems that the corporate winds are blowing the once-proud Dodge brand towards oblivion. Perhaps Alfa will ultimately prove to be the more compelling performance brand, but in the short term, Fiat-Chrysler seems to be trading in one potentially strong brand for two relative unknowns.

]]> 65
Toyota To Emerge With Emerging Market Strategy Sat, 05 Mar 2011 13:59:14 +0000

On Wednesday, March 9th, Toyota will announce its new long term strategy plan to the public. A core piece will be a push into emerging markets. TTAC has been following signs of this for a while. The signs range from a car, the Etios, designed exclusively for the emerging markets, to a factory up in the woods near Sendai, Japan, that looks very much like a prototype for Toyota’s latest export product: Low cost car factories.

The Nikkei [sub] agrees and says that “Toyota Motor Corp. is overhauling its strategy because it is now clear that emerging nations will replace industrialized ones as its most important markets.” Will replace? Wake up!

Emerging auto markets already buy more cars than the established markets. According to a J.D. Power study, emerging markets accounted for 51 percent of the global light-vehicle sales in 2010. For this year, J.D. Power expects this number to rise to 53 percent, mostly driven by China and to some degree Brazil. As other markets join the fray, this shift will accelerate.

As the BBC said last month:

“The main battles will be fought in Asia, where sales are set to grow the fastest in the years ahead. Whoever wins in China and India will become the biggest in the world.”

Toyota needs to shift its focus along with these developments. Toyota suddenly find itself in the wrong places at the wrong time. Toyota dominates in Japan, a shrinking market. Toyota is strong in the U.S., a market that has matured and promises no significant growth. In Europe, the world’s most competitive and crowded marketplace for cars, Toyota holds a crumbling market share of 4.8 percent, with Hyundai hot on its heels.

Toyota is a late-comer to China, they forged a joint venture with FAW and sold their first Made-in-China Toyota in 2003. According to J.D. Power, Toyota holds a 4 percent market share in China, a far cry from Volkswagen’s 12. In India, where Toyota arrived a few years earlier than in China, Toyota defends a tiny market share of less than 3 percent, whereas their colleagues at Suzuki own half of India’s growing market. In Brazil, Toyota boasts a market share of 1.9 percent. Something needs to be done, fast.

A step in Toyota’s new emerging market strategy is that Toyota will tailor the vehicles it sells in emerging markets to local tastes, writes The Nikkei [sub].

According to another story in The Nikkei [sub], and as predicted by TTAC last December, Toyota will derive five or six models from the Etios, including a minivan and an SUV. The cars will be introduced beginning next year in emerging markets in Asia and Latin America, including China and Brazil.

The new Vitz/Yaris subcompact, released last December in Japan, will be sold in Japan, the U.S. and Europe only. Too expensive for emerging markets. Instead, “Toyota plans to develop a subcompact with a 1.2- to 1.6-liter engine for release in 2013. Parts procurement costs for this model are to be roughly 20 percent lower than those for the Yaris,” says The Nikkei.

“The roads of the world make the automobile,” Akio Toyoda said. “Our goal is not to sell 10 million vehicles but to provide automobiles that 10 million customers desire.”

It will be a while. This year, Toyota’s sales are projected to reach 8.61 million units. That is only slightly up from the 8.55 million units delivered in 2010. Other manufacturers spent many decades in emerging markets and are way ahead.

]]> 9
Volvo To Slash US Lineup: Which Would You Kill? Thu, 27 Jan 2011 22:21:09 +0000

Volvo has come to the kind of conclusion we haven’t heard from an automaker in some time: it’s selling too many models. With nine models currently on the market, the Chinese-owned Swedish automaker has opted to cut that number by “five or six” nameplates, and will rebuild its US lineup around its XC60 and XC90 crossovers, and S60 sedan. As a Volvo spokesman explains to Bloomberg

We have to focus on the key segments with significant volume potential.

The first model to go from the lineup will be the V50 station wagon, but from there it’s anyone’s guess. To help kick off the speculation, we present the graph above, charting the recent sales fortunes of the nameplates that Volvo is considering for death. Since the one model on the chart that has already been marked for death (the V50) has the lowest volume, it might be safe to guess that the next model up the volume ladder (C30) will be the next to die. From there, it’s a lot more complicated. Last year the S40 moved 5,623 units, the C70 sold 5,263 units, the XC70 sold 6,626 units and the S80 sold 7,724. In terms of sheer volume, there’s reason to kill every one of these nameplates… but strategically there’s just as much of an argument for investing in any one of them. Too bad there’s only marketing resources for “five or six” nameplates. So, which models would you kill?

]]> 59
BMW: One Million FWD Cars By 2015 Tue, 23 Mar 2010 19:58:51 +0000

While the autoblogosphere frets bout whether BMW drivers can tell which wheels drive their cars, the real news in the BMW-goes-FWD storyline is the impact that the sea change in brand strategy is expected to have on volume. Automotive News [sub] reports that BMW is developing a new family of modular gas and diesel engines, which are intended “primarily for BMW’s new front-wheel-drive architecture, but the powerplants also will be used in the automaker’s rear-wheel-drive cars,” according to CEO Norbert Reithofer. And the volume at which this new family of three, four and six-cylinder engines will be produced is one of the early indications of where BMW is going with its FWD expansion. Today, BMW sells just under 1.3m vehicles worldwide. That’s fewer cars than will be powered by this new family of engines alone, which Reithofer says will motivate 1.5m vehicles worldwide. Considering BMW’s goal is to sell 2m vehicles of all its brands by 2020, it’s clear that much of that growth will be made possible by new FWD-inclusive drivetrain technology.

According to Reithofer, 700,000 to 1 million cars per year will be built on the firm’s new FWD platform by 2014 or 2015. By contrast, BMW currently sells about 400,000 small and compact cars annually, which includes the FWD MINI and the RWD 1 Series. Furthermore, it took eight years, between 2001 and June of 2009, to produce 1.5m MINI-branded vehicles. MINI’s best sales year was 2008, when it sold about 230,000 cars. BMW’s 1-series has performed similarly, selling 225,000 units in 2008 and 217,000 in 2009 [full BMW 2009 report in PDF format here]. Clearly BMW is going to need more than one new model to make serious inroads towards its hugely ambitious goal.

Currently, Reithofer is keeping his cards fairly close to his chest. A new MINI is due in 2014 and the “BMW 0 Series” FWD model will debut shortly thereafter, positioned under the RWD 1 Series. From there, it’s anyone’s guess. Or, as Reithofer puts it, BMW can’t spill the beans “because then [VW CEO Martin] Winterkorn knows it as well.” After all, the 3800mm to 4300mm size bracket for this new platform puts it squarely in Volkswagen Golf territory, and nobody wants to compete there with a single model. The Golf is based based on a modular platform, similar in concept to BMW’s, but between its many brands and bodystyles, Volkswagen plans to build no fewer than 60 variants of the MQB (Golf) platform.

In short, BMW is planning on running right into the buzzsaw that is the most competitive segment in Europe. Of course, there’s not much choice involved in the decision, because steep ramp-ups in European emissions standards will make BMW’s current business model largely impracticable. Meanwhile, faced with the same pressure, Mercedes will be launching a similar FWD volume-grab based on platforms and technology that will emerge from ongoing talks with Renault/Nissan. Audi has already moved to downsize with its new A1, and with sales and perception momentum as well as VW’s platform synergies behind it, Ingolstadt has already stolen the march on BMW. Which means the market for premium (or not) front-drive compact cars is going to be white-hot within the next few years.

BMW is increasingly an anomaly within the auto business: a privately-owned, independent manufacturer that is not quite a focused niche player and yet also isn’t prepared to compete in the scary world of true volume automaking. With emissions standards nipping at its heels, and with growth a necessary constant for industry success, BMW has little choice but to commit to a full-on, mass-market transformation. Whether BMW can perform this shift while keeping its all-important brand equity intact is a huge open question, and one that will be answered by the firm’s execution from here on out.

]]> 24