COMMENT: VW: From classy caviar canapes to bread and butter

Franz W. Rother is Editor-in-Chief of Automobilwoche

Just four weeks ago VW boss Bernd Pischetsrieder was still sitting on his high horse. In an interview with Automobilwoche he proudly stated that Volkswagen always found a buyer for each car produced. He said that he himself had decided on the price for the Golf V, after intensive discussions with brand boss Detlef Wittig -- an absolutely fair market price. He argued that if low-cost brands such as Renault, Peugeot or Opel thought it necessary to start sales campaigns, then that was their problem -- VW did not need any such campaigns and the (high) price for the Golf V would not change.

Meanwhile, the price structure has started to crumble. Suddenly, as if by magic, just three months after the sales start, VW launched a special Golf model with free climate control worth 1,200 euros. Officially, the special offer will end at the end of September. But even Pischetsrieder should know that in the future he will not be able to offer climate control as an extra feature. The competition will leave him no choice.

On the contrary: in coming months, at the sales start of the new Astra at the very latest, VW will have to review prices for the Golf again and will have to add a few more features for free. Because even with climate control, the car is still too expensive.

According to internal research undertaken by one competitor last October, the trendy version of the Golf with 75 HP was 34 percent more expensive than the average price of its main rivals within the compact car segment. Meanwhile, the additional costs for the premium features have shrunk to less than 10 percent due to the "anniversary special offer."

However, the Golf still costs nearly 20 percent more than its cheapest competitor, the Fiat Stilo (with 95 HP engine). This seems to call for even more changes. Those faithful customers who last autumn bought the Golf at the listed price probably are exploding with anger now.

No doubt, Pischetsrieder and his sales strategists have totally miscalculated -- as others have before them. They thought a little glamour, silicone-cushioned handles and the kind of craftsmanship that demonstrates the smallest gap widths would be enough to turn a bread-and-butter car into a caviar canape. Chrysler made the same mistake in the U.S.A. that VW made in Europe, and failed.

The current market is not strong enough for that. The typical VW clientele in Germany is more interested in the future of pension schemes than the legroom in the new Golf.

Pischetsrieder might soon be confronted with totally different and worse problems than the pricing for the Golf. The extended Easter holidays for the employees of the three largest German plants already demonstrate the seriousness of the situation. There is no reason for the competition to laugh at the market leader's mistakes either: if the economy doesn't improve soon the whole industry will come a cropper.

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