Modified: July 09, 2013 10:41 AM
To fix Chevy in Europe, GM should look to VW
One of the challenges General Motors faces to fix its money losing European operations is to ensure that there is clear brand separation between Chevrolet and Opel/Vauxhall in the region.
Can GM learn from Volkswagen, which is regarded as the master when it comes to positioning its many brands? VW Group's brand portfolio includes the core VW marque, Skoda and Seat, as well as Audi, Bentley, Porsche and Lamborghini.
The first thing is to bring clarity to the Chevrolet brand, says Tim Urquhart, senior analyst at IHS Automotive. Chevrolet's European range is a "hodgepodge" of models, starting from the Korean-built Spark minicar and rising all the way to the U.S.-sourced muscle sports cars, the Camaro and Corvette, he says.
"I'm not sure if this communicates to customers readily what the brand is supposed to stand for," Urquhart says.
Brand clarity is VW's clear strength, he says: "Skoda represents, value, quality and space. VW represents quality, efficiency and desirable product lines. And Audi is a design and technology-led premium brand."
This is achieved despite VW Group vehicles sharing a lot of major components, according Michael Gartside, senior analyst at PwC Autofacts. "The Seat Leon, VW Golf and Audi A3 are closely related and similar in size but they are visually different. They have very different interiors and have a different market position," he says.
VW Group also successfully maintains a price differentiation between models with similar underpinnings such as the VW Golf and Audi A3, something other companies often fail to achieve.
"You find their brands often compete in the same or very similar price and product segments," Gartside says.
That brings to mind the Chevrolet Trax and Opel Mokka subcompact SUVs. These are essentially the same car, but Chevrolet's addition of the high-tech MyLink telematics in higher-spec models means the Trax then competes head-on with the more premium positioned Mokka.
This potential cannibalization of sales by the cheaper brand is something VW has avoided, according to Gartside. "Where there is the likelihood of cross-brand comparisons, spending more for a VW or Audi provides most consumers with a clear return," he says.
The task will become substantially more difficult if GM's alliance PSA/Peugeot-Citroen strengthens. PSA struggles to separate its own brands. Earlier this year, PSA outlined a strategy for Peugeot to become more upmarket with a range of more traditional models. Citroen will have the upscale DS line, which takes a more youthful approach to premium sales, as well as "C-line" compact models as the value offerings.
This was broadly welcomed by analysts, but not without caveats.
"We are concerned that the existence of both entry-level/basic models and aspiring higher-end products within the two brands will not be easily understood and accepted by customers," Fitch Ratings said in a February statement.
Chevrolet's more immediate problem is address falling sales, which were down 31 percent in Europe to the end of May this year, according to industry association ACEA. That will be tough with a range cars that "hardly impress," according to IHS Automotive's Urquhart.
"GM says it does not want to market Chevrolet as a budget brand. Fair enough, but given the current model line-up it's hard to see how they will grow sales and market share in Europe without resorting to discounting and price selling," he says.