The Volkswagen group has been talking about brand differentiation for years. Among all its higher-volume marques, Audi has been the most successful because it fulfills the expectations customers have for a premium brand. That is reflected in its steady growth.
But for Seat, Skoda and the VW brand itself, growth appears less of a sure thing.
If the VW Golf does well, the VW Polo suffers. In addition, there are indications that Skoda's growth may hurt the VW brand.
VW's products are good, but do they have the right flavor and do they offer the value that customers want?
Premium was the buzzword a few year ago -- even in lower segments. But Europe has changed. Economic growth is lackluster, incomes and income expectations are lower, and long-term unemployment seems here to stay.
Many customers no longer are seeking status when they purchase their cars. Paying a E2,000 price premium to get a higher-end car can mean the difference between a family holiday or staying at home this summer.
VW dealers in Germany say they badly need an entry-level car. The answer is next year's Fox. It is expected to be less expensive and will give more value for money than the Lupo it will replace. The Lupo starts at E10,150, which makes it premium priced for its segment and therefore more difficult to sell.
But the Fox alone cannot do the job for VW. The Wolfsburg-based brand -- once renowned for its ability to appeal to everyone -- needs a wider range of economically priced cars in the lower segments.
The French carmakers are doing well in the lower segments because they have a broad small-car portfolio. PSA/Peugeot-Citroen will increase its offerings through a joint venture with Toyota.
Renault will benefit from such cars as the new Twingo and, to some extent, the Logan.
Korean carmakers are gaining in Europe by strengthening their model offerings in the segment and even Fiat seems to be improving its fortunes a bit thanks to the success of the Panda minicar.
Apparently, there is a broad European customer base that wants small cars that provide value for money.
VW can be more successful in the lower segments. All it needs is the right cars at the right price.