Tag Archives: Porsche

More Discovery, less Land Rover

The replacement for Land Rover’s compact, family-friendly model, the Freelander, was announced this week with a new name – the Discovery Sport.

lr_ds_statics_07Pulling the Freelander into the Discovery range is a sensible move for the Land Rover/Range Rover brands. It rationalises the model ranges, and it co-opts a name which has assumed sub-brand status thanks to the Discovery’s combination of modern but uniquely Land Rover looks and unbeatable functionality. The intention is clear from the oversized ‘Discovery’ bonnet badging where ‘Land Rover’ used to sit.

The new Discovery Sport has been engineered and packaged to provide more space than the outgoing Freelander, including a third row of seats, in a barely-bigger footptint. That’s clever. And it manages it while looking sleeker, more premium and completely contemporary.

But in doing so it leaves behind the Land Rover design language which has helped make the existing Discovery a brand icon and a statement of resolute differentiation from SUVs produced by other brands, which are mass-adopting a lower, less utilitarian look. The exterior styling also has a lot in common with Range Rover’s urban, fashion-oriented Evoque model, and plenty of similarities with the Evoques’ big brother.

It even shares that Range Rover’s Sport tag. This merges and confuses the two brands. But, more importantly, sportiness has little if any relevance to Land Rover. It’s diffuses the brand.

So what makes the Discovery Sport a Land Rover? And what will make the Discovery replacement a Land Rover? It’s no longer the styling – if anything, Range Rovers now have the more utilitarian body shapes. And it’s not the core value of functionality – after all, the Range Rover Sport also offers seven seats.

The increasingly high price point for Land Rovers doesn’t help. At launch – with only one engine, taken from the existing car – the Discovery Sport will cost from £32,000 to £43,000. A few options and the price will creep towards £50,000. That’s well into Porsche Macan territory – an SUV which is sporty because the brand dictates it.

Compare Land Rover’s price positioning with, say Audi’s. Equivalent versions of its Q5 SUV range top out at £37,500. OK, it’s not a Land Rover – but if the unique identity of the Land Rover brand is diluted then so is the emotional appeal of its products. Which is where Audi, BMW and Mercedes come in. They’ve aggressively targeted every market segment, especially SUVs. They’re premium but they’ve opened themselves up to everyone rather than adopt exclusive pricing. They’re a threat, the more so as Land Rover becomes more premium and less obviously functional.

Land Rover makes excellent cars. Sales will continue to grow in the short-to-medium term. But it has serious brand challenges. It should ensure that sales ambitions don’t shape the brand, and that Land Rover’s brand differentiation, achieved over decades of leadership, is both preciously preserved and clearly stated. That starts with the design of the product, but with the Discovery Sport it has become more generic. In the long term that’s going to help Audi, BMW and Mercedes more than Land Rover.

 

 

Volkswagen group not profiting from its brands’ equity

_origin_Fakti-kas-tevi-parsteigs-9Martin Winterkorn, boss of Volkswagen Group, admitted this month that the business “urgently” needs better profits, and today’s half-year results announcement confirmed falls in both profits and sales. This is the company, remember, which has targeted global number one status by 2018, and since Winterkorn became CEO in 2007 CEO has increased production by 4m units and doubled its revenues.

One of the reasons for VW’s poor profitability is that it isn’t global in terms of geographical spread. It’s in the key growth market, China, but is actually over-dependent on it, whereas it has little traction in south and south-east Asia. And market share is relatively low in the USA, with the VW brand on the slide. Another factor is that VW is light on compact SUVs, the biggest growth segment globally. A further reason and perhaps the most significant is its sheer size – a company this big simply can’t avoid inefficiencies.

But here’s the elephant in the boardroom: VW’s problem is also down to brands. VW group isn’t merely huge; it has a huge brand portfolio, with 12 brands in total – stretching to trucks and motorbikes – and over 310 models. Paradoxically, rather than providing economies of scale, in the accumulation of brands the collective mass has outweighed the ability to exploit the efficiencies.

By 2007 it already had the considerable challenge of consolidating and managing a passenger car portfolio of SEAT, Skoda, VW, Audi, Lamborghini, Bentley and Bugatti. Each was struggling for both individual relevance and group synergy. Skoda had already begun to produce cars in the VW brand’s space. VW in turn was encroaching on Audi, which was moving onto mainstream segments previously the preserve of these brands while simultaneously launching de-facto Lamborghinis. Bentley was doing a fine job. Bugatti was, well, Bugatti, and SEAT was struggling not to be a Spain-only brand and was being jumped by Skoda. The group was competing with itself, and the mainstream brands were sharing the same market space but without sharing the economic benefits. And meanwhile the world was plunging into an economic downturn.

So what did VW do? Since Martin Winterkorn’s 2007 accession it’s added four more brands: Porsche, Ducati, MAN and Scania. It has also become the largest stakeholder in Suzuki and even consumed the design house Italdesign Giugiaro. And Skoda has stated that it wants to sell on quality and style, while Lamborghini and Bentley have announced SUVs.

VW’s strategy goes directly against the new automotive industry paradigm. Toyota has continued to excel in financial performance. It has not acquired other makes but concentrated on its core brand, which has maintains clear values, and its own premium-luxury brand, Lexus. Hyundai, which led even Toyota on profitability in 2013, was forced into a merger of unequals with Kia when the South Korean business bubble burst in the late 1990s. They produce cars for the same market segments, yet with only two brands they’ve not only managed the situation by differentiating the brands but have grown stratospherically since 2007. Meanwhile Ford has divested itself of Aston Martin, Volvo, Jaguar and Land Rover, and is emerging strongly under the ‘One Ford’ mantra. GM is now doing the same in Europe, discarding Chevrolet to concentrate on Opel/Vauxhall. And VW’s German rival BMW has limited its acquisition trail to the very distinct Rolls-Royce and Mini brands and retained the BMW group values across its portfolio.

They’ve all benefitted from a focus on a single brand or a primary and secondary brands. It’s very hard for Volkswagen group to do the same. The VW range’s own brand is still strong in spite of becoming part of the uncomfortable brand portfolio dynamic. But the group’s brand is infinitely less than the sum of its parts. It’s impossible to say what it stands for in the way that you can about its volume peers Toyota and Ford.

That VW’s profits are suffering is not surprising. That’s what happens when a goal defined by volumes is set. If the goal were instead to define and differentiate the brands more clearly, with each given the objective of becoming the most desired among consumers, then the volumes would follow. They would do so more slowly but they would do it sustainably.

Recovery gets real at the Geneva motor show

genevaWith the glitter of last week’s Geneva show’s press day reveals having been swept away and the dry ice cleared, now’s a good time to reflect on the what it meant for the business.

The Geneva show always provides an annual shot in the arm for the motor industry. It’s at the start of spring, in a bubble of snow-capped mountains and clean air, with the God Particle leaving nearby. Switzerland has no OEMs so it’s neutral – no Frankfurt or Paris-style shows of national strength. And it allows the niche producers to sit among the big players in the main halls, so exotica and design are as prominent as commoditised volume cars. It’s a good place to be, even in a post-recession landscape.

But, ironically in a market showing the first signs of sustainable recovery, this year the event came with an unusually large dose of reality. It’s as though the industry doesn’t want to push its luck, to be distracted from a hard focus on that recovery. Which is hardly surprising: in spite of five consecutive months of growth in Europe, sales are still a very long way off pre-recession levels – three million units in fact. Almost all of the OEMs are losing money in Europe, and incoming PSA CEO Carlos Tavares was quoted in Geneva saying that making money hasn’t been part of its culture, and neither was it at his previous employer, Renault.

So it was appropriate that many of the key press day launches were focused on the more fertile market opportunities. But that paradoxically comes with some challenges – for both bottom lines and brands.

Renault_TwingoThe rash of new city cars from Toyota, Peugeot, Citroen and Renault will deliver volumes. They’re cars for our time – cheap, urban cars with an injection of fashion, fun and flair. But small cars and small price tags also offer small margins, especially when they have the quality demanded by downsizers and the Apple generation. The development cost-sharing for the Toyota Aygo, Peugeot 108 and Citroen C1 will have helped, as will the Renault’s Twingo’s joint development with Daimler’s next-generation Smart. But these are not the cars those companies really want to be shifting. They’re cars for the marketers, not the FDs, better for long-term customer acquisition and upselling than short-term profits.

BMW_2_Series_Active_Tourer_at_the_2014_Geneva_Motor_Show_BMW_52185BMW’s 2-Series Active Tourer has properly given its brand and marketing people something to think about. It’s two things a BMW has never been before: front-wheel drive and a family MPV – in effect, an aspirational Kia Carens. Mercedes-Benz has trodden the MPV path already with the A-Class, and has reverted from a clever, one-box design to a conventional hatchback. The B-Class has retained the one-box shape, but Mercedes makes vans; BMW makes the Ultimate Driving Machine.

However, BMW’s strategy is conservative compared with what led to the Geneva debut of the Porsche Macan compact SUV. Barely a decade ago, ‘Porsche’ and an ‘SUV’ didn’t belong in the same garage, let alone the same sentence. Now, thanks to the Cayenne, they’re synonymous, and over half of Porches are front-engined and four-wheel drive. The SUV may have saved Porsche but the company made the SUV a global phenomenon.

I’m not sure BMW will be hoping that it does the same for the front-wheel drive people carrier. It’s brand people may have to be as clever as its engineers over the coming years.

Jaguar to land on aluminium feet

22-2014-jaguar-f-type-fdThat Jaguar is set to build compact cars is not a surprise. It’s a necessity and a belated one at that.

The brand has to grow and to do that it has to diversify. Large, essentially traditional saloon cars and sports cars are not enough. It’s 10 years since Porsche started producing the Cayenne SUV, which now provides over half its sales. And in that time BMW, Mercedes and Audi have transformed their product ranges by introducing new models into parts of the market they’d never previously touched. Including downsizing into compact and mini vehicles as well as SUVs. This is where the growth is, and will continue to be as the Chinese market dynamics shift from luxury for the wealthy few to affordable premium for the new middle classes.

Add in the facts that the compact Range Rover Evoque – a daring departure for the brand – sold more than twice Jaguar’s total volume in 2012 on its own, and that the Jaguar brand accounted for less than 20% of Jaguar Land Rover sales in the first half of this year, and it’s clear the new strategy is not a choice for Jaguar. It’s an imperative.

But it’s one which needs extremely sensitive handling. Jaguar is not a German premium brand. It’s a British brand with heritage. And a royal warrant. When the prime minister climbs into his XJ it’s a statement of pride, not efficiency. Mercedes are driven by taxi drivers. Audi has diversified to the point where it is commoditised – you don’t need to look anywhere else, whatever kind of car you want.  BMW has even invented a few sub-niches of its own. Jaguar doesn’t do these things and doesn’t need to.

The mere fact that a 3-Series rival and an SUV will bear the Jaguar badge will be enough of a leap. Remember that Mercedes makes trucks. Audi has its roots in NSU, which made lawn-mower engines. And BMW used to make three-wheelers. Whereas Jaguar established itself making desirable cars, with sporting pretensions.

It has therefore recently been busily reinventing its image around sportiness, with core brand campaigns centred on athletics and cycling – where Britain currently excels. Compact mainstream models and especially SUVs don’t lend themselves to this. But Jaguar is cleverly taking the route of aluminium architecture for the new cars, meaning light weight for better handling and performance. This will help the brand fit of the new cars – and, just as important, add premium perception and differentiation.

The sales model for the new Jaguar SUV will obviously be its cousin, the Evoque, but the model for its positioning and image will surely be the Macan, Porsche’s new smaller SUV. Porsche has done Jaguar a huge favour by making an even bigger leap first.