How did Volkswagen conquer the world?

Gigi Douban Jul 28, 2015
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How did Volkswagen conquer the world?

Gigi Douban Jul 28, 2015
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Volkswagen’s very public goal has been to be the biggest car maker in the world. And it reached that goal in the first six months of this year, selling 5.04 million vehicles and moving past Toyota.

If you think of Volkswagen’s car brands as if they were part of a stock portfolio, it would be pretty diverse. And that’s a good thing, says Thilo Koslowski, vice president and automotive practice leader at Gartner. 

“As a large company that owns multiple brands, it is important that you have to have a balanced approach,” he says, “a premium brand and volume brands.”

For Volkswagen, that volume brand is Volkswagen. Audi, another Volkswagen brand, has had very healthy profit margins. And, “a company like Porsche, which is also branded within the Volkswagen group, has the highest profit margin of traditional auto manufacturers that is out there,” Koslowski says.

But just because a car company is number one in sales doesn’t mean it’s making money, Steven Szakaly, chief economist with the National Automobile Dealers Association, says.

“Realistically it doesn’t really mean anything in terms of profitability, popularity of models,” he says.

Szakaly says Volkswagen’s aggressive global push adding factories and brands could work against the company: “A large system that produces a large volume of motor vehicles is also very expensive to run and it’s also very expensive to maintain.”

But that global expansion got it to number one. Mike Austin, editor in chief of Autoblog.com, says the company’s sales in China have been a major plus. In Europe, of course, it’s a slam dunk. On the other hand, he says the company is struggling in the U.S.

“They only have about 30,000 units so far this year,” he says. “It’s one-sixth the size of Toyota in terms of sales.” He says Volkswagen and Toyota are so close, it’s anyone’s game for the next six months.

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