Where is VW?

Where is VW? image

Text: Tito F. Hermoso / Photos: | posted February 16, 2011 09:34

Wo ist Volkswagen?

"Vo ist Fo Ve?" Where is VW? With GM still rising from the ashes and Toyota bedraggled by North American recalls and suits, Volkswagen or VW, has every reason to aim for Number ONE. The good doctor, Chairman F. Piech doesn't have to be an ambitious genius to strategize that. Its wide product range, large stable of brands and quality offerings continue to lead sales even after the EU has dropped its recession busting clunker replacement sales subsidy. In Europe, VW is number one in almost all of the 27 countries of the EU, a Hitlerian dream that not even the might of the Wehrmacht achieved in the '40s. VW is on the comeback trail in North America, placing its bets on a new Chattanooga factory and expansion of its Puebla factory. Instead of SUVs and Pick up trucks, which are in resurgence at the latest Detroit Auto show, VW will produce an Americanized Passat to do battle with Malibus, Fusions, Camries and Accords. VW continues to preserve is dominance in China against dozens of powerful interlopers. It continues to lead in the big Latin American car making markets. And VW, in keeping with its roots as Auto Union in the 30s, is always on the look out for acquiring more brands in aid of comprehensive growth. Suzuki, Scania and MAN are already in its orbit and it has always had its sights on FIAT's Alfa Romeo.

VW über alles?

But over here VW's are barely noticeable other than as 1.] a still numerous trinket from the past, lovingly cared for by several VW Beetle Clubs, 2.] The Port Irene imports of Japanese market Mexican made VW New Beetles, 3.] a few Caravelle and old Passat units, from the remnants of the Autostadt boutique VW dealership of Peter and Paul Rodriguez, and 4.] mention in the BOI history records of one DMG, one of the country's largest car assemblers and makers of the all Filipino DMG Sakbayan, based on the Volkswagen Beetle. Perhaps VW's absence here is understandable as there may still be an outstanding warrant of arrest for Volkswagen's top man, Herr Martin Winterkorn, no doubt a victim of the court struggle for the Audi dealership some years ago. Herr Winterkorn at that time was Audi's CEO. But German allergy to doing business in the Philippines shouldn't surprise as the Philippines hasn't paid for FRAPORT's funding for NAIA 3 in the past decade or so.

Absent in Asia?

Still Volkswagen is not exactly as popular at Toyota or even Hyundai in other parts of the world. There as many VW models on Hong Kong streets as there are Mercedes and BMW. VW is not even as common as Mercedes in Thailand or Indonesia. Despite several years of on and off negotiations with Malaysia's home grown Proton, VW is not half as visible as sales of its subsidiary Skoda, which was in the Malaysian market before VW. Even in India, VW is not only a Johannes-come-lately, its presence looks token compared to Ford, Hyundai and Mercedes. In the Middle East, Mercedes out number VW models in many cities. Apart from the locally made Kombis and Golfs in South Africa, Volkswagens are far less common than even old clunkers from long departed French brands. So, excluding the zero growth EU market, how can VW even hope to claim to be Number ONE when it doesn't even have the convincing global presence of GM, Toyota and even Ford?

Is it a European thing?

To be fair to VW, other European volume makers are not exactly forces to be reckoned in growth markets. Francophone Africa is swarming with Asian cars as French cars are looked fondly as antiquities. Latin America does have a strong European presence but are not as domineering overall as US and Asian brands. In Asia, we've seen pioneering attempts but sustainability all but withered when the Asian brands arrived. To Asian hearts and minds, the cachet of volume European brands is just not in the same league as the prestige European brands as Volvo, SAAB, Mercedes, Audi, BMW and Ferrari. Nissan's prestige is unmoved by its alliance with Renault, the result being the scant recognition of Renault in Asia. Peugeot, Citroen and FIAT-Iveco were first movers in China, but things just didn't work out as grandly as it has for VW, GM and the Asian brands. Besides, if many of the same revered European brands did not have the perseverance to soldier in the US market, why should they bother with Asia? A retreat to comfort to the stable social utopia of Fortress Europe was always the easy way out.

Small market

Excepting the usual defeatist excuses about the Philippines being a small market, like it or not, we are still recognized as being the oldest car culture in Asia. This makes the Philippine market, now with 17 major brands, much more than in any ASEAN country, a good bellwether to learn sophisticate marketing skills for a discerning rich man's market. Philippine society ably translates Asian expectations in plain car language. Thus the rumor mill, for over the past one and half years, have been awash with speculation and more grist for more speculation on VW's intentions for our market.

Rational choice

If VW just needs a presence - as surely, big or small, there is money to be made - the rational choice would an existing distributor. The business model would be to aim for the premium market of discerning enthusiasts. This market the is well served by MINI, Subaru, Jaguar-Land Rover, BMW, Volvo, Maserati and Mercedes Benz. PGA has a long history with Volkswagen Group, having been distributors for Porsche and Audi. The owners are entrenched in car enthusiast society, the market it serves. But PGA will have to protect its Audi franchise as there is some product overlap between Audi and VW. Thus it has to refuse to market the Phaeton, Tiguan, Passat and Tuareg. The Polo and Jetta, bread and butter cars in the EU, will not have the cachet of an Audi A1 or MINI here. The cute Mexican made New Beetle won't cut despite the many sentimentalists out there as it is as dear as a VW Golf, sans the Golf's the performance abilities. Thus the most sensible models VW can sell through PGA are the Golf GTI - a riposte to Subaru's, EVO's and MINI's and the VW Caravelle/Multivan. In Europe, the VW Caravelle/Multivan is more respected than the Mercedes Viano as the latter is a product of the Mercedes Truck division. The Caravelle would compete nicely with the Chrysler Town and Country and the Toyota Alphard. And if PGA becomes the VW distributor, they can finally replace their Mercedes Vito service van for a proper VW.

Ambition vision

But if VW's Asian lieutenants want to please the grandiose vision of Dr. Piech, VW has to ally itself with a conglomerate. The speculation is the favored conglomerate has an international reputation for Banking and Real Estate. Its successful ventures into Telcos and Utilities was achieved by hiring outside of its rather large cadre of own bred lieutenants and troopers. It, along with another Banking conglomerate, are minority partners in the distribution and manufacture of two of the top five local motor vehicle brands. To make the shareholders happy, the chosen path was to sew up the dealer network between the two conglomerates, leaving the core competence of operations and manufacture to the foreign partners. The conglomerate's car making companies have a wellspring of recently retired executives who were known to think out of the box when the spurt in car making began in the newly minted Industrial Parks here in the early 90s. For so long as they are not bound by non-compete clauses, they should be tapped if the intention of VW is to be a major player.

The China card

One factor VW should consider is how this pans to its constituency in China. It is acknowledged that VW's biggest market and biggest money earner has been China, not Germany. As quality of Chinese made cars ramp up and with some excess manufacturing capacity of 5 million units, ready and able for exports, FAW and SAIC, VW's partners in China, will wisely use its VW connections and influence to find markets for their production, especially when PH gains a bilateral trade agreement with the world's biggest exporter. If VW finally decides the vagaries of the Philippine market, they should choose a committed partner and not the kind who destroy the VW brand if the partner suddenly drops it like a hot potato.