Emulating Germany’s Automotive Success

Photo from bmwblog.com

Photo from bmwblog.com

When people in America say “The BIG Three” you know they’re talking about GM, Ford, and Chrysler. But use the phrase  anywhere else in the world, and no one will even think of those American automakers. As of 2013, the largest automotive company in the world, by revenue, is the Volkswagen Group with $270 billion in revenues. Daimler AG (i.e. Mercedes-Benz) comes in 3rd with $162 billion and Bayerische Motoren Werke AG (i.e. BMW) comes in 7th at $106 billion. What I’m getting to is that Germany is the world’s largest and most influential car manufacturing economy.

Germany alone produced over 5.6 million cars in 2012, putting them in 4th place behind China, Japan, and the US, though that discounts the fact that the German firms listed above produce a considerable number of the cars in aforementioned countries as well as in Mexico, France, and many others. The true “BIG Three” are thus, VW, Mercedes, and BMW.

If you want to count being the biggest auto manufacturer as producing the most cars, that’s fine, but it means having razor thin profit margins when compared to competitors and it means cutting corners. Toyota tops VW in the number of cars it produces, but the fact that they brought in $60 billion less in 2013 shows that people are willing to pay a premium for a better car. The VW Jetta, for example is aimed squarely at the Toyota Corolla and VW tries to keep the Jetta’s price the same as the Corolla’s . However when customers didn’t like the 2012 Jetta’s torsion beam suspension, VW threw it out and began offering the car with a more expensive fully independent rear suspension and sales picked up.

Photo from ConsumerReports.org

Photo from ConsumerReports.org

During the recession, VW focused, not on austerity or cutting corners, but on developing new models and opening new plants. This helped the company substantially to maintain year after year growth even in Europe, where car manufacturers have been struggling to keep their heads above since 2009. An online post from the British magazine Autocar highlighted the point back in 2009 stating:

“In the first nine months of the year, VW Group’s sales were up 34 per cent to 622,853 units. This has been helped by the launch of new Golf and Polo models, with sales of these up 54.1 per cent and 56.2 per cent respectively.”

Forbes interviewed Mercedes-Benz vice president of marketing and saw a similar trend in their strategy:

“Mercedes still managed to emerge from the recession with renewed momentum, launching five new models and building share of market, as it is looking to its 14th consecutive year of sales growth in 2011.”

This success has not gone unnoticed. The Fiat group which owns the brands Fiat, Ferrari, Maserati, Lancia, Alfa Romeo and now Chrysler (they sound like a HUGE and important company, now, don’t they?) is now only afloat because they purchased a controlling interest in Chrysler right before the European economy tanked. For Fiat executives, turning Chrysler around was a fairly easy job, turning around the Italian side of the family is turning out to be a much more difficult task. Fiat is now looking at the VW Group as a model of how to succeed.

One example of how the Italians are taking their cue from the Germans is the way that Fiat is rebooting Maserati. Maserati is an old company with a racing heritage. A good comparison to Porsche, where VW has found a balance between catering to the masses with it’s Cayenne SUV (which literally doubled its sales), it’s Panamera Sedan (which was meant to double sales, but fell a bit short), and it’s lower priced Boxter roadster, while maintaining it’s company heritage with 16 variations of it’s 911 on offer. Porsche is now releasing a small SUV called the Macan. Porsche sold 160,000 cars to Maserati’s 15,400, last year, as Reuters pointed out.

The upcoming Maserati Levante at the 2011 Frankfurt Auto Show. Photo by David Villarreal Fernández

The upcoming Maserati Levante at the 2011 Frankfurt Auto Show. Photo by David Villarreal Fernández

So, the Reuters article notes, Maserati released two new sedans (the Ghibili and the Quattroporte, the blog Jalopnik has a great review of them) that share various components with other Fiat group vehicles, the way Porsche gets the same air-conditioning or window motors in it’s vehicles as say the VW Jetta. Following Porsche’s strategy, Maserati has an SUV and a sports coupe in the works.

Fiat is catching on. They are realising why it is that the Germans are propping up the European Union. The only question is will other European car makers catch on before it’s too late?

This post is for the Germany in Europe Campus Weeks initiative, information can be found at the German Information Center website.