5 Tricks Volkswagen Used to Beat GM in the Sales Race
What does it take to become king of automakers? General Motors (NYSE:GM) and Toyota (NYSE:TM) have used varying methods to claim the crown, but Volkswagen (VLKAY.PK) is now a serious contender to the throne. After setting a goal to be top of the pack by 2018, Volkswagen has a shot at making that happen sooner. The first step was beating GM in sales to take second place. According to a report by the Detroit News, VW has already pulled it off by passing General Motors in 2013 sales.
The 9.73 million auto sales reported by Volkswagen beat GM’s tally of 9.71 million sales only slightly, but even different readings of the numbers say a shift in the market has taken place. Next up for Volkswagen would be sustaining its slight edge over GM while picking off Toyota. At the moment, Volkswagen is only 270,000 units off the pace.
If VW is capable of topping all automakers in global sales, it will have to repeat and improve upon the tricks the automaker used to nudge aside General Motors. Here are five tactics Volkswagen used to outrun GM in 2013 auto sales around the globe.
1. Stressing cars, not trucks
As Toyota showed in the past decade, cars are the key driver in global auto sales, which differs from a U.S. auto market dominated by pickup trucks. What’s important to remember is that the United States is no longer the world’s biggest auto market. Markets such as China and India revolve around smaller passenger cars. In the top 10-selling vehicles on the planet, Volkswagen has three entries in smaller cars, while General Motors only has one, the Chevy Cruze.
2. Making Audi a powerhouse
General Motors has done great working building its Cadillac brand, which represented the luxury segment’s top-growing nameplate in 2013. However, Volkswagen is already there with its Audi brand, which is surging toward the top of the category, with only BMW (BMAXY.PK) ahead in its sights. Audi sold a company record 1.58 million automobiles in 2013 to post a gain of 8.3 percent on the year.
In line with its goal to be top automaker by 2018, Volkswagen is aiming for Audi to be the top luxury brand by 2020. With fewer than 80,000 cars separating it from BMW, that goal is within reach. Audi is presenting the entry-level A3 and sporty luxury SUVs as a way to gain ground in the segment. Among the brands under VW’s umbrella, none funds the corporate mothership on the scale Audi does. GM may have a burgeoning force in Cadillac, but Audi is already there.
3. Focusing on China
While it’s clear GM is committed to upping its game in China, the biggest product releases were designed chiefly for U.S. customers. A new Cadillac Escalade, the 2014 Chevy Silverado/GMC Canyon, the Canyon/Colorado coalition, and even the Corvette all scream stars and stripes. That’s crucial to General Motors as it tries to fend off Ford (NYSE:F) among U.S. automakers, but on the world stage, bigger dividends are paying off in China.
Volkswagen made headlines in January when it showed it passed GM for 2013 sales leader in China on the strength of cars such as the Polo, Golf, and Jetta, the latter of which is the third biggest seller on the planet. No automaker had bested GM for eight years in China, but VW was able to do that on the strength of a surge of 16 percent over sales of the previous year. GM put up an 11-percent increase, but it was Audi and the small cars that gave VW the crown in China.
4. Setting and achieving ambitious goals.
It’s one thing for an automaker to say it will make major headway and another to actually execute and pull off such a strategy. Volkswagen’s corporate efficiency has been remarkable in that it seems capable of delivering on big promises. In fact, some analysts believe Volkswagen won’t have to wait until 2018 to claim top spot among automakers. It’s not a stretch to say the German automaker can do it by the end of 2015.
VW has taken many chances that set it apart from other automakers, many of which enjoy great success. For example, Ford strove for greater efficiency under Alan Mulally, seeking to part with Jaguar and Land Rover in a sale to Tata Motors (NYSE:TTM). By contrast, Volkswagen has sustained and grown its luxury and specialty stable, which includes Porsche, Lamborghini, Bentley, and Bugatti.
5. Dominating Europe
While GM has led the U.S. auto market in sales, Volkswagen has dominated the sector in Europe with a market share of nearly 25 percent. Opel and Chevrolet combine for 8 percent in the European Union, but that hold may lessen as GM pulls Chevy from the region in an effort to prop up Opel. Europe has proved to be an incredibly sore spot for General Motors in recent years, which is common among all automakers, but the edge Volkswagen holds has had a huge impact on the overall sales race.
VW’s slip in the U.S. market, where it’s no longer in the top 10 of brands following a 7 percent drop in 2013 sales, hasn’t deterred Volkswagen from investing in more U.S. production. VW has $7 billion set aside for North American projects in the coming years. On the docket is reportedly a midsize SUV that should enhance VW’s appeal stateside.
The automaker is planning to turn a weakness into a strength in its push to unseat Toyota, its last remaining target. To get there, Volkswagen is sure to draw from the playbook that helped it top GM.
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