What’s going on at Volkswagen?
Volkswagen Group, which also owns brands including Audi and Skoda, is competing in an increasingly tough environment, and it’s struggling to keep up. That’s because while demand for electric vehicles (EV) is booming in countries including the U.S. and China, the European market is already running out of steam.
December 2023 data from the European Automobile Manufacturers’ Association (known by its French acronym ACEA) showed EV sales in the final month of last year declined for the first time since April 2020—to the tune of 16.9% at 160,700.
Against this backdrop, it’s been a brutal few years for the German car industry, the largest in Europe with 800,000 employees. Volkswagen and its rivals, BMW and Mercedes-Benz, are scrambling to bolster EV sales while a growing number of Chinese startups announce electric model launches in Europe, offering highly competitive prices.
When your CEO admits ‘we are no longer competitive’ … you know you are in real trouble.
Gabor Schreier, chief creative officer, Saffron Brand Consultants
In 2023, Volkswagen initiated a three-year mission to “restore core brand competitiveness” and ensure its offering was “future-proof and sustainable in the long term.”
To achieve this, it’s concentrating on improving its sales performance and cutting costs, including headcount. The transformation program is focused on three things: optimizing material and product costs; reducing fixed and manufacturing costs; and increasing revenue.
Time to shift marketing gears?
Marketing will be crucial to pushing the third focus forward for Volkswagen as it continues on its journey, with the company hoping to increase its namesake brand’s return on sales from 3.6% up to 6.5% by 2026.
It’s already made financial progress in key market China. In December 2023 it snatched back its best-seller crown from homegrown car startup BYD, shifting 209,476 units and achieving a year-on-year growth of 41.5%, while claiming a market share of 10.29%.
However, that doesn’t mean that whoever succeeds Kennedy won’t have a long road ahead.
Gabor Schreier, chief creative officer at Saffron Brand Consultants, said: “When your CEO admits ‘we are no longer competitive’ … you know you are in real trouble.
“The new CMO of Volkswagen has a mountain to climb, and one of its core problems is the brand itself,” he added. “It’s a catch-22—it needs to make a big investment in both brand and innovation, but currently lacks the resources to do so.”
He said recent scandals—including the brand’s 2016 emissions scandal, which rocked the business after it was found to have installed illegal “defeat devices” to cheat emissions tests—have taken their toll on the flagship business, as well as sister brands Audi and Porsche.
The creative continued: “It did the right thing to try and clean up its image and brand with investment and focus on EVs, but it is considerably slower than its more nimble competitors like Tesla and BYD.”
Data from global brand consultancy Interbrand shows that even amid global economic uncertainty, auto is one of the most resilient industries. However, its 2023 Best Global Brands report found that while automotive brands grew their market value by 9%, Volkswagen’s brand only grew 2%.
