Volkswagen is having internal issues with profitability
News out of Germany today indicates that Audi is going to take control of Bentley. But that's only the beginning of their problem.
Volkswagen is one of the biggest, if not the biggest, automotive groups on gods green earth. And they are by far the biggest luxury automotive group on earth. But bigger isn't always necessarily better. In fact, untamed growth is almost always certainly the single biggest destroyer of business in history. If you grow way too quick and don't control said growth you encounter all sorts of problems.
That is not Volkswagen. Volkswagen has amassed its empire over almost a century. But they are having similar problems to that which a company with massive short term growth might have. Things like severe under and over-performance in different sectors specific models being profitable while others just aren't and a lack of will to control any of those issues.
Part of the big problem with Volkswagen, as anyone who's familiar with who owns who in the incestuous world of automotive, is that while none of Volkswagen's brands claims to compete with each other? The specific cars do. It's like standing over a murdered person with a gun and saying you didn't shoot them. No-one is actually going to believe that you weren't the murderer and it really doesn't matter whether you actually did it or not.
Let's take a run through cars throughout the Volkswagen Group that inadvertently undercut the other Volkswagen cars. There's the Volkswagen Polo, the SKODA Fabia and the Audi A1. The Volkswagen Golf, the SKODA Kamiq and the Audi A3. The Audi TT and the Porsche Boxster. The Volkswagen Tiguan, the SKODA Kodiaq, the Porsche Macan and the Audi Q5. The Volkswagen TRoc/T-Cross, SKODA Karoq and the Audi Q3. The Volkswagen Touareg, the Audi Q7 and the Porsche Cayenne. The Porsche 911, the Audi R8 and the Bentley Continental GT. The Audi E-Tron GT and the Porsche Taycan.
That list keeps going for another couple of pages and I'm not going to take up your time boring you with Volkswagen vehicle comparisons. I mean we haven't even made it properly to Bugatti, Lamborghini and Bentley yet. But it's confusing, and everyone knows it, including Volkswagen.
But last month there was a rumour floating around that almost made me rejoice. Volkswagen was considering selling Lamborghini and Bugatti. That makes a hell of a lot of sense for Volkswagen. Neither are high volume brands, both are ultra-expensive to both produce and sell and they still compete with other products on the Volkswagen line. Alas, this morning it seems that these hopes of mine that Volkswagen is going to start getting their proverbial sh*t together have amounted to nothing.
Volkswagen announced this morning that Bentley will become an Audi brand. It will relinquish control of the brand and pass it to Audi who control many of the other Volkswagen luxury brands. But to me, that seems like a massive mistake. Audi and Bentley have the potential to compete so why the hell would you move the two brands closer together.
Annoyingly still, the reason they did it was so that the two brands could share technology. That means electrification and autonomous driving capabilities. But Audi already does that with Porsche? So by adding Bentley in the mix as well, you're going to get yet another E-tron/Taycan Frankenstein. And so I sit here with my head in my hands asking why.
Bentley isn't even doing that bloody bad. Their cars are probably the most unique of the Volkswagen stable of brands and they're actually of decent quality as well. The DriveTribe creators from Australia have all agreed in fact that the Flying Spur is absolutely gorgeous and indefinitely rates in among the top cars on earth. So why the hell does Volkswagen now want to change that?
I mean I don't need to ask the question because the answer is obvious. It's for short term profitability and that fact alone frustrates me so bloody much. The reason it frustrates me is that long term it actually puts the brand in a worse position. If you undercut the Bentley product and start nailing German parts to it in an effort to bring costs of the cars down? You're going to find that Bentley buyers are going to end up buying the cheaper German counterparts or much worse change brands altogether.
It also indicates something far scarier for Bentley lovers worldwide. It could indicate that Volkswagen is gearing up to sell Bentley, and not in a good way. Volkswagen could be winding down design and manufacturing operations, switching them to Germany, in order to stop intellectual property being produced by Bentley themselves. The Bentley name holds a great deal of value with or without the tech behind it and my feeling is that Volkswagen doesn't want to give away or pay for someone else's trade secrets.
What that means long term though is that when Volkswagen do decide to ditch the Brit, it won't be until years after until the Bentley is anywhere near what it is today. Even if an established manufacturer buys them they still need to convert their own engines to work in a Bentley. It also opens an opportunity for the Chinese to buy the brand as they have done with multiple other renowned brands such as Volvo and MG.
So what is the answer for Volkswagen? It's quite simple actually. It's so simple that I explained it in that one sentence. Simplification. Volkswagen needs to go through SKODA, SEAT, Volkswagen, Audi, Porsche, Bentley, Lamborghini and Bugatti with a massive broom and come back to the core values of each brand to figure out which cars they should be producing. SEAT, for example, is known for being a cute fast car of the Mediterranean, the core Volkswagen brand is classically an ultra-practical vehicle with creature comforts, SKODA is the sporty and adventurous brand and Audi is mid-range luxury.
How do you fix that from the point of view of cars? Well some of them need to go. The T-Cross and Trock for example were bad ideas from the start considering that SKODA already had other products on the market. The Kodiaq for SKODA is pointless both in price and size as is the Fabia when considering SKODA has SEAT to compete within that area. The Audi Q5 is a silly car today when you consider that it's built-in Mexico and the Q3 should be a Sportback model only. The A1 can get the flick as can many of the mid-range A models. Porsche should only produce sports cars (none of this Boxster, Macan or Cayenne business), Lamborghini should only produce performance cars, Bentley should only be ultra-lux GT cars and Bugatti should be one-off track limited vehicles.
Suddenly if you do all that the Volkswagen group doesn't look all that big and the consumer finds it easy to make a choice about which Volkswagen they should buy. It also means that Volkswagen can spend more research and development budget on individual vehicles making those vehicles of a much higher quality and it allows them to focus on aftersales service (a point that overseas has been a sore one for some time).
For the short term though that's not happening. For the short term, Volkswagen is presuming Bentley's move will be the end to all of their problems. To be honest? I doubt even that will happen. But at the same time, I hope that Volkswagen doesn't tank the Bentley brand for profitability, because that'd be a crying shame and somewhat ironic. A German giant crushing the small-time and small volume British luxury car manufacturer. Wouldn't it be great if the ending of this story was something like the German giant empowers the small-time and small volume British luxury carmaker to become everything it should be? I suppose we seldom get a happy ending to any story in today's world.