Evolution of Volkswagen Then and Now
The Volkswagen Beetle, having been named the Car of the Century in 1991, is one of the most storied cars in all of automotive history. While there have been several iconic cars throughout history, such as the Ford Model T and F Series, few have been as well-loved as the Beetle — and none has been brought back after production was halted.
In 1932, when Adolf Hitler came out of a jail, he called Ferdinand Porsche and said that he read a book on Henry Ford and his cars in America. Hitler showed his interest in manufacturing a cheap car in Germany. A car which can carry 2 adults and 3 children, can go 100 km/hr and can get an average of 14 km/liter. And price shouldn’t be more than 400$.
Introduction
Volkswagen is a German Automaker that came into existence on May 28, 1937. It was founded before the Second World War. Since then it has gained immense fame and popularity due to the quality, durability and reliability of its products. The reason it came into being was because in the 1930’s, the German automobile market only consisted of luxury cars that couldn’t be accessed by the masses; so, the German Labor Front founded Volkswagen and become a part of the ‘peoples car project’. It is the parent company of the Volkswagen group of motors that consists of companies such as Porsche, Audi, SEAT, Škoda, Bentley, Bugatti and Lamborghini. It even gained the position of the Number 1 automaker in the world along with its subsidiaries recently despite being hit hard by many developed economies of the world after it was found that several TDI cars produced by Volkswagen used cheat devices to pass the emissions test and the cars actually produced 40 times more emissions than the permissible limit in some cases.
Originally operated by the German Labor Front, a Nazi organization, Volkswagen was headquartered in Wolfsburg, Germany. In addition to his ambitious campaign to build a network of autobahns and limited access highways across Germany, Hitler’s pet project was the development and mass production of an affordable yet still speedy vehicle that could sell for less than 1,000 Reich marks (about $140 at the time). To provide the design for this “people’s car,” Hitler called in the Austrian automotive engineer Ferdinand Porsche. In 1938, at a Nazi rally, the Fuhrer declared: “It is for the broad masses that this car has been built. Its purpose is to answer their transportation needs, and it is intended to give them joy.” However, soon after the KdF (Kraft-durch-Freude)-Wagen (“Strength-Through-Joy” car) was displayed for the first time at the Berlin Motor Show in 1939, World War II began, and Volkswagen halted production. After the war ended, with the factory in ruins, the Allies would make Volkswagen the focus of their attempts to resuscitate the German auto industry.
Volkswagen sales in the United States were initially slower than in other parts of the world, due to the car’s historic Nazi connections as well as its small size and unusual rounded shape. In 1959, the advertising agency Doyle Dane Bernbach launched a landmark campaign, dubbing the car the “Beetle” and spinning its diminutive size as a distinct advantage to consumers. Over the next several years, VW became the top-selling auto import in the United States. In 1960, the German government sold 60 percent of Volkswagen’s stock to the public, effectively denationalizing it. Twelve years later, the Beetle surpassed the longstanding worldwide production record of 15 million vehicles, set by Ford Motor Company’s legendary Model T between 1908 and 1927.
With the Beetle’s design relatively unchanged since 1935, sales grew sluggish in the early 1970s. VW bounced back with the introduction of sportier models such as the Rabbit and later, the Golf. In 1998, the company began selling the highly touted “New Beetle” while still continuing production of its predecessor. After nearly 70 years and more than 21 million units produced, the last original Beetle rolled off the line in Puebla, Mexico, on July 30, 2003.
What the Volkswagen logo actually means
Volkswagen is a word of 'German Origin'.
And it's pretty obvious what the Volkwagen logo is (a V over a W in a blue background, surrounded by a circle). It's origin is rather mundane though. The logo was the result of an office competition to see come up with a logo. The winner of the competition (who won 50 Marks for his troubles) was an engineer named Franz Reimspiess (the same man who perfected the engine for the Beetle in the 1930's).
And, in German Phonetics:
V is pronounced as 'F' and
W is pronounced as 'V'
What is the history of Volkswagen (car manufacturer)? How did it gain popularity?
In a way Adolf Hitler did that.
In 1932, when Adolf Hitler came out of a jail, he called Ferdinand Porsche and said that he read a book on Henry Ford and his cars in America. Hitler showed his interest in manufacturing a cheap car in Germany. A car which can carry 2 adults and 3 children, can go 100 km/hr and can get an average of 14 km/liter. And price shouldn’t be more than 400$.
Hitler gave it a name, Folk’s Wagon (People’s Car) or Volkswagen.
A seemingly impossible task was given to Ferdinand Porche and he started working on a car made from an Aluminium. After the second world war started, bombs were dropped on the factories and dream of Hitler remained just a dream.
Ferdinand Porsche was thrown into the jail. When he came out of the jail, he saw his own design’s Volkswagen running on the road. He fell down and started crying.
Anyway, Volkswagen looked like Beetles and people started calling it Beetles anyway. It has 64 different names in 64 different countries. It produced more than a million by 1955. It remained on the top till 80s.
So, in a way, Adolf Hitler started Volkswegon with a dream.
Volkswagen SWOT analysis
lets talk about the strengths of the Volkswagen ………
1. The widest brand portfolio among all automotive companies
Volkswagen’s brand portfolio is the largest among all automotive companies. The company sells its vehicles under 12 different brands
Company’s cars are sold under Volkswagen, Audi, Seat, Škoda, Bentley, Bugatti, Lamborghini and Porsche brands. Ducati is Volkswagen’s motorcycle brand. The company’s buses, heavy trucks and other commercial vehicles are sold under Scania, Man and Volkswagen’ Commercial Vehicles brands.
No other Volkswagen’s rival has so many brands under its management. General Motors, which is the 3rd largest automaker in the world, only has 10 different brands and Toyota currently sells its vehicles only under 4 different brands
2. New “TOGETHER – 2025” strategy
In the wake of their emission scandal and the external market pressures Volkswagen has introduced a new strategy plan that will focus on delivering key goals by 2025. The company’s key objectives are:
• Introduce 30 new electric vehicles by 2025. Volkswagen calls this objective as the ‘major company’s electrification’. Up until now, the company was reluctant to engage in costly race for electric vehicles.
• Develop new competence in battery technology, digitalization and autonomous driving.
• Increase research and development (R&D) spending to double-digit billion range.
Volkswagen’s further objectives outlined in the plan are to increase company’s efficiency and profitability. The new strategy will focus company’s efforts on some of the most important areas and will provide a clear direction, which is something many automotive companies lack right now.
3. Diversification strategy
Volkswagen’s revenue is much more spread across different brands, types of products and geographic areas than its rivals’ revenues.
The company’s wide brand portfolio allows to target different consumer segments and satisfy their diverse needs better.
Moreover, Volkswagen offers many types of automotive and maritime products and financial services, which further diversify company’s sources of income.
Only 74.5% of Volkswagen’s income come from the main ‘Passengers Cars’ segment. ‘Commercial Vehicles’, ‘Power Engineering’ and ‘Financial Services’ generate the rest 12.4%, 1.9% and 11.2% of the revenue, accordingly.
No single market generates over 20% of Volkswagen’s revenue, which is by far the best geographically diversified income among all automotive companies.
4. Synergy between brands
Synergy between the brands is one of the key Volkswagen’s strengths. Many of Volkswagen’s brands, including Škoda, SEAT and Volkswagen, or Bugatti, Lamborghini and Porsche, share their R&D spending, build technology, access to different markets and customer knowledge to increase sales and decrease costs. At the same time, they are able to cater for different consumer groups.
Synergy would not be possible between only a few brands
5. Joint ventures with local Chinese automakers
China is the world’s largest automotive market share and the largest Volkswagen’s market in terms of the number of vehicles sold. Volkswagen operates in China through two joint ventures: SAIC Volkswagen and FAW-Volkswagen.
Through both partnerships, the company offers over 150 different models for the market and sells over 3.5 million units a year. This allows Volkswagen to capture 14.6% market share and to become the second largest automaker in China behind General Motors.
By establishing itself in China, Volkswagen will be able to compete in the world’s largest automotive market better.
Now lets talk about Weaknesses
Volkswagen receives a lot of criticism and negative publicity for the following things:
• ‘Dieselgate’ scandal. In 2015, the company was found to install software code into its diesel vehicles, which would control different emission levels during the vehicle testing in a laboratory when compared to the real world emission levels.
The company was investigated and found guilty in many countries, which fined the company. The fines, damages and other losses from the scandal totaled €16.2 billion for Volkswagen.[1]
• Vehicle recalls. Over the last few years, Volkswagen had to recalled millions of vehicles worldwide and has received lots of criticism for that.
Negative publicity has hit hard Volkswagen Group. The company’s sales declined in 2015 and will likely decline in 2016. The company experience billions of losses, many current and potential customers. Company’s brand image has been severely affected and it will take lots of time to recover it.
Negative publicity is one of the worst weaknesses Volkswagen has brought upon itself.
2. The highest recall rate in the U.S. market
Volkswagen’s massed produced vehicles have the highest recall rate in the U.S. market among all the automakers. A study published by iSeeCars.com has revealed that Volkswagen Group has a recall rate of 1805 vehicles per 1000 vehicles produced.[3]
This means that Volkswagen Group has recalled each of its vehicle nearly twice. A high recall rate results in additional costs, disappointed customers and negative publicity.
Volkswagen should implement better quality control procedures to minimize this weakness.
3. Low market share in the U.S. automotive market
United States is the second largest automotive market in the world with over 18 million vehicles sold.[5] Moreover, it is the largest automotive market in the world in terms of value. A high market share in the U.S. automotive market would guarantee huge earnings as in the case of General Motors and Ford, both relying on the U.S. to generate 55.5% and 62.3% of their revenue, accordingly.[5]
At the moment Volkswagen’s share in the U.S. automotive market is at best weak. The company sold less than 850,000 thousand vehicles in the U.S. and captured less than 5% market share, despite being the largest automaker in the world.
4. Little expertise and no competence in making battery driven vehicles
Volkswagen has long disregarded the demand for electric vehicles and made little efforts to enter the market. The company’s first all-electric e-Golf has been introduced to the market only in 2014. At that time, many e-cars have been in the market for a few years already. Up until now, Volkswagen only has 2 all-electric vehicles. Volkswagen e-Golf range is only about 83 miles, compared to Nissan Leaf’s 107 miles at nearly the same price.
In order for Volkswagen to fulfill its plans to introduce up to 30 all-electric vehicles by 2025, the company will have to acquire more patents, new skills and gain more expertise. The company has pledged to invest billions in order to acquire the technology.[1]
At the moment Volkswagen can barely compete with other electric cars’ automakers and is far behind Tesla, the key rivals in the industry.
Opportunities :
1. Fuel prices are expected to rise in the near future
Fuel prices have been low for the last few years and are expected to rise in the near future due to the changes in the supply. Low fuel prices have increased the demand for large vehicles such as pickup trucks and SUVs. Many companies, including General Motors, Ford, Chrysler have benefited from the low fuel prices, because of their strong SUVs and pickup trucks offerings.
On the other hand, Volkswagen didn’t invest much into growing its line of light trucks and has opted to compete in the smaller vehicle range. The demand for small vehicles always rises when the fuel prices are high.
Volkswagen could also push its plans to introduce the first competitive electric vehicle earlier than 2020 and benefit for the growing demand for them.
2. Acquire skills and competences through acquisitions
In order to fulfill its goals outlined in the new strategy plan, Volkswagen will have to develop new competence in battery technology, digitalization and autonomous driving.
The fastest and least costly way to do that is by acquiring smaller startups, which have already developed the skills and the technology needed for Volkswagen. Usually, acquisitions are costly, but the current interest rates are the lowest in history, so capital can be acquired cheaply.
3. Demand for autonomous vehicles
Currently, nearly 33 companies are working on autonomous vehicles.[4] Few of them, including Google, Ford and Tesla, are testing their autonomous vehicles on the roads and none of them are selling these cars to the general public. It is hard to estimate the exact demand or the market value (it is expected to be worth US$45 billion by 2025) for the autonomous vehicles, but according to the efforts of all the major automakers, it seems that autonomous vehicles is the next ‘big thing’ for the industry.
Volkswagen is in plans to introduce its autonomous vehicles by 2025. The company should introduce its autonomous vehicles earlier to gain higher market share and increase sales.
4. Weakening euro exchange rate
The majority of Volkswagen’s revenue come from Eurozone countries, where euro is the only currency. Therefore, the changes in euro exchange rate have little effect on the company’s revenue and profits. Nevertheless, exchange rates still affect exports to other countries and this is where weak euro exchange rate against other currencies, benefits the company.
Lower euro exchange rate against the U.S. dollar makes Volkswagen’s vehicles cheaper for the U.S. citizens. The company could push its exports to the U.S. or other countries for as long as the euro exchange rate is low against other currencies.
Threats :
1. Intense competition
Volkswagen is faced with an ever increased competition from the traditional automotive companies, the new players and saturation of its main markets.
In China, one of the key company’s markets, new home based Chinese manufacturers are competing by offering lower prices, but similar quality build vehicles.
New companies, such as Tesla with its electric cars will make it very hard for Volkswagen to compete in the electric cars segment. In addition, Google, which tries to build self-driving cars is also threatening the traditional automotive industry. The competition is further fueled by the fact that the global automotive production capacity far exceeds the demand. In 2015, there was an estimated global excess production capacity of 31 million units.[5].
NOW, How exactly does the Volkswagen emission fraud work? Why not have the emission control working all time?
Volkswagen had been inserting intricate code in its vehicle software that tracked steering and pedal movements since 2009. When those movements suggested that the car was being tested for nitrogen-oxide emissions in a lab, the car automatically turned its pollution controls on. The rest of the time, the pollution controls switched off.
Regulators didn't notice this ruse for years. The problem was only uncovered by an independent group, the International Council on Clean Transportation, which wanted to investigate why there was such a discrepancy between laboratory tests and real-road performance for several of VW's diesel cars in Europe. So they worked with researchers at West Virginia University, who stuck a probe up the exhaust pipe of VW's clean diesel cars and drove them from San Diego to Seattle.
What the researchers found was shocking. On the road, VW's Jetta was emitting 15 to 35 times as much nitrogen oxide as the allowable limit. The VW Passat was emitting 5 to 20 times as much. These cars were emitting much more pollution than they had in the labs.
In May 2014, both California's air-pollution regulator and the EPA ordered Volkswagen to investigate and fix the problem, and the company claimed that it had done so. Once again, the cars performed well in testing, but real-world performance still didn't match up. At that point, EPA regulators really started grilling Volkswagen about the discrepancy, even threatening not to approve the company's 2016 line of clean diesel cars. VW finally cracked and admitted the existence of these defeat devices, which had been carefully hidden in the software code. Scandal ensued.
Sources
1. Volkswagen Group (2016). Annual Report 2015. Available at: http://www.volkswagenag.com/content/vwcorp/info_center/en/publications/2016/04/Y_2015_e.bin.html/binarystorageitem/file/Y_2015_e.pdf
2. Volkswagen Group (2016). News. Available at: http://www.volkswagenag.com/content/vwcorp/info_center/en/news/2016/06/2025.html
3. Our Windsor (2016). Stats show which automakers are the worst offenders in recall land. Available at: http://www.ourwindsor.ca/community-story/6951147-stats-show-which-automakers-are-the-worst-offenders-in-recall-land/
4. CB Insights (2016). 33 Corporations Working On Autonomous Vehicles. Available at: https://www.cbinsights.com/blog/autonomous-driverless-vehicles-corporations-list/
5. Jurevicius, O. (2016). Ford SWOT analysis 2016. Available at: https://www.strategicmanagementinsight.com/swot-analyses/ford-swot-analysis.html