* Skoda targets upmarket buyers with concept car
* Seat to focus on Europe after China export failure
* Skoda and Seat to miss 2018 sales targets - IHS
By Andreas Cremer
GENEVA, March 5 If Volkswagen wants
to beat Toyota to the global autos throne, it can't
afford to take its foot off the gas in mass-market cars.
Yet two of its three volume brands continue to cause
headaches, with Czech division Skoda trailing ambitious sales
targets and Spanish carmaker Seat battling a decade of losses.
Lower down the chain, VW is also struggling to hit cost
goals for its planned budget car for emerging markets, a VW
executive told Reuters on Tuesday.
To overcome its low-end woes, the German group is now
striking out in a new direction to boost the image and appeal of
Skoda and Seat, moving the former back upmarket while refocusing
Seat on Europe after a failed China export strategy.
The European auto slump caused Skoda deliveries to fall 2
percent last year to 921,000, well short of a 2018 goal of 1.5
million. Sales at Seat were up 11 percent at 355,000, but
underutilised capacity served to extend its long run of losses.
By contrast French carmaker Renault's budget
models helped it to defy a weak Europe and score significant
gains in emerging markets, with a particularly strong showing
from its no-frills Dacia brand.
Without a turnaround in mass markets for VW, Europe's No.1
automotive group could struggle to surpass Toyota as the world's
biggest carmaker by 2018. In the nearer term, failure to get to
grips with the lower-cost brands is likely to weigh on its share
"VW needs a compelling presence in volume segments and
emerging markets if they're serious about clinching the top spot
and retaining it," said Stefan Bratzel, head of the Centre of
Automotive Management think-tank near Cologne.
Regardless of whether it surpasses Toyota, VW must succeed
in lower-cost categories to remain a force in a volume segment
that brings the economies of scale required to meet its profit
goals. Skoda and Seat accounted for 13 percent of VW's 9.7
million record sales last year.
The Wolfsburg-based company rejected suggestions that the
change of tack may renew past friction between Skoda and Seat
and with the core VW division.
There is always a risk of toes being stepped on in a group
spanning 12 brands and about 300 distinct models. In 2009
Skoda's Superb estate trumped VW's equivalent, but more
expensive, Passat in quality surveys and offered features that
were priced as extras in the Passat. The upscale shift ruffled
feathers at VW, resulting in the departure of Skoda's CEO.
"Why should Skoda build only practical cars," VW Chief
Executive Martin Winterkorn told Reuters. "However, we must
ensure precise distinctions are made between the brands, that
the brands interact well and that everyone finds their corner."
Previously positioned as VW's budget alternative for eastern
Europe and Asia, Skoda will target more affluent buyers in
future, its CEO said in an interview with Reuters.
Skoda flaunted its elegant Vision C concept car at the
Geneva auto show this week, its first coupe alluding to a more
dynamic styling of future vehicles - the five-door model has
enclosed door handles and triangular headlamps.
"We never before expressed passion in our products," CEO
Winfried Vahland said. "It's like the brand is growing up."
Similarly, Seat is countering its image as the black sheep
of the VW group by offering more variants of its Leon model and
sharpening its focus on rebounding European markets.
Though reducing non-production staff and administration,
it's unclear when the Spanish business will return to profit,
CEO Juergen Stackmann told Reuters. Seat has amassed 1.5 billion
euros ($2.06 billion) of losses since 2005
The brand is now reaching beyond its traditional base of
young city dwellers, targeting families and fleet operators with
the Leon ST, its first estate. The model has attracted 20,000
orders within weeks, Stackmann said.
Seat is also considering building cars in China, he said.
Plans by his predecessor to expand to China from Seat's base in
Martorell failed because of high import duties and distribution
problems, Stackmann said. Seat sold a dismal 1,100 cars in the
world's biggest market in its first full year there in 2013.
Forecasters, however, remain sceptical that VW's shake-up
will have the desired effect.
"VW has such a spread of the (volume) market with the likes
of Skoda and the VW brand. Seat doesn't fit right with that
portfolio," said Jonathon Poskitt, head of European forecasting
for specialist analyst LMC Automotive.
Seat deliveries could rise 30 percent to 462,000 cars by
2018, research firm IHS Automotive estimates, still short of
Stackmann's goal of 500,000. Sales at Skoda, meanwhile, could
grow by 26 percent to 1.16 million vehicles, the forecaster
says, against a target of 1.5 million.
"I view myself as a member of a relay team taking part in a
marathon run," Stackmann said. "It's a tough business."