Porsche and VW: the cuckoo sings

As AutoCognition noted in a previous article, Porsche has installed itself at VW like a cuckoo in a nest. From this strategic position it is then be able to demand a choice selection of joint ventures, all structured entirely to its own advantage. This is somewhat at variance to the conventional view of Porsche’s move on VW. This would assume that Porsche was seeking to control VW in the manner of a conglomeration. One would therefore expect the result to be one of Porsche restructuring VW in order to bring greater efficiencies and therefore greater profits to the group as a whole.


AutoCognition has long contended that this is very much a secondary priority. The first priority is for Porsche to enhance its own prospects by demanding resources from VW. Furthermore, by lowering costs for Porsche at VW’s expense it is also a clever way of transferring funds from VW to Porsche. In effect, Porsche is dealing in futures on the vehicle development market: the current cost of Porsche’s investment in VW is the present value of its part in the forthcoming joint model development programmes. Porsche will therefore see a return on its investment in terms of cost savings rather than taxable profit shares.


The conventional view of the Porsche holding would have seen the sports car manufacturer forcing though restructuring at VW in order to increase the larger firms profitability. This would probably have entailed redundancies and shifting of production to low labour cost regions. Instead, as predicted by the cuckoo nesting theory, Porsche is now interfering in VW’s model development programme to its own advantage. The German publication Automobilwoche reported recently that friction has arisen between the two companies over the joint development of the Cayenne/Toureg SUV. Porsche is apparently planning to release the new Cayenne in early 2010 while VW will not release its Toureg II version of the off-roader until six months later. This allows Porsche to make a splash in the market with the new vehicle and scoop the honours, leaving VW looking like an also-ran.




WEekly News - 18 June 2007


CO2 regulations begin to bite

Figures released by the SMMT show that the government’s punitive road tax bands are beginning to take serious bites into the UK new car market. The organisation found that buyers are moving into lower tax bands by the hundred thousand, with 61% of new cars in 2006 falling into the lowest CO2 band A-D (i.e. less than 165 g/km CO2) compared to 43% in 2000. 


Bands A and B are the least compromising when it comes to caring for the environment. Growth in these bands has taken place, though not enough to signal that consumers are putting environmental concerns before all else. Although the least polluting cars, those in Band A, have almost quadrupled in number the total is still insignificant. This is really the preserve of electric cars since not even the hybrids are this parsimonious. Band B is more the hybrid event with the Toyota Prius and Honda Civic Hybrid being well within its parameters. Even so, these two lowest bands, which include the most economical conventional powertrains, still comprise less than 5% of the total market for new cars in 2006.


The greatest growth has taken place in Band C. This includes the smaller superminis, suggesting that people are being more careful about choosing engine sizes. For example, by selecting a Fiesta with a 1.4 litre engine instead of the 1.6 a buyer can drop from Band D into Band C. For the same size of car they save £25 on vehicle tax as well as gaining on fuel consumption. The saving may seem small, but it is enough to sway those at the margin and results in an additional 326,000 car buyers in Band C. Many of these buyers have come down from Band D, but downsizing higher up the table means that this band has also expanded, by 67,000 car buyers in 2006 compared with 2000.


However, the cost differences become much less significant for the higher bands. The downward shift has clearly expanded bands A-D while bands E-G are witnessing a general exodus, yet it is not the highest band that has been hit hardest. Band E has lost over 100,000 buyers, Band F over 80,000 while Band G has dropped by 75,000. This suggests that the die-hard gas-guzzler buyers are the most tenacious buyers, clinging to their larger executive cars. It clearly indicates that the punitive taxes in the highest bands do not go far enough.


At the Automotive Clusters conference in Chepstow recently, Dr Ian McRae argued that rather than concentrating on CO2 alone, government regulations should focus on the weight of the vehicle. Structuring vehicle taxes on this basis would encourage manufacturers to strip excess bulk out of their products which would then benefit vehicle emissions of all forms, not just CO2. He also pointed out that the used car market was a key element in supporting the sales of new low-emission cars since buyers would be wary of paying more environmentally conscientious vehicles if the sacrifice was not reflected in a higher value when it came up for replacement.


Feature Analysis
Ford Volvo: sell or lend
Taxi Fare for China
Marketing the MG TF
Support UK, buy foreign
Ford and PAG
Longbridge Reopens
Salvation of Chrysler
Start a Car Company
Weekly News
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