Auto Motives

Aravindhan Sundar suggested in his comment on yesterday's post that Boeing's approach might be easier in B2B businesses than in B2C ones. I think line extensions might be easier in B2C businesses. It must be relatively easy to package a detergent in a single-wash sized sachet, or in a 1kg pack to cover the household for a week or a month, in an industrial size 200 kg sack or army sized container loads. Ditto for flour, or biscuits, or most consumables. "But what about durable goods?" you might ask. Madura Garments, manufactures shirts and trousers for three very different market segments at three very different price points in various sizes. I have a strong suspicion that all three brands of apparel are made in the same factory on the same machines by the same labour, supervised by the same managers and sold in the same Planet Fashion stores. Automobile companies have also started to catch on. And this brings me nicely to my topic for today.

Consider the Skoda Octavia sold in India today. It is a mid sized car about 4660 mm long and 1800 mm wide with a 1.8 liter turbo-charged petrol engine or a 2.0 liter turbo-diesel engine developing between 148 and 184 bhp driving the front wheels. The Volkswagen Jetta also is a front wheel drive car with a 1.8 litre turbo petrol or 2.0 liter turbo-diesel engine developing between 148 and 184 bhp and happens to be near 4600 mm long and 1800 mm wide. The Audi A4 sold in India is again a front driver available with a 1.8 liter turbo petrol or 2.0 liter turbo-diesel developing between 148 and 184 bhp. The car is 4700 mm long and about 1800 mm wide. Incidentally, if you take the boot off these cars, you get the Skoda Fabia, VW Golf and the Audi A3 with lengths around 4000-4300 mm.

Under the skin, all these cars share the same suspension geometry based on the MQB platform, the same steering systems, very similar brakes and of course the same engines all made by the same group of companies. In Europe, the very same cars are sold with the same configurations, albeit with a wider range of engine and body choices, beginning with 1.2 liter and 1.4 liter turbo-petrol developing from 100 bhp on the Octavia and the Jetta and topping out with a 3.2 liter V6 turbo petrol on the A4.

It would be unfair if I did not also state here that there are some differences between the three cars. The interiors are designed to be 'value' (read budget) on the Skoda, boring on the Volkswagen and curiously dated on the Audi. Similarly the steering feel is aloof on the Skoda, devoid of any feeling on the Volkswagen Jetta and artificial on the Audi A4.

Clearly then, the Volkswagen group has segmented the market without segmenting the product line. The real clincher is the pricing difference across these models. The Volkswagen group sells the Skoda for about 14-18 Lakh Rupees, the Jetta between 16-20 Lakh rupees and prices the Audi A4 from 36 to 58 lakh rupees.

Audacious aren't we, Audi?