What happens when you cheapen your products, and increase prices?

I have been commenting, in other forums, how Stellantis, Ford, and VW, in particular, have been on a campaign to make cheaper product, and charge more for it, to fatten margins well above their historical norms. The plague offered them “shortage” and “supply chain disruption” excuses for the gouging. Customers no longer accept those excuses. Customers in their largest markets are also starting to reject the high prices, and low quality.

Screaming headlines this morning about the horrible plunge in profits at VW.

Graph of operating margin, by year, since 2010, shows the “plunge” is only reversion to the norm. So what does management do? Dump on it’s employees. VW is seeking to close plants in Germany, and seek out cheaper labor, to try and reinflate their margins to the above normal level.

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I can see how people would try to avoid high prices but avoiding low quality is much harder

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My theory why VW sales are still rising in the US, is their market share is so small that they have not irked enough people yet to reach “stay away” critical mass. In markets where they have a large share, the EU and China, their sales are falling. Notice the clue about the price escalation in the article: vehicle volume down 8%, but revenues down only 0.5%

If not word of mouth, you can do research. Ford has been flamed in the US media for it’s excessive warranty claim expense, because they build poo. Look at where VW ranks.

Or you can look in Consumer Reports, for articles like this. 47% of Jetta owners say they would buy another. VW’s latest science, the Taos SUV? Only 38% would buy/lease another, one step above the most unsatisfying car in the country, which is an Infiniti.

2024 J D Power initial quality survey. Look how far down VW and Audi rank, in spite of their high prices and expensive service.

J D Power vehicle dependability study for 2024. iirc, these rankings are for cars that are three years old.

For comparison, the 2015 vehicle dependability rankings, when Martin Winterkorn ran the show. VW was roughly average, and Audi was better than average. My 2014 VW has been excellent. Winterkorn’s ambition was to top Toyota. He seemed to understand that decent reliability and customer service, played a role in achieving that goal. The typical Welchist beancounter seems to regard quality and customer service as costs to be minimized. The followers of Welchism enjoyed fat profits, for a while, but now it’s coming around to bite them.

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As has been posted on METAR many times, in both Europe and the US demand for EVs has grown less than expected, causing pain to the automakers who made too many EVs.

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I think that is misdirection from the OEMs. What is killing the western car companies not named Tesla is that they are rapidly losing share in the world’s biggest car market, China, because they cannot build a competitive BEV.

That and the fact that they still cannot build a competitively priced BEV that is profitable in any market. If a company is losing thousands of dollars on every BEV it sells, the impetus to sell a lot of them is pretty small without significant government support. The losses from BEV sales are so bad that the OEMs would rather give Tesla a billion plus dollars for carbon credits than produce more BEVs.

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BYD claims to have very low cost technology for EVs. Can Tesla or others match it? Or will they require tariff protection?