Have you ever come across a magazine image of a car that you really, really liked… and then realized that it is not sold anywhere in America?
If you are a fan of European automakers, this has definitely happened to you. Maybe even more than once.
Some car manufacturers create certain models only for specific continents or regions. But why do they torture us like that? Why do automakers sell different car models around the world?
The international auto market
In the past decades, the European automotive market has become a natural battleground for competition. European automakers needed to start exporting in order to discover the additional volumes they need to achieve higher profits.
Export became a vital strategy for automobile manufacturers that face very narrow domestic markets. They need to be able to reach people outside their country because the sales at home are not enough for their financial growth. One such example is the case of Swedish automakers. They realize 90% of their total sales outside of Sweden.
This dependency on export makes it crucial for companies to choose the right internationalization strategy for each continent. “The world has become such a global village these days”, you might think. Why can’t they make the same cars and sell them everywhere?
Why don’t we see more of the BMW 1 Series, the VW Polo, the Audi A1, the Toyota Auris on American soil? Do automakers have to invest in engineering, design, and production of different models when they can “act global” instead?
The strategic factors
In order to help consumers relate to certain car models, automakers choose to invest in relevance. The strategies they use are quite diverse depending on the economic and cultural background of the people they target. Reasons may include the automaker’s location of production, their distribution network, and, of course, the local regulations. Yet, they do not stop there.
The local language, cultural and religious beliefs, and lifestyle habits of the people play a major part in the strategic approach.
In order to have a global reach, you have to think and act with a local mindset.
One of the main reasons you won’t see certain car models in the U.S. is related to government regulations. The United States has a different perspective on safety and environmental regulations than the EU. This is why some cars can’t get a certificate to enter the country.
In most countries, cars are made to international safety standards called the UNECE standards (United Nations Economic Commission for Europe). Even though the standard seems European-only, it is now applied to most countries… except for the USA and Canada.
The U.S. has its own safety standards called the Federal Motor Vehicle Safety Standards. Canada has its own regulation – Canadian Motor Vehicle Safety Standards.
Thus, car manufacturers who want to sell a certain model worldwide have to make three versions of each car: ECE left-hand drive, ECE right-hand drive, and US/Canada FMVSS/CMVSS.
This makes the costs of retooling a car for the American market extremely high. Automakers do not have any logical reason to do that unless they are certain the car will be a huge success in the country.
The automaker has to go through an expensive certification process to be able to sell its car in the United States. The differences between the regulations in the U.S. and the EU, however, sometimes make the whole process pointless. Quite often this is done in order to stimulate the local automotive market.
Making the importing process expensive for foreign cars leads to higher prices on the imported models. This automatically makes the local manufacturers more affordable. The more people buy locally produced vehicles, the more they stimulate the national economy.
People from all over the world wonder why Americans insist on driving big cars. Europeans, on the contrary, continue driving much smaller vehicles. For some, the reason may be the idea of the American dream. For others, however, it all comes down to economic reasons.
One thing we know for sure: the infrastructure landscape in Europe is quite different than that in the US. Cities are denser and streets are tighter. There is a lack of parking places not only for big trucks but for cars as well. This is why the smaller your car is, the easier it is for you to get around.
We don’t have such a problem here in the USA. We do travel more. Americans are on the road for more than 290 hours a year. In Europe, people have better public transit and other alternatives to driving. So their cars remain parked about 95% of the time.
The most important reason, however, is the price of fuel. Gas in Europe is much more expensive than it is in the U.S. Europeans may have everything else for free – health care, good education, maternity leave… Yet, all this compensates with the huge gasoline prices. This is why Europe is really focused on fuel economy.
Cultural differences are probably the biggest issue for many automakers. Some nations pay a lot of attention to the names and colors of the car models they see. Others only pay attention to the functional parameters.
One classic example of a cultural misfit was the story of the Nova model by Chevrolet. When Chevrolet launched the model in Latin America, people did not want to buy it. The word Nova brought associations with the “no va” phrase in Spanish. “Doesn’t go.”
Did Chevy score an own goal in this case? Apparently no, as the story seems to be just an urban legend. Yet, it sets a good example of how good intentions can go wrong if you don’t pay attention to the local culture.
Different cars in different countries
This is one of the most common strategies automakers use to succeed in foreign markets. They do not sell the exact same cars abroad. But they rarely develop models entirely from scratch either.
Quite often, they would have the same platform and then add different modifications based on the market they want to enter. They would slightly change the shape, the engine, the color, or the name to match the local specifics.
Different cars in the same country
There are occasions on which an automaker would do the same as the above… but within the boundaries of the same country or region. This happens when the automaker owns a portfolio of different brands and markets the same car under a different brand. The practice is called re-badging.
Automakers may commit to re-badging to expand the ranges of different brands in one market without developing completely new models. General Motors is quite good at this. Just compare the Cadillac Escalate, Chevrolet Suburban, GMC Yukon Denali, and Chevrolet Tahoe.
This is the approach that Nissan uses to expand vehicle production, too. Nissan offers one car at multiple Japanese dealerships this way. Two different automakers can also pool resources by operating a joint venture to create a product, which then each can sell as their own.
Re-badging is a practice that intends to save development and engineering costs. Yet, the effect may be quite the opposite sometimes. Having multiple car brands can greatly increase selling cost, as each brand needs separate marketing and often requires its own dealership network.
It’s important for automakers to forecast the potential costs re-badging can bring in the future.
One of the best examples of good international strategy is the one Volkswagen followed when entering the Chinese market.
In the years between the 1970s and the 2000s, we would hear of numerous cases of car models launched in China that we have never heard of before. Most of them were creations of the Volkswagen Group.
Case: Volkswagen in China
Throughout the years, Volkswagen not only learned the particularities of the Chinese market but also became a true professional in the automotive game. The brand has mastered the art of joint ventures, which is a prerequisite for foreign automakers who want to sell in China.
In fact, Volkswagen is one of the few companies that quickly gained the advantage in Asian markets and has not experienced any net or operating losses. The brand established its first joint venture almost thirty years ago and today is the second largest foreign carmaker after General Motors.
The all-time favorite
One of the most popular Volkswagen models in China was the Volkswagen Santana. The Santana was the first car to roll from the joint venture’s production line back in 1985. The model is based on the original VW Passat B2. The Santana became a favorite of government officials and policemen in China.
The largest group of clients was taxi fleets. In 2012, the original Santana was discontinued (or was it?) to give way to newer versions. This evoked deep emotions from the Chinese people as most of them have had a Santana throughout their whole lives.
The same car model was popular in other parts of the world, as well. Does it look familiar to you? In North America, the Santana was also known as the Volkswagen Quantum. In Mexico, it got the name Volkswagen Corsar, while in Argentina it was the Volkswagen Carat. By the early 2000s, the Santana has sold over 3.5 million cars in China since 1985.
The Santana vs. the Golf
What made the Santana so popular in China? Were other VW models as successful?
The people of China are known to be a nation with strong cultural beliefs. Animals and signs carry mythological significance and still have a strong influence on people. We all know of the Chinese dragon, right? This is exactly what made the Santana so successful.
Let’s compare the VW Santana with the VW Golf in China. The attempt Volkswagen made to launch its Golf model was a disaster. The reason was only one. It lacked the dragon’s tail.
See, the Chinese consider the car as a symbol of the dragon. So when they first got acquainted with the VW Santana, naturally, they compared its shape with the one of a dragon. It had a face with the engine showing the head, the passenger cell – the body and the trunk – the tail. It had it all.
But when they saw the VW Golf, they did not see the dragon’s tail. Being a hatchback, it did not embody the full image of the Chinese dragon. The car was considered imperfect, so it was not bought at all.
Setting an example
Many other automakers today take Volkswagen’s experience as one to follow. Designers develop new concepts that match the Chinese culture and symbolism.
Exterior contours that comport to Chinese ideas of balance. Interior colors and fabrics designed to signify status and evoke respect. These practices are carried to other cultures and new markets around the world.
After all, doing business is an emotional game. Making it work globally means thinking locally! Just like in any other game, it’s important that players do not bet all their chips at once.
And as much as we want them to, they cannot put all their cards on the table either. So we only have to wait and see what they have in storage for our region, don’t we?