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The ‘re-badging strategy' of the car industry may finally be working in India, with the Volkswagen Group breaking the code. Re-badging involves production of multiple models from a single base car, helping firms reduce development and sourcing costs.
In March, the Skoda Rapid and Volkswagen Vento spelt double trouble for midsize sedan king Hyundai Verna's sales by selling over 60 per cent more volumes. Rapid sold 2,882 units that month, and Vento 3,908 units, compared with 4,132 units of the Verna.
Launched last November, the Rapid is basically a re-badged Vento, produced alongside at the Volkswagen Group plant at Chakan.
“What carmakers play on is that customers see them as different cars, though inside, they may be all same. The idea is to attract two different sets of buyers who may have different requirements — something you cannot meet with one model,” Mr Abdul Majeed, Partner and Auto Practice Leader at PwC India, said.
Globally, the re-badging practice has been there for years. Carmakers have significantly reduced development costs — which, at a minimum, is about Rs 300 crore for a new model, by sharing the platform and parts with others vehicles and hence garnering a larger scale of operations.
In India, such examples include the Nissan Micra and Renault Pulse, apart from the Volkswagen Polo and Skoda Fabia. Sometimes two separate companies also work together with such a strategy — the Suzuki A-Star was re-badged as the Nissan Pixo in Europe.
“It's picking up in India now, as the market gets closer to the developed countries. We will see a lot more sharing between OEMs now to reduce business risk. If you invest so much, you need to be sure you make money,” said Mr Majeed.
Such a strategy usually works best for large auto groups with multiple brands under it. Volkswagen, for example, shares platforms across its many brands such as Skoda, Seat and Audi; while Renault does the same with Nissan and Dacia.
General Motors also has such a practice with its Buick and Opel brands, while Toyota is also developing two-seater sports model with Subaru in Japan.
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