On paper yes, in practice no.
In December 2013, General Motors announced it would kill the Chevrolet brand in Europe to concentrate on ailing Opel and its UK sister brand Vauxhall. A reshuffling of priorities that made sense given Opel racked up an incredible $18 billion in losses over the past 12 years. GM cited damaging in-house competition that had eroded the profitability of both Opel/Vauxhall and Chevrolet in the region to justify the cull. Harsh but clean-cut, killing Chevrolet Europe is one of these decisions that is strategically sound but could potentially oversee the reality on the ground and changing consumers perceptions as a result.
Too big to kill?
Killing a brand such as Chevrolet in such a large market as Europe – 13 million new vehicles this year – is a huge deal and is not likely to happen smoothly. In troubled times, General Motors has made the decision to sacrifice the smaller of two struggling brands, but perhaps not the less healthy. By 2011 Chevrolet was selling just under 200,000 annual units on the continent through a network of 1,900 dealers, a little below Volvo and more than Mini, Honda, Suzuki or Mazda. Granted, the brand perception of Chevrolet may have morphed from badass American cars to dubious Korean imports by the time most models in the range had a Daewoo origin, but Chevrolet enjoys almost 100% awareness in Europe due to its long American heritage.
It’s not like GM killed a young, tiny brand in the bud like Nissan could be tempted to do with Infiniti in Europe if sales don’t increase dramatically in the near future. And it’s certainly not the same as killing Cadillac which had repeatedly struggled to sell more than a few thousand cars annually in Europe over the past two decades. Chevrolet is a brand that, if segmented well and properly differentiated with Opel, could definitely have kept growing on the continent. Heck, if Peugeot/Citroen PSA, in a similar precarious situation in Europe as GM, can finally decide to significantly differentiate its two brands while adding a third premium one (DS), why can’t the #3 manufacturer in the world do so?
Is the Opel brand really more healthy than Chevrolet?
By killing Chevrolet instead of Opel, did GM make a big mistake and cull the healthier of the two brands? The plan was that in the process, two things would happen: first most Chevrolet sales would transfer to Opel, then Opel, now GM’s only mass market brand on the continent, could return to profitability and its long lost days of teasing Volkswagen as Europe’s favourite brand. Does this mean that the health of the Opel brand is so tarnished that it needs its internal competitors shut off to prosper? It would appear so. Again on paper, it looks like the first thing happened: as Chevrolet abruptly died, losing 40,000 sales year-on-year in Europe in H1 2014, Opel gained almost as much (35,400). But there is nothing to say that these additional sales came from buyers who would have otherwise bought a Chevrolet.
In fact the detail by model over the period shows that Opel’s gains are in fact due to two new models (the Mokka and Adam), quite independently from Chevrolet’s death. The Corsa is only up 1% on the back of massive rebates continent-wide and stronger-than-usual sales to rental companies, plus I don’t believe the new ‘generation’ is ground-breaking enough to trigger a sudden surge upwards. The Astra (-9%) is outside the Top 10 for the first time since the nameplate was launched over two decades ago. The Insignia is up 35% but that’s not coming from the Chevy Malibu, stillborn here. The Meriva (2%) and Zafira (+8%) are ok but not selling in enough numbers to lift the brand, the Agila (-8%), Antara (-51%) and Ampera (-64%!) are sinking while the Cascada (+41%) is merely a blip on the radar at just 4,200 sales continent-wide. Only the Mokka (+62%) and Adam (+28%), both launched a bit over a year ago, logically step up, but what will happen when they stabilise?
Another concerning element is the definite lack of appeal of the Opel brand with private buyers, and this is a consistent situation all over Europe. Having a large part of its sales going to rental companies or fleet impacts a brand’s resale value extremely negatively as lots of ‘young’ used cars flood a market that never had a natural demand for it in the first place. For example, at home in Germany where you would expect a minimum amount of loyalty for the brand, the Corsa and Astra are the least popular models in their segments in terms of private sale ratio (17% on average). In comparison, Chevrolet was above 40% private sale ratio across most segments before last December’s announcement…
General Motors says ”Opel showrooms will become bigger, this is a really good opportunity to strengthen the Opel brand. We will try to capture customers who were in the low-price segment of the market.” So Opel has been rid of Chevrolet to get bigger showrooms and compete with Skoda and Dacia, whereas it couldn’t make a profit even when competing with Volkswagen? More than an uninspired facelift of its best-seller Corsa will be needed to achieve that. Opel CEO Karl-Thomas Neumann has said in April that the automaker could reach break-even as soon as 2015, which would be a year ahead of target. However GM lost $305 million during Q2 2014, compared with a $114 million loss a year earlier, saying most of the losses were related to the closure of Opel’s assembly plant in Bochum. A lot of mixed messages indeed.
How is the transition going at dealership level?
This is potentially the worst sign. The brand is supposed to sell cars up until 31 December 2015, yet in the Netherlands, Europe’s 6th biggest market, not a single Chevrolet was sold in July! And only one in Latvia, 4 in Finland and 6 in Estonia. This is a particularly abrupt fall even for a brand that has announced it would close down shortly. Saab didn’t fall that fast that early. A few days ago General Motors announced that “the dealer transition from Chevy to Opel is working extremely well: 85 percent have converted to selling only Opel.” This may be the case as a European average but is actually incorrect in France.
Over the decade up until 2013, Chevrolet was the third fastest growing brand in France below just Dacia and Kia with sales up 452% between 2003 and 2013 and its standalone dealership network growing from 93 to 170. Here the sudden announcement of the death of Chevrolet in Europe has angered a large part of Chevy dealers which felt they were left with no future while having built a brand from scratch for nothing. As a result, according to French magazine Auto Plus, the relationship between the General Motors France head office and the dealers is currently at its worst and that cannot be a good sign of healthy sales in the country. 140 dealerships have reportedly already closed down, not selling a single new vehicle this very minute, and as a logical consequence no Opels either – although the magazine is unclear on this point.
Fine, we can’t buy any Chevrolets in France anymore, or close to that. How about current owners that need repairing and/or spare parts? This is where it gets worse. Officially, over 160 service centres affiliated with Chevrolet are still in operation across the country, and General Motors has vowed to maintain Chevrolet after-sales service in Europe up to 2025. In practice, Auto Plus magazine reports French Chevy owners having trouble getting spare parts under reasonable delays and, more worringly, even getting latent defects taken care of!
But Chevrolet is not dead…
But fear not, everything will be fine because “Opel will develop a range of models targeting former Chevrolet buyers” said Opel CEO Karl-Thomas Neumann recently. So let me get this straight. We kill Chevrolet, then start from scratch again and create a whole new range of Opel models that will undercut the current ones price-wise the same way Chevrolet undercut Opel. All this while counting on current Chevrolet owners that can’t even get their cars repaired (even though they’re supposed to until 2025) to not be angry enough to give up on either Opel or Chevrolet altogether?
The Corvette and Camaro will supposedly remain available after 2015 though. Only there won’t be anyone to sell them.
Not such a good idea after all.