Strategy: Was killing Chevrolet in Europe a good idea?

Chevrolet Cruze crash. Picture courtesy of autoblog.comGeneral Motors crashed Chevrolet down in Europe. A good thing?

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.

Chevrolet Bel Air ImpalaChevrolet’s heritage is still present in European consumers’ minds.

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?

Chevrolet Spark Europe 2014The Spark was Chevrolet’s best-seller in Europe in 2013.

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.

Opel Corsa Europe 2014GM is counting on a clumsily facelifted Corsa to revive Opel sales in Europe…

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?

Opel Mokka Europe 2014…but this responsibility falls on the Mokka for now.

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.

Chevrolet closing down. Picture courtesy of Auto PlusChevrolet closing down, Opel opening up?

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!

Chevrolet Camaro Europe 2014The Camaro & Corvette are your only hope of getting a new Chevrolet in Europe after 2015. Or are they?

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.

This Post Has 17 Comments
  1. Actually Matt, it was high time to kill Chevrolet !

    Essentially because it was awfully marketed by thugs with mafia ethics towards the press and customers.

    – Lying about their lack of innovation : nope GM guy your Volt is no way an electric car so there is no reason to price it that high ! And it became that huge flop…
    – Lying about the Korean origins : I once heard “the Cruze is absolutely not the successor of the Nubira/Lacetti” and I had to drink my glass of champagne not to laugh ^^
    – Threatening medias who dared to publish the real selling figures which were not so good. Every analyst knows that after the first year where usually the percentage growth is high, you have to watch carefully the month-to-month figures. On that level many Chevy models failed in their remaining years. Disappointed customers are not mute customers…

    In the last month, Chevroo was merely trying to sell overpriced cars – aka the Cruze – with old cancerigen Diesel engines !

    The bad marketing team at Chevrolet had a huge responsibility in the failing of this brand, far bigger than the products eventually… Phil got it perfectly 😉

  2. @Phil

    Ha ha, so true!

    Chevrolet will not be missed by many in Europe at all. It was not a well-known brand for its key vehicles and we all knew they were re-badged Korean cars of a sub-standard level to Kia/Hyundai. The Cruze was an exception, being quite good but priced at similar levels to the Opel/Vauxhall cars, so there was no point in buying one over the slightly more refined GM Europe cousins.

    Once more, GM USA has shown it’s inability to understand the European market (as it still fails to do with Cadillac) with the assumption that Chevrolet can be a ‘global’ brand just because it’s big in the U.S.

    It works in China, as there is more differentiation to the Buick cousin in model line-ups and China is simply a much bigger and diversified market. “That town is big enough for the two of them” -to quote wild-west films.

    GM is better off trying to make Opel/Vauxhall work in Europe with more competitive pricing and good-value technology. They must compete with Kia/Hyundai/Skoda and not with VW/Audi, I believe.

  3. The article seems as if it was written by an annoyed Chevy-owner.

    That Chevy achieved 452% growth between 2003 and 2013, well, that’s not really impressing. If I sell 10 and the next year 100, that’s 1000%…great.

    I agree that Opel is still facing diverse problems, including unavailability of important technology gadgets, but besides the terminating models Agila, Ampera and since the year one infamous Antara sales are growing for all models. The Astra is kind of a bad design and therefor it’s not surprising that he’s getting under pressure from Leon, Octavia, Focus… the Astra, especially the GTC, are oversized and overweight and also not marketed properly. To achieve equivalent performance with a Golf for example, I need a larger engine in the Astra, and that brings to me to a price region where people will rather take an A3 or 1series. The facelift was ridiculous and made the Astra only look even stuffier. Thankfully it is already close to the end of its lifecycle and we can hope for improvements there.

    Apart from that, brand image is improving quickly, sales are improving, investments are being made into R&D, overcapacity is being reduced, dealer network is being consolidated. That Opel is unpopular with private customers is not entirely true since they are ranking #2 in the used car market with Corsa and Astra being highly demanded (think they rank 3 and 4 behind Golf and Polo) and 11.7% market share. Thanks to Adam and Mokka Opel is improving with private new car buyers also.

    Chevrolet was just a mess, American brandname, Korean/Uzbek/whatever production, marketed through mostly worn down Daewoo dealers or in the back room of Opel dealers. Even after 10 years they cars had not received ANY level of awareness, while I am sure that the brand is quite known. Assuming that Chevrolet brought quite a contribution to the losses of GM Europe it was simply good to close them down. They had a line-up exactly matching the Opel line-up but still I haven’t seen some of the models on the street yet (e.g. Cruze estate). VW/Skoda did it way smarter, for example the Octavia is available as a notchback and estate, while the Golf is sold mainly as hatchback and MPV (estate just starting to grow), the Fabia was available as an estate, the Polo not. The Roomster and Yeti are categories VW doesn’t have on offer, while they have for example the Tiguan. Then the Rapid has no counterpart at VW, nor the Superb that is already above the Passt. The only equal model in the ranges of VW and Skoda is the citigo. That’s how differentiation works.

  4. I sell Opels in Estonia and I have to say that this is very critical article. Opel is doing well. We are getting new Astra next year, new Antara in 2016, new Insignia 2017. When VW did it with Golf/Polo that only changed the dash and some panels, nobody said nothing. Now Opel has done complete makeover with the Corsa and it is not enough? Corsa is still bigger inside than Polo/Fabia/Yaris. We also sell used cars from Germany and I can ride with two years old VW and Fords all the time. Yes Mondeo rides littlebit sportier then Insignia but the quality is from 2001 not from 2011 and VW Passat is overrated. Yes bigger boot but bigger road noise, more expencive to maintain.

  5. Camaro sales are also down due to the announcement & Corvette was just launched they’re also getting affected Chevrolet should have made a clear announcement that the Corvette & Camaro would continued to be sold . And also why couldn’t Chevrolet just stay but selling only luxury cars? so beside Camaro & Corvette launching the SS, Tahoe & Suburban here i bet Opel will never make cars like these above except Camaro.

  6. You cannot use ‘General Motors’ and ‘long-term strategy’ in the same sentence, except in ‘General Motors does not have a long-term strategy for their brands portfolio’

  7. Well, this article is very critical concerning Opel.
    Opel/Vauxhall is still rank 3 in Western-Europe and the only greater car maker which is expanding ist portfolio while all the other brands, especially PSA, Fiat and also Volkswagen will reduce their number of products….while Ford is offering crappy things like the Ecosport, offering a non-European car like the Edge and is unable to start production of its Mondeo which will still be an old car when it will be launched.
    Everything is new with the new Corsa except the platform. So it is as “clumsy” as every generation of Golf, Tuareg, Tguan or Sharan, so I don’t understand what’s the problem with this car which will offer one of the finest and most modern interiors in this class and the newest generation of engines and technology…

    @Nick: The Mokka by the way is not a rebadged Chevrolet. It shares ist platform with Chevrolet and surely some other components you don’t see but that’s the reason why carmakers are organized in groups.

  8. @Bryan

    “The majority of their cars and engines are a mix of rebadges from all aroud the world with only a german or british symbol to fool people. They have no true identity”

    This is the main issue that GM execs continue to think they can market around. Educated & informed consumers don’t want to buy fake goods. Brands do actually mean something. A Korean Daewoo with a Chevy badge is not a Chevrolet, just like a fake Chinese Rolex isn’t a Rolex. Ford has somehow pulled off that their brand can be a “local” brand in many countries–maybe because they’ve been doing it for 100 years. Chevrolet has always been identified as American. Unfortunately for Opel, they’re now selling Korean rebadges, too (Mokka). So unless they invest in product that actually reinforces what Opel has always been–German, economical, somewhat conservative but competent, a true alternative to VW, etc……they’ll die a slow death.

  9. A great, fascinating and dashing analysis Matt and full of truth! I believe that Opel will face difficult times in the future. Besides VW and Ford, there are signs of sales rebound from french brands and Toyota – Nissan. Opel is trailing behind them technologically and sooner or later sales will shrink. The good new SIDI and 1,6 diesel engines are not enough. They have heavy cars with heavy design.

    P.S.: I totally agree with you on the case of new Corsa. It’s – to say at least – an uninspiring refresh. Will they follow the same huge discount policy and continue to lose money?

  10. Killing Chevrolet in Europe was wrong decision. Chevroelt was marketed wrongly, GM has this idea that Chevrolet is their global brand-they even tried to promote Chevrolet in Europe instead of Opel which was clearly wrong too. Opel is and always was and will be European main volume brand in all segments, don´t push it upmarket, they tried to push it and it failed, they tried to promote Chevroelt and it failed – i don´t care about their heritage, but Chevrolet until DAewoo was rebadged was basically 0 entity in Europe, who cares they sold 100 Corvettes in Europe, they weren´t even mentioned anywhere. Than they tried to sell cheap korean cars as american and it was again GM US bosses logic…

    I think Chevrolet could have been succesfull as ,,value brand,, not as much as Dacia – or as cheap, but competint with Huyndai/Kia everyone knew it was korean brand anyway-korean cars i mean, but they want it to be american and this marketing strategy failed, if it was marketed as value brand competing Hyundai/Kia it could have been succesfull and produce in Poland – which is far lower cost than Germany for example. Simply they wanted Chevrolet to be succesfull, achieve higher numbers than thier 220 thousand per year, yet they promote it as US brand when everybody saw them as Daewoos- which would never changed if imports were from Korea.

  11. The image of Opel is broken, people in Germany even prefer Skoda/VW and Ford over Opel and make a lot of sense since the Skoda cars are nowadays more German than Opels. The majority of their cars and engines are a mix of rebadges from all aroud the world with only a german or british symbol to fool people. They have no true identity.

    I think than in the GM hands they will never succeed, they should be sold to some Chinese or Indian company like the Land Rover/Jaguar and Volvo did and maybe they can reborn in the future.

  12. I always saw the best option for Chevrolet in Europe as being a low cost entry-level aspirational model for the East, Russia, Turkey, North Africa etc, and the higher spec Opels and Vauxhalls being for Western Europe and as the premium product in the East. I never saw the point of marketing cheap Chevrolet badged Daewoos in England or Germany, which would likely cannibalize sales from the premium GM brands there. Were I a customer in one of those countries I may think quite differently of course.

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