Volkswagen’s strengths include a strong brand and diverse product portfolio, while weaknesses lie in the diesel scandal. Opportunities exist in electrification, but competition and regulatory changes pose threats.
Volkswagen is a renowned global automotive manufacturer with a long-standing history and a wide range of products. It produces more than 10 million vehicles per year and often competes with Toyota Motor Corporation for market share. The Volkswagen SWOT analysis provides an in-depth assessment of Volkswagen’s strengths and weaknesses within the company, as well as its external opportunities and risks. The objective of this SWOT analysis is to understand Volkswagen’s current position and to inform strategic decisions for the company’s future success.
Brief Company History
Established in 1937, Volkswagen is a German automobile manufacturer renowned for its iconic Volkswagen Beetle. After the Second World War, Volkswagen began reviving its operations and expanding its presence worldwide. Over the years, Volkswagen has developed new models and broadened its product portfolio. It has become one of the most prominent automobile manufacturers in the world and has acquired several well-known automobile brands.
In 2015, Volkswagen was implicated in a diesel emissions scandal, resulting in financial penalties and damaging its reputation. Nevertheless, the Volkswagen Group plays a significant role in the automotive sector, focusing on electric vehicles and innovation to define its future. As of 2021, its flagship brand Volkswagen held a market share of approximately 6.4%, second only to Toyota worldwide.
| Volkswagen Group | |
| Company: | Volkswagen AG |
| Industry: | Automotive |
| Subsidiaries: | Transportation, Financial Services, Logistics, Industrial, and International. |
| CEO: | Oliver Blume |
| Founders: | German Labour Front |
| Year founded: | 28 May 1937 |
| Headquarters: | Wolfsburg, Lower Saxony, Germany |
| Type: | Public |
| Employees: | 667,647+ |
| Ticker Symbol: | FWB: VOW |
| Annual Revenue (FY 2022-23): | $306.89 Billion |
| Annual profit (FY 2022): | $25+ Billion |
| Products: | Automobiles, commercial vehicles, internal combustion engines, motorcycles, turbomachinery. |
| Competitors: | Ford Motor, Hyundai Motor, Volvo Group, Renault, Stellantis, Toyota, PSA Group, Mercedes-Benz Group, and BMW Group. |
Recent Performance
Volkswagen Group has a wide range of products and has been really successful in the BEV market. BEV sales have been on the rise, and Volkswagen Group saw a 26% increase in total BEV vehicles sold and an overall BEV market share of 7% in 2022. Volkswagen Group already announced their key numbers for the last fiscal year and their outlook for 2022 on 3rd March 2022.
Even though the total number of vehicles sold decreased by 7% in 2022 to 8.3m, Volkswagen Group is still in good shape for the future. Volkswagen tries to outdo its competitors in advertising with its aggressive promotional image campaign. They try to make customers feel valued by meeting their needs. This is mainly done through image-based advertising.
Strengths
Strong Brand Reputation
Quality, reliability, and engineering excellence are just some of the reasons why Volkswagen is one of the most recognizable brands in the world. One of the most recognizable features of Volkswagen is its intertwined VW logo, which can be easily identified by most consumers worldwide.
Strong Financial Performance
With a lot of money comes freedom and the ability to do what it takes to beat the competition. Forbes ranks Volkswagen 8th in sales and 37th in profits. It’s 70th in assets and 100th in global market value as of May 2020.
Impressive Product Portfolio
Volkswagen offers a comprehensive selection of cars, SUVs, and electric vehicles to suit all tastes and customer groups. Whether you’re looking for a Lamborghini, Bugatti, Audi, Skoda, or something else, Volkswagen has got covered from affordable to luxury vehicles.
Strong Global Production Network
The Volkswagen Group has over a hundred and twenty-four production sites worldwide, 72 of them in Europe. They have factories worldwide, from Europe to America, to Asia, to Africa, and they have a huge presence in big and small countries. That’s a huge advantage.
Weakness
Negative Publicity Tainted Reputation
Volkswagen’s reputation took a massive hit in September 2015 when it was revealed that they had been using software in their cars to cheat on emissions tests. Volkswagen was fined over € 30 billion in different countries and has struggled to win back people’s trust.
Low Market Share
The US is the second biggest car market in the world, with over 18 million cars sold. It’s also the most significant car market by value. If you had a big market share in the US, you’d make a ton of money, just like General Motors and Ford. They rely on the US to complete 55.5% of their revenue and 62.3%, respectively.
Weak Marketing Strategies Outside Europe
Volkswagen is under-marketing and under-promoting its brands in the non-European market. In the majority of cases, Volkswagen will partner with an existing competitor. For instance, the company is partnering with JAC in China to develop cost-effective electric vehicles.
Higher Production Costs
Volkswagen’s SWOT analysis shows a weak spot in the form of higher production costs. This can harm VW’s cost-efficiency, profitability, and ability to invest in research and development. VW needs to focus on cost management, improving processes, and becoming more efficient to fix this weak spot.
Opportunities
Rising Fuel Prices
Fuel prices have been low for years and are expected to rise in the next couple of years due to supply changes. Low fuel prices have increased demand for large SUVs and pickup trucks. Many manufacturers, such as General Motors, Ford, and Chrysler, have seen strong sales of SUVs and pickups due to low fuel prices.
Focus on Eco-friendly Cars
Lots of people around the world are becoming more and more eco-friendly. Volkswagen can use this to its advantage by investing more in making hybrid and electric cars. They’ve invested €60 billion to develop electric vehicles over the next five years. Volkswagen Group reckons that by 2025 20% (2.5m) of all their cars will be BEVs.
Expand in Emerging Markets
The auto industry is making much money in the developed economies, but there is little room for expansion. Now is the time to take advantage of consumers’ growing middle-class spending power in Asia, Africa, the Middle East, and Latin America.
Expanding into Chip Manufacturing
Self-driving cars will be in high demand soon as 5G, artificial intelligence, and the Internet of Things (IoT) make cities more innovative and transport networks more efficient. Google and Tesla are already ahead of the game, but Volkswagen could jump on the bandwagon by investing more in autonomous research and development.
Threats
As the climate crisis escalates, governments will increasingly focus on reducing their GHG emissions and carbon footprint through strict environmental regulations. Like a criminal defendant, Volkswagen’s emissions and activities will be subject to heightened scrutiny from compliance auditors.
Stringent Environment Regulations
Monetary Penalties Due
Volkswagen’s emissions scandal has already cost the car maker much money, with consumers losing their trust in them and the company being hit with huge fines and damages. But it’s not over yet – the company is still facing lawsuits worldwide trying to get them to admit they cheated on their emissions tests.
Trade Negotiations
The US is trying to talk to the EU about renegotiating trade. Since it’s the EU’s biggest export, VW and other European automakers are bargaining chips in the negotiations. The worst-case scenario is estimated to cost the EU two and a half billion dollars annually.
Intense Competition
There’s much competition in the auto industry right now, with new car makers like Tesla and Zorya taking over from Volkswagen’s electric and fancy sports cars and old rivals like Toyota, Ford, Hyundai, and Nissan. Plus, all the ridesharing companies like Lyft and Uber, Didi, and Ola exist.
SWOT Comparison Chart
| Volkswagen | Ford | Toyota | |
| Strengths | – Strong brand image – Strong Financial Performance – Impressive Product Portfolio – Strong Global Production Network | – Established history – Strong presence in the US – Strong truck lineup | – Strong brand reputation – Technological innovation – Strong global presence – Extensive R&D capabilities |
| Weaknesses | – Negative publicity; Tainted Reputation – Low market share. – Weak Marketing Strategies Outside Europe – Higher production costs: | – Dependence on the US market – Decline in sedan sales – Financial challenges | – Product recalls – Relatively higher vehicle prices – Reliance on Japan market – Overreliance on sedans |
| Opportunities | – Rising Fuel prices – Focus on Eco-friendly Cars – Expand in Emerging Markets – Expanding into Chip Manufacturing | – Growing SUV market – Electric vehicle market – Partnerships and alliances | – Growth in emerging markets – Autonomous driving technology – Shift towards green technologies – Expansion of hybrid lineup |
| Threats | -Stringent Environment Regulations – Monetary Penalties Due – Trade Negotiations – Intense competition | – Economic downturns – Trade disputes – Technological disruption | – Currency fluctuations – Increasing regulations – Competitive market |
Recommendations For the Company
Volkswagen can do a few things to improve its standing and tackle critical issues. First, it should focus on resolving the diesel emissions scandal by being open and accountable and ensuring quality control measures are in place. The Volkswagen scandal could significantly impact diesel powertrains in the future, which could mean stricter regulations and more expensive investments. Second, Volkswagen should speed up its switch to electric cars to meet the growing need for sustainable mobility and become a leader in the industry.
- Focus on developing new markets,
- Prioritize hybrid and electric vehicles,
- Prioritize passenger safety,
- Make the company a leader in sustainable mobility and synthetic materials,
- Make connected cars a top priority,
- Bring in Audi, Porsche, and other brands,
- Focus more on the commercial vehicle business,
- Do more voluntary emissions testing and certification.
If Volkswagen wants to grow, it must expand into new markets like China and India with custom-made products and strong distribution networks. It must also focus on cost management and improving operational efficiency to lower production costs and stay competitive. Finally, it must stay ahead of the curve by innovating, investing in cutting-edge technologies, and building strategic partnerships. By following these tips, Volkswagen can build trust, take advantage of new opportunities, streamline operations, innovate, and ensure it’s ready for the future in the ever-changing automotive world.
References
- Jurevicius, O. (2023, March 30). Volkswagen SWOT analysis 2023 – SM insight. Strategic Management Insight. https://strategicmanagementinsight.com/swot-analyses/volkswagen-swot-analysis/
- Saric, M., & Rosi, B. (2020). SWOT and Pest Analysis of the Volkswagen Group. Scholars Journal of Arts, Humanities and Social Sciences, 8(8), 414–419. https://doi.org/10.36347/sjahss.2020.v08i08.003
- Sudhakaran, A. (2023, January 17). Volkswagen SWOT analysis 2021 – is Volkswagen still at the top? PESTLE Analysis. https://pestleanalysis.com/volkswagen-swot-analysis/
- Volkswagen: Business model, SWOT analysis & Competitors 2023. GITNUX. (n.d.). https://blog.gitnux.com/companies/volkswagen/
- Wood, M. B. (2004). Marketing planning. Pearson Educación.
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