You’re Going to See a lot More Volkswagen Ads Real Soon

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Volkswagen wants to flex its advertising muscle again, BMW is following its domestic rival into the brave new world of direct sales in Europe and BMW also says it doesn’t care about Formula 1. All that and more in this Wednesday edition of The Morning Shift for May 25, 2022.

1st Gear: VW on Every Screen

A new story out of Automotive News has shed some light on the German automaker’s desire to “refresh and reboot,” in the words of the brand’s head of marketing for North America. This is kind of a big deal, because Volkswagen’s historically quirky ad campaigns faded quietly into the background around the middle of last decade. The prospect of hundreds of premature deaths around the world stemming from its greed proved to be a tough marketing story to sell.

The new ads have been described as “practical and personal” by Auto News, and “nonconformist” by the agency responsible for them:

VW has kept the “Drive Bigger” tagline. But new ads from lead agency Johannes Leonardo interpret it at a much more practical and personal level, showing simple acts of kindness (with VW vehicles playing a central role) rather than the sweeping societal messages seen in previous work.

One spot, called “Those Guys,” features an annoying, impolite man who is so absorbed with his smartphone that he has no consideration for those around him. His obsession nearly kills him as he crosses the street head-down, but he is saved by VW’s “standard front assist” system that causes the driver of a VW Atlas to break in time before hitting him.

Another ad plugs the brand’s growing lineup of crossovers by positioning VW owners as going against the herd of other crossover drivers by playfully showing a stray sheep jumping into the back of a VW. The people in the vehicle then keep it as a pet.

The ad positions VW as “nonconformist,” said Jonathan Santana, a group creative director at Johannes Leonardo who recently joined the agency from Lucky Generals. “We are for those who choose differently.”

Volkswagen’s long held this outsider aura around it here in the States, though part of that can be owed to the fact that, up until recently, the company was dedicated to selling vehicle types that most Americans had no interest in, like hatchbacks, wagons and sedans.

Scratch the Jetta, a couple fast Golfs and the Arteon, and today’s Volkswagen is all crossover, all the time. That strategy is working. The brand will look to carry its perception of being weird and different into a new generation, but this time around vehicles that are not at all unique in their respective segments. It’s also going to spend a ton of money on platforms like TikTok and Instagram by partnering with influencers. The multi-screen VW onslaught is coming, so here’s your warning.

2nd Gear: Stellantis will pay

Speaking of diesel scandals, the U.S. arm of Stellantis, which was of course Fiat-Chrysler Automobiles, has reportedly agreed to plead guilty and pay the federal government $300 million for cheating emissions regulations in 2014-16 model-year vehicles, per Reuters:

The U.S. business of Fiat Chrysler Automobiles has agreed to plead guilty to criminal conduct and pay roughly $300 million in penalties to resolve a multi-year emissions fraud probe surrounding vehicles with diesel engines, people familiar with the matter said.

FCA US LLC, now part of Stellantis NV (STLA.MI), has agreed to plead guilty to a criminal conspiracy charge arising from its efforts to evade emissions requirements for more than 100,000 older Ram pickup trucks and Jeep sport-utility vehicles in its U.S. lineup, the people said.

The plea deal, negotiated with U.S. Justice Department officials, is set to be unveiled as soon as next week, though the timing could slip. The company would then enter its guilty plea during a subsequent hearing in a U.S. district court.

The affected diesel-powered vehicles span model years 2014 to 2016. FCA merged with French Peugeot maker PSA in 2021 to form Stellantis.

If you’re just catching up to this saga, it’s been going on for quite some time:

Negotiations between FCA lawyers and U.S. officials to resolve the current probe dragged on for years and across presidential administrations as the two sides haggled over whether the company would plead guilty and, if it did, the exact details in any criminal charge, one of the people said.

One of FCA’s employees is preparing to face trial on charges he misled regulators about pollution from the vehicles targeted in the investigation. Last year, the Justice Department disclosed charges against two additional FCA employees in the alleged emissions fraud.

An indictment alleges the employees conspired to install defeat devices in vehicles so they could dupe government emissions tests and then pollute beyond legal limits on roadways.

Conspiracy to deliberately cheat tests with defeat devices is different than the civil penalties for failing those tests that FCA has faced up until now. Between those and the ensuing recalls that followed, this scheme has come back to bite Stellantis pretty hard.

3rd Gear: Vinfast Strategically Moves HQ

The legal and financial activities of the startup EV maker are now based out of Singapore, according to its CEO, as it eyes exporting its products to North America. Operationally, Vinfast is still headquartered in Vietnam, but this move is a strategic play to instill confidence in investors. From Reuters:

VinFast has filed for an initial public offering (IPO) in the United States through a Singapore-based holding company – though market conditions might push the deal into 2023, Vingroup Chairman Pham Nhat Vuong said earlier this month.

Thuy declined to comment about the IPO when asked, but said the company’s EV expansion plans were not contingent on the listing. “Like any big corporate, we always consider all potential financing transactions,” Thuy said.

The CEO said she planned to spend more time in Singapore, where VinFast is buying a building, turning its holding company into an operating hub that would include an office and housing for staff and executives.

“We feel that Singapore is a jurisdiction that will give investors more confidence,” Thuy said. “We put ourselves in the shoes of the investors.”

While Thuy did not elaborate further, Singapore is widely seen as the most developed market in Southeast Asia, with a strong regulatory framework, mature financial services sector and access to arbitration.

Vinfast’s first U.S. showrooms are planned to open in California as soon as July, while the company is eyeing a $4 billion manufacturing facility in North Carolina to break ground by fall. The summer of Vinfast is coming.

4th Gear: BMW Does Direct

On Monday we discussed Mercedes-Benz’s plan to ditch dealers for direct sales in Europe in the coming years, where it can get away with doing that. BMW is going to do it too, per Automotive News:

BMW and Mini may switch to the so-called agency distribution model in Europe, BMW Group’s sales and marketing boss Pieter Nota confirmed.

“We are currently talking with our European dealers about a move to a genuine agency model,” Nota told Automotive News Europe on the sidelines of the Villa d’Este Concours here.

Autohaus magazine had reported in March that BMW planned to end its authorized dealer system in Europe from 2024 for Mini and from 2026 for the core BMW brand and instead rely on agency sales for new cars.

Nota said that the timing is still under discussion and that the agency model could be applied to the BMW and Mini brands, but not to the company’s Rolls-Royce ultraluxury brand, which will stay with the current franchised dealer model.

Having Mini as a low-stakes testbed for trials like this can really work in BMW’s favor. This won’t be the first time the company has attempted direct sales — it did so with the i3 and i8 in Europe when those cars were initially launched in the early part of the prior decade. But this time it’ll obviously play out on a much larger scale. Under the supposed scheme, dealers won’t make the sort of commissions they used to as “retailers” under a fixed-fee model. Rather, the idea is that with inventory and promotions cut, everything will even out:

Premium automakers in Europe generally offer dealer margins of 12 to 16 percent, with amounts varying according to the product line and the market. In the agency model, sales commissions are expected to be roughly halved, to a mid-single digit, but dealers will not incur inventory and promotional costs.

We’ll see about that.

5th Gear: BMW Doesn’t Do F1

Mercedes is in Formula 1 and soon Porsche and Audi will be too. You’d think that’s got BMW feeling quite lonely. Apparently not, per an interview with the M car boss quoted over at BMW Blog:

“We have no ambitions for Formula 1,” [M chief Frank] Van Meel firmly stated. Instead, the company continues to focus its motorsport efforts on the upcoming LMDh project. “For us, it’s really important to have the [electrification] story of transformation embraced as fast as possible. Formula 1 is still discussing the regulations around electrification. So for us, it was very clear. Let’s go faster into that [electrification] segment,” Van Meel says.

BMW has put all of its eggs in the endurance racing basket for the moment, which is cool to me as an endurance racing fan though not so cool if I were more concerned about the company’s return on investment. I mean, I personally believe the 24 Hours of Le Mans is the greatest race in the world, and I can’t wait to see BMW campaign an LMDh prototype in IMSA and, ideally, that crown-jewel event one day.

But sports car racing doesn’t have the wave of enthusiasm behind it that F1’s currently enjoying — no other form of racing really does — and so this strikes me less as BMW not having ambition for F1 but rather not having the money to spend on it. Volkswagen could do both because it’s freaking Volkswagen. BMW, like most other automakers, has to be choosier.

Reverse: A Way to Go