Cars are an essential part of our lifestyle. Each household in America owns an average of 2.28 cars. It's no hidden fact that car brands have the potential of making some big bucks. Brand loyalty for cars is very apparent as well. With so many companies to choose from, people end up finding their chosen one which they praise to be the best. However, people often only look at the shiny badge on their grill to signify who makes their car. The truth is, the industry is dominated by automotive giants. An example of this is cars such as Audi, Bentley, Bugatti, Lamborghini, and Porsche, which are all owned by Volkswagen. Yup, the same manufacturer that made your grandma's Beetle makes Chiron's and Aventadors. Almost every car brand nowadays owns or is owned by another manufacturer. Mazda and Subaru are the last large manufacturers that are independent.
These manufacturers often say that their smaller sister brands are dedicated to making luxury or performance cars, while the mother brand is for a more practical and average car. However, when looking deeper, one will discover that many key aspects remain the same. For example, the engine in the Toyota Avalon, Highlander, and Camry is also put in the Lexus ES and RX.
So, if these cars are essentially being created from the same manufacturer, with the same parts, why are these manufacturers putting a different brand on them. It is true that a large factor is that different brands can focus their resources on separate goals. Volkswagon can create better daily driver cars if that's their only focus, and Porsche will make better sportscars if the same principle applies. However, I believe the main reason is often to bump up the prices. People often don't look at Toyotas as being a luxury car, due to the image the brand has adopted from selling sedans and trucks. Lexus however, displays a very luxury like image due to the fact that its line up is all luxury vehicles. As a result, people will be willing to pay more for the car if it's made by Lexus because it has that luxury sense tied with it. So next time you may be in the market for a car, you might want to consider if you're paying those few bucks extra for a better car, or just a different badge.
Interesting post! I didn't know that so many car brands were actually all just differentiated from the same company. It makes sense that this would be the case though, because production is far more efficient if these companies are combined.
ReplyDeleteFor example, with the engine you mentioned, if the same engine can be used in so many different cars, it will allow for cheaper and more efficient production, which can keep car prices down, though this isn't always true in the case of luxury cars. However, by keeping prices down for the most part, companies can sell consumers more cars. In the eyes of consumers, this is one way in which monopolies can have a positive impact on consumers.
This is a really concise, yet thorough take on the car oligopoly market! Most of this stems from the fact that when it comes to creating cars, and with anything, reducing costs is a must. Take, for example, the Bentley Bentayga. It's a $200k plus SUV that shares the core and most of its technology from an Audi Q7 that is about a quarter of the price. Or, for example, the GMC Yukon versus the Chevy Tahoe. Both cars, made by GM, share identical chassis and near-identical interiors. This simplification in production is what allows cars like these to be produced at far lower costs for companies with broad portfolios of brands, like Volkswagen and GM.
ReplyDeleteSource: https://www.carscoops.com/2017/11/is-bentley-bentayga-really-more/
Great post, Gibson. Like those who commented before me, I was surprised to learn that there was such uniformity in the auto industry. If luxury vehicles are produced with some of the same parts of more run of the mill vehicles, then, like you said, are we just paying for a different badge? It makes me think a bit about the general conglomeration of society. Corporations keep merging and merging in today's society, and the effects are starting to be felt by the consumers. Oligopolies are not regulated as heavily as monopolies, if at all, but they have some of the same market practices that monopolies do. Your post is an example of how the auto industry is already applying those practices. It hurts the consumer because there is less differentiation, which means less competition and therefore higher prices. And if we're talking from a consumer point of view, I would certainly want the luxury car I purchased to be different from a average car. I'm not only paying for the chassis and interior, I'm paying for a different car performance. If they're the same engine, then on a fundamental level, it's the same car.
ReplyDeleteI am surprised with your Volkswagen example because I was not aware that one manufacturing owns so many different names. It is important to be aware and realize these giant companies and oligopolies that dominate certain products and I think your idea of them owning these different brands to earn more money is a key piece. We may not realize we are paying more for something that is relatively the same with all these different names and versions.
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