Seat Boss Schleef: In The Automotive Business We Are Victims Of Our Own Good Deed

2023 Author: Eric Donovan | [email protected]. Last modified: 2023-08-25 09:36

The car manufacturer Seat was able to increase its sales in Germany despite the declining overall market. In an interview with the Netzeitung, Seat boss Andreas Schleef attributes this to a timely and market-driven product range.

Seat increased its sales figures in Germany in the first ten months of the year by 2.8 percent compared to the previous year. The Altea played a major role in this success. “Our medium-term planning for this model is around 60,000 units a year. For this year we had set ourselves the goal of 30,000 units. We exceeded this goal by the end of October,”said Seat boss Andreas Schleef of the Netzeitung. The 61-year-old manager expects a similar success from the Toledo, which came onto the German market at the beginning of December.

Although Schleef wants to increase Seat's market share in Germany to three percent in the medium term, he is primarily concerned with qualitative growth. “That means that we want to offer vehicles that are even better equipped. We want to make the balance between volume and result more balanced. We want to become premium in our segment, that is, to imitate a little the path that Audi once took.”

«Not more than a signal»

Netzeitung: Mr. Schleef, the Association of the Automotive Industry has just announced that the number of new registrations in Germany in November compared to the previous year rose by 11 percent to 284,000 units. Is that more than a selective improvement?

Andreas Schleef: It's still too early for a trend reversal. Unfortunately, we have had too many negative surprises in recent years. Overall, this year's total sales are lower than the previous year for the fifth year in a row. So I hope this is a sign of recovery. But I wouldn't want to derive more than one signal from it.

Netzeitung: What needs to be done so that sales recover?

Schleef:It's a very complex matter. But it can be summed up in a nutshell: In the automotive business in particular, we are in the situation - to put it bluntly - that we are victims of our own good deeds: That means: The vehicles are not only good, but also durable. Accordingly, the interested party can postpone their purchase decision for a new product. In addition, the additional demand is limited. It is usually a replacement requirement.

«Consumption strongly driven by feelings»

Netzeitung: And first-time buyers are not in sight?

Schleef: No, which brings us to demography at the same time: Unfortunately, it is such that our population is not growing, but rather a stagnating one. It therefore depends on the consumer's attitude: How he assesses the general economic situation. And in Germany consumption is very much driven by emotions. This means that when times are bad, people are more likely to think of increasing the savings rate than buying a car.

Netzeitung: Does that also apply to other countries?

Schleef:This is completely different in many other European countries. This is also the case in Spain: the framework conditions in the European Union are generally comparable. But the attitude of consumers to the general situation is very different in Spain. In November we had the highest sales there since statistics exist.

Netzeitung: Can you express that in units?

Schleef:The Spanish market this year is around 1.2 million units, or around 100,000 per month. So when you ask about a cause, you quickly get to the feelings of the customers and less to something that we can influence ourselves. That makes it so difficult for us as a provider. The automotive industry tries to persuade customers to buy with a firework of products: This is currently happening with a large number of campaigns, for example a discount campaign, which I think is wrong.

Half-empty glass in Germany

Netzeitung: Would you say that people in Spain are more optimistic about the future than in Germany?

Schleef: It's always difficult to say: The German, the Spaniard. But if I interpret it in black and white, then I get the impression that the glass is half empty in Germany, but half full in Spain. The Spaniard approaches things with a different approach, realizing the same reality. He says: Times are bad, but why shouldn't I treat myself to anything today? The German says: Times are bad, that's why I have to save so that I don't get worse in old age.

Netzeitung:The sales figures of the Federal Motor Transport Authority from January to October show Seat sales of almost 51,000 vehicles in Germany, an increase of 2.8 percent compared to the previous year. In view of the declining overall market, did this increase surprise you?

Schleef (hesitates):No! I don't want to sound arrogant, but I believe we have a product range that is very timely and in line with the market. But there is a downside: Our market share is currently just under two percent. That means that out of 100 cars sold, in quotation marks, “only” two are from Seat. We have a small, but very specific clientele. And with the Altea we have a completely new model on offer for these. So I'm particularly pleased that we not only went against the market trend, but that the Altea achieved the highest number of all of our models in October, even before the Ibiza (2187, editor's note).

Goal overflown with Altea

Netzeitung: You launched the Altea in June, which has since sold more than 30,000 times worldwide. Did he exceed expectations?

Schleef: Our medium-term plans for this model are annual

at 60,000 units. For this year we had set ourselves the goal of 30,000 units. We exceeded this goal by the end of October.

Netzeitung: Are you increasing your sales expectations for the coming year because of this success?

Schleef: We are careful and have to make realistic plans. That is why we have designed our processes in such a way that we achieve a high degree of flexibility. In this way we can react quickly to high demands, but without aligning ourselves in such a way that if, contrary to expectations, things go worse than planned, we will be hit hard. We can easily compensate for a range of plus to minus 20 percent.

New logistics system

Netzeitung: So you can rule out long delivery times? Currently, competitors have to wait up to four months for some models.

Schleef:If our customers choose, they want the product quickly. Long delivery times are no longer an issue in the industry - and certainly not at Seat. In general, our delivery times are well below these four months. We are currently working on a new logistical system that we want to introduce in France after Spain and Portugal. With the so-called Seat Distribution System (SDS), we want to ensure that dealers can access all models available in our factory without long delays. Using a special system, he can see what we will be producing shortly. In this way, the dealer can check whether the vehicle requested by the customer is available. This enables retailers to shorten delivery times from the customer's point of view. We launched SDS in Spain last year and will expand it to Germany.

Netzeitung: Two years ago you once said that by 2005 you wanted to sell up to 10 percent of all new cars over the Internet. Do you stick with this statement?

Schleef: I'm more cautious about this prognosis and I'm leaving

no longer assumes double-digit sales rates. But I would not take internet sales - which eSEAT is the only manufacturer to offer in this form - from our offer because it is an option for the future. It always surprises me that while the used car market plays a major role on the Internet, the new car market does not. The used car market on the Internet is far more risky. But if this situation changes towards buying a new car, we will benefit very quickly thanks to our young customers.

Must be noticed

Netzeitung: The Toledo has been with dealers since the beginning of December. How many units do you want to sell from him in 2005 and can you already say something about the pre-orders?

Schleef: A week is too short to make a forecast. However, as with the Altea, the trend seems to be continuing that we are attracting a large number of interested parties who have never been to Seat before to the showrooms. At the Altea it was 40 percent. This is fantastic because the Altea had no previous model. The Toledo has a previous model, but its design is completely different. Even so, he is seeing a similar trend. Due to its concise design, the Toledo is very controversial. But we made a conscious decision for this design. As a small manufacturer, we need to be noticed.

Netzeitung: If you can't say anything about the pre-orders, then you can say about the expectations for 2005.

Schleef: We want to sell 100,000 Altea and Toledo units per year worldwide: 60,000 Altea and 40,000 Toledo. In Spain, where the Toledo was introduced in November, the sales figures are already very good.

Netzeitung: What do you primarily attribute to the fact that a car attracts customers to the showrooms to this extent? Is it just the design?

Schleef:Obviously! I've been in the automotive industry for a few days now, but I can't remember that a vehicle like the Altea came in second place in a renowned German automobile newspaper that surveys its readers every year, even though the car is still was not on the road at all. This shows that it can only be due to its appearance.

«Altea our safest car»

Netzeitung: Is the Altea the car that has given you the most joy at Seat so far? They received a design award even before the market launch, and the Altea has just been awarded five stars for occupant safety at the NCAP.

Schleef:The NCAP shows that the Altea is our safest vehicle. This can also be extended to the Toledo: Although it was not rated, it has the same basic data. The Altea is so important not just for me but for Seat because we are pursuing a three-pillar model in our corporate strategy: the Ibiza, the Leon and the Altea / Toledo. And each of these three pillars should contribute roughly the same to the overall result. This strategy seems to be working - in terms of both the number of items and the result. I am so happy that it works with the Altea because it is the first car that has been launched since I've been with the company. Therefore, with the first baby, you always have the greatest emotional bond. But beautiful new things can also be expected from Seat in the future.

Netzeitung:For a long time it was not known exactly what the Seat brand stood for within the VW Group with its brand thicket. So the Altea was able to sharpen the brand image?

Schleef: Yes. And the Toledo continues that. In our segment, technically speaking the A0 and A platform, we want to appeal to customers who perceive design as their own value, who want sporty vehicles and who want athletic and unconventional solutions away from the mainstream.

Netzeitung: How do you intend to keep the customers who have come to Seat with the brand?

Schleef:Cars under the Seat brand name have only been around outside Spain for a good quarter of a century. This makes us the youngest European brand by far. A car buyer does not automatically think of Seat, but first of the volume manufacturers. Because that is the case, we consciously address customers for whom a vehicle is more than a means of transport that can get you from A to B. At the moment we can advertise our products more than the brand itself. In the medium term, of course, it is essential that we strengthen our customers' brand awareness. For us, the sharpening starts well. On average, our customers are significantly younger than other group brands …

Young customers

Netzeitung: … the average age is 37 years …

Schleef: … yes, and that means that our customers are on average ten years younger than the Audi customer. We have a significant proportion of new car customers who are between their early 20s and their mid-30s. So we have very young customers, which makes me very confident. If this group is very satisfied and we look after them with our service and our dealer network, then it will be easier for them. From a purely statistical point of view, older customers will of course buy fewer vehicles in the rest of their life than young people.

Netzeitung: Do you think that customers now associate the “Auto emocion” advertising message with the Seat brand?

Schleef:I don't know of any dedicated scientific studies that would prove that. But I believe that this message has now caught on. Especially with our target group. The slogan Auto emocion is so brilliant because it expresses two things ideally: With emocion you know what is meant in every language. It also expresses that we are the only Spanish automobile brand in the world. We are Spanish, but we deliver value. In all trademark research there are no negative attributes if you put the word Spanish next to it.

Growing market share

Netzeitung: Are the Altea and Toledo vehicles that can increase Seat's market share from the current 1.9 percent in Germany?

Schleef: Our internal sales figures are such that we want to sell more in Germany in 2005 than this year. If the market remained at the previous level, this would result in an increase in market share. But the market share as such is only a secondary indicator for me. The total number of items sold is important. This year it is nice that we have an increasing market share. But it is more important that the sales figures have been reached.

Netzeitung: Despite everything: what market share are you aiming for in 2005?

Schleef:I don't want to limit it to just this one year: I told our colleagues at Seat Germany to develop a medium-term plan with an increase in market share of up to three percent.

Netzeitung: Medium term means?

Schleef: Medium term means: five years upwards.

Netzeitung: In 2003 you sold a total of 437,000 cars. What do you want to achieve in the coming year?

Schleef:That is difficult to answer because we are changing our model series. We launched the Ibiza and Cordoba in 2002 and this year we have built a completely new range of models with the Altea. At the same time, we have reissued the Toledo. We have also discontinued the Inca and Arosa and the Leon cannot run for another five years in its current form due to its age. Therefore it is difficult to give absolute numbers for the next twelve to 24 months. All in all, our strategy for the next three to five years assumes that we will utilize the existing production capacities of roundabout 500,000 units per year in our main plant in Martorell. However, due to flexible working time models, expansion is possible.

In the next three to five years, however, we will not invest our energies in additional capacities, but instead focus on more qualitative growth. That means that we want to offer even better equipped vehicles. We want to make the balance between volume and result more balanced. We want to become premium in our segment, that is, to imitate a little the path that Audi once took.

Consolidation of all activities

Netzeitung: Last year you had to accept a drastic drop in net profit from 203 million euros in 2002 to 134 million euros. Will the current year look better?

Schleef:The numbers you are referring to have to be put into perspective. They relate to the entire Seat business. In Spain it relates to more than just the automotive business. We are consolidating all group activities in Spain such as importer, the VW plant in Navarra, VW Financial Services and the like. The bottom line figures are an expression of an investment in the future. We have renewed the entire model range, which of course cost money in the beginning and is reflected in the balance sheet. We are absolutely on target when it comes to internal values. I am very satisfied with the development of our core business. Not yet with the absolute numbers, but we are on the right track.

Netzeitung:How important is the Chinese market, which is generally regarded as the growth market, for you? VW also has its own plant there.

Schleef:VW has a plant there together with Audi. The group is currently excellently positioned as a whole in China. VW and Audi are market leaders there. China is not only a booming market, the WTO rules will open it up even more. But the Chinese market is of no interest to my company at the moment because the products that are in demand there are excellently covered by VW and Audi. Our products do not stand a chance there in significant numbers at the moment. We are therefore concentrating our strategy on our target markets in Europe, Central and South America. For Seat, the growth market will be North America. At some point maybe Asia, too, but as Seat boss I won't experience that on my job.

Enormous growth rates in Eastern Europe

Netzeitung: And Eastern Europe?

Schleef: We have enormous growth rates in some markets there. However, we are also seeing an enormous drop in prices that we do not want to and cannot go along with. But Eastern Europe is part of Europe for us and therefore a core market. We have certain markets there with market shares of over five percent. This applies to Slovakia, Slovenia or Romania, for example. Poland was also very good, but there are problems with prices.

Netzeitung:As a subsidiary of the VW Group, you can, on the one hand, fall back on the technical innovations of the Wolfsburg-based company; on the other hand, you are dependent on their product policy. Isn't that what makes sense from a cost point of view, an obstacle to the innovative strength of the Seat brand?

Schleef:If everyone offered the same thing, you'd be right. But with the creation of the brand group as a control element, this is prevented. Thanks to the clear brand values such as design and sportiness, we have taken a different approach based on the same basic values. You can install the same unit in a Skoda or Seat, but the overall concept is decisive. This is what defines innovation in vehicle construction, that they offer a different end product with the same components. A Seat Altea cannot be compared with any product within the group.

No competition to the Golf Plus

Netzeitung: Really? At the end of January, VW will be launching the Golf Plus, which is very similar to the Altea. Aren't you worried that potential Altea customers won't turn to the Golf Plus?

Schleef: In terms of room definitions, the Golf Plus is definitely comparable to the Altea. But the Altea is designed completely differently, also in terms of design. We have already had experience with two other vehicles, the Alhambra and the Sharan, which are conceptually similar. But we can see that the customer who drives an Alhambra does not want a Sharan and vice versa. Based on this example, I assume that no one is taking a buyer away from the other.

Netzeitung:VW recently reduced its profit forecast from 2.5 billion to 1.9 billion euros. Is that why Seat is under particular pressure to distribute a dividend?

Schleef: We are a 100-year-old VW subsidiary. Therefore, as usual, we transfer what we generate to our shareholders. If the group is not doing well in general - especially the largest single brand - you have to do your bit, of course. Everyone tries, of course, to try harder to maintain cost discipline. In concrete terms, however, there are no other requirements. But the shareholder's demands are legitimate. The shareholder who gives money wants to see a reasonable return.

Labor costs alone are not decisive

Netzeitung: At the beginning of November, the wage dispute in Wolfsburg was ended with an agreement that guarantees employees a job guarantee until 2011 thanks to a wage waiver. Can Germany remain attractive as a business location only by lowering wage costs?

Schleef:In my opinion, this collective agreement is an important step in the right direction for VW in the current situation. However, I think that the discussion about wage costs in Germany is too short. Because for me it is not the wage costs that are absolutely decisive. If it were reduced to that, we would no longer be allowed to practice industrial production in Germany at all, as there are more favorable locations further east. So it is not the wage costs alone that are important, but the difference between costs and income. The worker simply has to generate more than it costs the company. Our structural problem in Germany is that we finance our social systems through the labor factor and not through indirect forms as in other countries. Without proper tax reform we will not get anywhere. We were too busy working, so I'm a fan of indirect taxes like consumption taxes.

Frank Mertens conducted the interview with Andreas Schleef