SEAT Revises Growth Plan in China
Executive Summary
The Spanish auto maker has stumbled in China, where it sold only 3,500 vehicles and now is backing off retail-network expansion plans.
MADRID – Spanish auto maker’s SEAT move into China has not been met with much luck.
Just a few months after landing in the buoyant Chinese market, new-vehicle demand slowed significantly and SEAT struggled to get off the ground.
Shipments of its Leon model to China totaled only 3,500 units last year. And although dealers sold them all, they had to do so at cut-rate prices, with discounts reportedly exceeding 20%.
SEAT likely entered the market thinking added sales there would help push its operations back into the black. But the difficult traction now has Volkswagen’s Spanish arm pulling back on expansion plans.
SEAT started its foray into China expecting to add to its dozen or so dealers, but it now is tabling a move to extend the network and will rely on selling cars through VW retailers instead.
Its false start in the world’s biggest market is just the latest setback for the struggling brand. With losses in 10 of the last 11 years and red ink totaling €1 billion ($1.3 billion) since 2008, SEAT continues to be the weak link in Volkswagen Group.
Rumors surface periodically that VW may jettison the brand, and the parent company no longer appears in a hurry to deny them.
The decline in industry new-vehicle demand in Europe in 2012 forced SEAT to cut production 20.3% from its plans when the year began. Sales for the brand fell 8.3% from an already-depressed 2011 to 321,000 vehicles.
Two weeks ago, SEAT reached a cost-cutting agreement with its works council in return for a promise to maintain employment throughout 2013 at current levels. The move spares the jobs of some 340 workers.
