Inside the industry: Is the VW Group about to pull the plug on Seat?

Just how long can the Volkswagen Group hold off making a decision on what to do with its problem child Seat, unprofitable once again, consequently last in the queue for semiconductors and seemingly forgotten in the rush to develop EVs? The VW Group acquired Seat in 1986 and has now spent decades trying – and failing – to find a course that can deliver Seat sustainable profits, pursuing everything from producing value-focused models to marketing a sportier, more youthful outlook. Just a few years ago, it appeared the recipe of slavishly using VW underpinnings and mixing them with powerful marketing might work. For a period, graphs rose from red to black, although never as markedly as Skoda’s, whose brilliant, long-standing reputation for delivering innovation and quality for a fair price has always been grounded in authenticity. But the pandemic hit hard. There are plenty of good reasons why businesses hit the skids during the shutdowns, but – in marked contrast to the rest of the industry – Seat hasn’t had the chance to seize profits from pent-up demand. In Europe, registrations to the end of July are down 35% year on year. Few are faring worse. The reason is obvious: in the simplest of terms, it cannot make enough cars because it doesn’t have enough computer chips. The deeper question is why its parent has left it in such a precarious position. The answer surely lies in the fact that its affections have moved on, to offshoot Cupra, which in contrast to its mothership has found success in recent times, emerging from a bit-part role as the maker of performance models to find a purpose in the electric era. Today, Cupra is as intriguing as it is successful, although just how successful is hard to ascertain as its sales figures have been carved out from Seat’s, exacerbating its growth and its parent’s fall. Last year, it registered around 25% of the cars Seat managed. But what’s got the VW Group excited is not Cupra’s volumes or necessarily its electric leanings but the fact that its vehicles sell at a considerable premium over down-in-the-dumps Seats. In other words, its brand, unencumbered by history and 1000 reboots, is considerably more desirable. So, what next for Seat? There seem to be just two options: another roll of the dice, perhaps reinventing as a Dacia-esque budget brand (although parts and labour costs have always meant the VW Group has struggled with that concept), or closing down and moving on. As a recent report from analysts LMC Automotive highlighted, it’s hard not to suspect that the VW Group has already come to a conclusion, even if it hasn’t pulled the trigger. While Skoda has the electric Enyaq iV on sale, has revealed the 7S concept and has outlined a path to its core models being electrified, Seat has nothing and Cupra everything. In an all-electric future, that can surely only mean the end is nigh. When asked for comment, Seat supplied the following statement: "Seat is a company with two well-defined brands: Seat and Cupra. Cupra is not replacing Seat. The two brands are complementary as they target two completely different audiences. With Seat we have a volume brand and with Cupra we have an unconventional challenger brand that sits between volume and premium. "Cupra gives the company an opportunity to become more profitable. With both brands, we offer customers everything from the most efficient traditional combustion engines to 100% electric vehicles. Demand for our models is at very high levels. The shortage of semiconductors continues to impact production, but the company is doing its utmost to deliver this high demand to dealers and customers. "Seat has a clearly defined role in the Volkswagen Group: its customers are roughly 10 years younger than the average. The brand’s current range is the strongest and widest in its history, following a record €8 billion investment in recent years. "Seat offers what the combustion and PHEV markets need now for the transition to electrification. We can't electrify all cars at once, and in a complex global environment, we're prioritising the higher-margin Cupra models and launching new electric vehicles solely under this brand. At Seat, we will continue with both hybrid and high-efficiency combustion engine vehicles. "Different markets’ electrification is accelerating at different rates, therefore there is still plenty of opportunity for Seat in markets where demand for combustion and electric hybrid models is high and will remain so for the next decade."