VW's Seat Targets North Africa, Latin America in Expansion Push

  • Seat will market a new, large SUV produced in Germany in 2018
  • Spanish unit aims to lift margin to as high as 4.5% from 1.7%

Volkswagen AG’s Seat division will seek to expand its business in North Africa and Latin America in the next decade, as the Spanish brand looks to stabilize earnings by reducing its reliance on Europe.
 
While increasing sales in markets such as Italy and France is still a priority, “it would be healthy for us to sell about 30 percent of our cars outside Europe in next five to 10 years,” Luca de Meo, head of the mass-market brand, said Thursday in Barcelona. Making Seat vehicles in VW production facilities in Mexico could facilitate access to Central and South American markets, he said.

Seat, founded in 1950 as an assembler of Fiat models and bought by Volkswagen in 1986, has long been a weak link for the German automaker, which has said it will re-evaluate its portfolio in the aftermath of the diesel-cheating scandal. That puts pressure on Seat, which sells more than 90 percent of its vehicles in its home region, to further improve its performance. Competition in Europe’s saturated car market is set to intensify amid PSA Group’s plans to acquire General Motors Co.’s Opel to create Europe’s second-largest carmaker.

After almost a decade of losses, the Spanish brand posted an operating profit of 153 million euros last year, boosted by the new Ateca, its first sport utility vehicle. Still, profitability is weak, with an operating margin of 1.7 percent of revenue, compared with 6.7 percent for the group and 8.7 percent for the Czech-based Skoda brand.

Ateca’s Brother

In an effort to boost this performance, the company will roll out a larger SUV in 2018. Based on the VW Tiguan and produced in Wolfsburg, Germany, the Ateca’s “large brother” will become the Spanish brand’s new flagship.

While Seat’s bread-and-butter will remain affordable hatchbacks like the Leon and Ibiza, “large SUVs represent one of the fastest-growing markets,” said de Meo. “We are confident about the potential of our new car.”

The new model would become the third SUV for Seat after the Ateca and the new compact Aron, due this year. The expansion has paid off with the brand’s deliveries up 14 percent through the first two months of 2017, according to data compiled by Bloomberg.

“We are tailoring our models to market demand, moving from traditional body styles such as people carriers and sedans to SUVs and crossovers, with a bigger potential to demand premium prices,” said de Meo, who worked at Fiat and VW’s Audi before joining Seat in 2015. The goal is to increase the unit’s operating margin to as high as 4.5 percent in the coming years, he said.

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