Volkswagen AG (OTC: VLKAY), is one of the world’s largest automobile manufacturers, posting $272 billion in revenue for fiscal year 2017, at a company worth of over $75 billion. While the company’s namesake brand has remained a key component of its overall portfolio, Volkswagen Group has acquired a diverse portfolio of companies and brands throughout the years. A new CEO, Herbert Diess, was hired in 2018, and he oversees the groups diverse brand of companies.
One of Volkswagen Groups’ oldest acquisitions, Audi AG (OTC: AUDVF), was bought in 1966. Originally, the two companies were well integrated, with several versions of the Passat being derived from similar Audi models and other Audi models taking major components from Volkswagen models.
However, Audi changed strategies in the early 2000s and has gone on to target a more upmarket audience than Volkswagen. As of early 2019, Audi is renowned as a brand for distinguished professionals and high-level government workers in different countries around the world.
Bentley, Lamborghini, and Bugatti
The year Volkswagen began targeting the super-luxury market was 1998. Bentley, Lamborghini, and Bugatti all became Volkswagen Group companies during that year.
For Bentley, Volkswagen’s purchase immediately resulted in a $2 billion investment that upgraded Bentley production facilities in the United Kingdom. Today, however, most of Bentley’s parts are produced at factories in Germany and assembled at plants in the United Kingdom, where they are finished and prepared for distribution.
The addition of Bugatti and Lamborghini also added a new dimension to Volkswagen Group’s portfolio. While Bentley Motors had represented the finest in racing history, the company’s strategy moved away from racing long ago. The acquisition of these two new companies brought the future of supercars to Volkswagen.
The Bugatti Veyron is one of the brand's most notable cars and is considered the fastest consumer car on the market. Meanwhile, Lamborghini maintains a strong reputation in its market and is among the first names mentioned in any conversation about supercars.
Porsche and Ducati
Another busy year for Volkswagen acquisitions was 2012. During the course of the year, the company finished the 100% purchase of the Porsche and Ducati brands. Continuing with the company's diversification strategy, the acquisition of Porsche added depth to the Volkswagen Group's portfolio of luxury vehicles. Whereas the acquisitions of 1998 targeted supercars and ultra-luxury brands, the 2012 acquisition of Porsche landed right between Audi’s professionals and Bentley’s billionaires.
The acquisition of Ducati, on the other hand, is diversification of a different type. By purchasing the Italian motorcycle manufacturer, Volkswagen Group added another product class altogether to its offerings. Ducati’s brand of stylish performance motorcycles is featured in racing circuits and has a strong following of enthusiasts around the world.
Skoda and Seat
In addition to its acquisition of major luxury brands, Volkswagen also acquired Seat and Skoda. The former is a Spanish made car competitively priced to the lower end of the market, and the latter is from the Czech Republic, also targeting the lower end, though with a wider range of products compared to Seat. Volkswagen Group acquired Skoda in 2000 after nine years of making progressively larger investments into the company. Seat is a Volkswagen veteran, being acquired in 1990 after being the major shareholder since 1986.
The Bottom Line
Volkswagen Group has grown into one of the largest automobile manufacturers in the world. The company has reached this status by pursuing a diversification strategy that has led to the acquisition of some of the world’s foremost luxury brands. With these acquisitions, the company has focused on delivering quality and performance in all areas of its business.