Badge engineering would appear to be a win-win for carmakers. Beyond production and delivery of restyled components, it's cheap to produce the same vehicle with largely cosmetic changes. It can also expand a new model's potential customer base - Buyer A wouldn't want to drive a car from Brand X, but Brand Y is worth consideration.
The VW up! citycar is a case in point, though this particular example combines target price with brand affiliation. If a customer isn't prepared to pay a premium for the Volkswagen version, perhaps the lower-priced Skoda or Seat is more tempting? Benefits aside, the other way customers can view this strategy is as a cynical marketing exercise. Before the Volkswagen Group, many have tried the same strategy, setting precedent that bears examination.
General Motors, Ford and Chrysler were the first to experiment with badge engineering on a large scale. Yet for every positive example, such as the Chrysler Voyager, Plymouth Caravan and Dodge Town and Country minivans, there are many more failures - although GM could justify the Chevrolet Cavalier-based Pontiac Sunbird and Buick Skyhawk, the foolhardy decision to glue a Cadillac Cimarron badge onto the same J-car platform haunts the company to this day.
Even when a car is engineered above and beyond the source model, such as the Ford Mondeo-based Jaguar X-Type, the reaction of the buying public to the new model cannot be accurately predicted. Although the X-Type received generally good reviews in the motoring press, customers were well aware of the car’s origins and were unhappy to pay Jaguar money for what was considered a dressed-up Ford.
In fact, the number of times badge engineering has done more harm than good makes it a decidedly dangerous strategy. During the 1980s, the decade in which American carmakers took the practise to its extreme, the argument was that they could not finance development of individual models for each brand. With that in mind, was the decision to move away from such obvious badge engineering the beginning of the end for Pontiac, Oldsmobile, Plymouth and Mercury, which had few original models?
Badge engineering has a better chance of success when cars based on the same architecture are sold in different regions. Take for example the Opel/Vauxhall Insignia and the Buick Regal. Not only do American buyers ‘in the know’ appreciate the European ties (Buick itself has a sports heritage, going back to the Grand National edition of the '80s Regal), but if you live in North America and want a sporty Buick, this is the only way to get one.
Returning to the Volkswagen up!, it could be an opportunity missed. While the VW Polo, Seat Ibiza and Skoda Fabia all use largely the same platform, they are distinctly different cars. The up! and its derivatives are not. If it proves to be that customers prefer brand engineering rather than badge engineering, the similarity between these vehicles could cause more problems than it solves.