Badge engineering boosts carmakers market strategies

Source: The post Badge engineering boosts carmakers market strategies has been created, based on the article “What is ‘badge engineering’ in cars, how it helps customers, automakers” published in “Indian Express” on 6th January 2025

UPSC Syllabus Topic: GS Paper3-Effects of liberalisation on the economy

Context: The article explains “badge engineering,” where carmakers share vehicle platforms to save costs and widen their market. It highlights Toyota-Maruti’s success in India, offering similar cars under different brands, while some global partnerships, like Renault-Nissan, faced challenges. Badge engineering boosts carmakers market strategies

What is Badge Engineering?

1. Definition: Badge engineering involves car manufacturers sharing a vehicle design or platform, allowing them to sell essentially the same car under different brand names.
2. Cost Efficiency: By using shared platforms, companies avoid the high costs of developing a new model from scratch.
3. Market Impact: This strategy contributed to Toyota achieving its best-ever wholesale figures in FY24, with over 40% year-on-year growth in unit sales.
4. Consumer Choice: Though cars share platforms, aesthetic tweaks and brand perception influence consumer purchasing decisions, allowing for targeted marketing strategies.

What are the Benefits for Manufacturers?

1. Cost Efficiency: Sharing platforms reduces R&D costs and increases economies of scale.
2. Market Expansion: Maruti targets premium buyers through Toyota’s Innova; Toyota gains access to Maruti’s budget segments.
3. Increased Options: Toyota sells strong hybrid variants of Grand Vitara, while Maruti focuses on mild hybrids.

What are Examples of Failed Badge Engineering?

1. Examples of Successful Badge Engineering
2. Toyota-Maruti Suzuki Partnership (India): Toyota’s Taisor (rebadged Maruti Fronx) and Grand Vitara-Hyryder collaboration boosted Toyota’s FY24 sales by 40%.
3. Hyundai-Kia: Creta and Seltos share platforms but compete strongly.
4. Volkswagen-Skoda: Models like Taigun-Kushaq share platforms with distinct features.
5. Hindustan Motors Ambassador: Rebadged Morris Oxford (1957-2014).
6. Examples of Failed Badge Engineering
7. Renault-Nissan (India): Terrano (Duster) and Scala (Sunny) failed.
8. Aston Martin Cygnet: Rebadged Toyota iQ sold poorly in 2011.
9. Audi 50: A rebadged VW Polo discontinued after low sales.

What are the Challenges of Badge Engineering?

1. Consumer Rejection: Poorly differentiated models, like Renault Scala (Nissan Sunny) and Nissan Terrano (Duster), failed in India due to lack of uniqueness.
2. Flagship Exclusivity: Suzuki did not share Swift or Jimny, and Toyota kept Innova Crysta and Fortuner exclusive, limiting collaboration.
3. High Price Perception: Aston Martin Cygnet, a rebadged Toyota iQ, failed in 2011 due to a significant price jump.

Question for practice:

Examine the benefits and challenges of badge engineering in the automobile industry with examples.