The amount of disbelief and subsequent despair that filled the GM Authority offices this past Friday, after being told that GM’s Opel brand will be discontinued in Australia, was nothing short of towering. The brand’s operations were being shut down after less than a year of launching in the country — which itself seemed short-sighted, mis-calculated, and ill-advised.
No matter which way you look at it, 11 months is not enough to launch and subsequently develop a brand, especially one that — for all intents and purposes — is brand new to a market.
GM/Opel had planned to sell 15,000 cars in the first three years of entering the Australian market. In reality, it sold 541 units in 2012, and 989 units in the first six months of 2013, with profit likely being even more elusive. However, Opel only offered three models in Australia at the time of its demise: the subcompact Corsa (3 and 5 door), the compact Astra (3 and 5 door, plus wagon), and midsisze Insignia (sedan and wagon); the subcompact Mokka crossover being due to arrive in September, thereby expanding the lineup to four models.
But just as 11 months isn’t nearly enough time to properly develop a brand, three (of even four) models isn’t nearly enough to spark the interests of enough car buyers. The new and unknown nature of the Opel brand in Australia definitely didn’t help, either.
Adding insult to injury is the fact that Opel only had 20 dealers to sell the three nameplates across all of Australia. This amount pales in comparison to the amount of dealerships GM’s Holden brand has in the country. For the sake of comparison, there are 31 Holden dealers in Western Australia — one of seven Australian states — alone.
And as if the lines between the positioning of Chevrolet and Opel in Europe weren’t blurred enough, we were told that there was a considerable amount of friction between Opel and Holden (for all intents and purposes, the Australian-market Chevrolet) in Australia — further underlining the fact that there seems to be space for only one mainstream brand from one automaker, especially in an über-competitive market like Australia. Of course, fans of Kia and Hyundai would likely dispute that statement.
Lack Of Strategy
Ultimately, all existing Opel units sitting on dealer lots will be significantly discounted, and owners of current Opels in Australia will likely be visiting a Holden dealership to service their vehicles. But having digested the development for a couple of days, we’re left with the following observations:
- Why was the launch of Opel approved in Australia in the first place given the possibility of competitive moves by rivals? If the decision was ultimately a mistake, how will the automaker avoid repeating it in other markets in the future?
- By dropping the Opel brand entirely, GM seems to have had no hope of overcoming the obstacles it encountered in the venture.
- Opel is already losing money in Europe, so why not give the brand give more time to grow and develop in Australia as well, even at a loss?
Ultimately, GM’s effort to bring Opel to Australia seems rather half-assed — especially when the exported units presented an opportunity for GM-Opel to increase European vehicle output in the face of grave production overcapacity and slumping automotive demand in the region.
Update: After publication, Opel Australia spokesperson Michelle Lang emailed us the following statement:
Opel Australia will cease operations and will commence winding down its network immediately.
In order to be competitive, Opel Australia would need to follow recent competitor price reductions, and significantly reposition the price of its core volume models. These changes, combined with the continued investment required to ensure brand awareness, result in a business which is not financially viable for any of the parties involved.
Opel will now begin analysis together with Holden regarding the potential for future Holden- badged niche product, in order to ascertain if opportunities for individual carlines exist.
Opel Australia is working closely with employees, dealers and suppliers to conduct this closure process in an orderly and responsible manner. As always, customers are of the highest priority, and Opel Australia will remain in close contact with them, to ensure all on-going obligations to these customers are met.
Customers are encouraged to contact the Opel Customer Assistance Centre on 1800 993 677 with any concerns or questions.
To that end, we feel compelled to make the subsequent follow-up comment: we’re certain that, in deciding to bring Opel to Australia, General Motors and/or Opel conducted some form of business analysis as it relates to costs and threats. Such an analysis should have most certainly included the costs associated with launching Opel in a market unfamiliar with the brand, along with various circumstances, such as the threat of price reductions by competitors. That’s just a grave reality business decision-making, one that we can only assume is present at a global powerhouse of a business such as General Motors — if not internally, then perhaps externally in the form of contractor-style analysts and business intelligence firms.
This allows us to reach the following conclusions: GM-Opel already knew of costs associated with launching Opel in Australia (“continued investment required to ensure brand awareness”), so the only variable that actually changed since the brand’s Aussie launch is the “recent competitor price reductions”; these should have been part of the business forecasting scenarios examined by the automaker before entering the market. In that regard, we stand by the analysis that the determination to launch Opel in Australia was premature, for whatever reason — be it bad business data, an incomplete analysis of possible business scenario, poor business intelligence processes, or anything in between.
As an aside, perhaps Opel Australia could have found a way to differentiate itself from the competitor(s) that had reduced prices… in other words, let’s not forget the power of a brand — especially one that’s brand new to a market, and whose image hasn’t yet been tainted, defined, or established.