Why in news?

Nearly half of Toyota Kirloskar Motor's car sales in India over the past year were rebadged Maruti Suzuki models, driving Toyota to its highest-ever wholesale numbers and over 40% year-on-year sales growth in FY24.

The success of "badge engineering" as a sales strategy highlights its growing popularity among carmakers, with expectations of continued use in the coming year.

What’s in today’s article?

• What is Badge Engineering?
• Badge Engineering – early origin and uses
• Benefits of Badge Engineering
• Collaboration at the Platform Level

What is Badge Engineering?

• About
  • Badge engineering involves the sharing of a vehicle platform or an entire model between different car manufacturers.
  • This allows at least one of them to avoid designing or engineering a new model from scratch.
• Key Features
  • Shared Elements: Cars can share platforms, design cues, engines, or parts.
  • Aesthetic Tweaks: Some design elements are modified to align with individual brand identities.
• Degrees of Rebadging
  • Minimal Changes: Simple badge swaps with little alteration.
  • Extensive Customization: Completely distinct cars built from the same platform.

Badge Engineering – early origin and uses

• Early Origins: GM's Pioneer Move (1909)
  • General Motors began sharing chassis and platforms among its brands, marking one of the earliest examples of badge engineering.
  • GMC trucks were rebadged as Chevrolet models, while platforms were shared with brands like Oakland, Oldsmobile, Buick, and Cadillac.
  • Premium brands like Buick and Cadillac received enhanced exteriors and interiors for a luxurious appeal.
• India’s Early Badge-Engineering Success: Ambassador
  • The Hindustan Motors Ambassador (1957–2014) was one of India’s first successful badge-engineered vehicles.
  • It was essentially a rebadged Series III Morris Oxford.
• A Global Attempt Gone Wrong: Rover CityRover
  • The Rover CityRover (2003–2005) was a rebadged Tata Indica marketed by MG Rover in the UK.
  • While the Indica succeeded in India, the CityRover failed in the UK, criticized as a poorly executed attempt to prevent MG Rover’s bankruptcy.

Benefits of Badge Engineering

• Cost Efficiency through Badge Engineering
  • The auto industry benefits from economies of scale by producing similar models, sharing costs, and spreading investments.
  • This approach keeps overheads low and increases production volumes.
• Consumer Advantages and Buying Decisions
  • Buyers consider factors like brand familiarity, warranty offers, and dealership accessibility.
  • Badge engineering allows carmakers to position themselves as premium product builders, justifying higher price tags.
• Expanding Customer Reach
  • Maruti Suzuki: Targets premium segments with rebadged models like the Invicto (Toyota Innova Hycross).
  • Toyota Kirloskar: Taps into the lower-end market with models like the Taisor and Glanza.
• Retaining and Upselling Customers
  • Maruti Suzuki retains customers by offering upgrades as they move up the price bracket.
  • Toyota provides multiple options in segments where it has traditionally struggled, such as lower-end vehicles and CNG-equipped models.

Collaboration at the Platform Level

• About
  • Cross-brand partnerships sometimes occur during the early stages of car development, focusing on shared platforms.
  • Unlike badge engineering, these partnerships result in more differentiated products.
• Examples in the Indian Market
  • Hyundai and Kia:
    • Models like the Hyundai Creta and Kia Seltos, or Hyundai Venue and Kia Sonet, share platforms, engines, and gearboxes.
    • Despite shared underpinnings, they differ significantly in design and features.
    • The two companies compete fiercely despite their collaborative roots.
  • Volkswagen and Skoda
    • Partnerships are evident in models like the VW Taigun and Skoda Kushaq, or VW Virtus and Skoda Slavia.
    • While they share basic platforms, differences exist in design, ground clearance, engines, and gearboxes.
• Key Feature: Competitive Independence
  • Although these partnerships originate at the development stage, brands ensure individuality and compete independently in the market.

Success and Challenges of Badge Engineering

• While Toyota and Maruti Suzuki's partnership has been highly successful, other collaborations have not fared as well.
• Unsuccessful Partnerships
  • Renault and Nissan:
    • Nissan’s Terrano (a rebadged Renault Duster) and Renault Scala (a rebadged Nissan Sunny) both failed to gain traction.
• Flagship Models Kept Exclusive
• Some popular models, such as Suzuki's Swift and Jimny, and Toyota’s Innova Crysta and Fortuner, have been excluded from badge engineering partnerships.
• Luxury Failures:
  • Aston Martin's Cygnet (a rebadged Toyota iQ with premium features) flopped due to poor sales despite its high price.
  • Volkswagen and Audi - The Audi 50, essentially a rebadged VW Polo, was discontinued despite the Polo’s widespread success.
• Lessons Learned
  • Badge engineering works best when consumer preferences and brand positioning are carefully aligned.
  • However, it can fail when the rebadged product is misaligned with the target market or priced unrealistically.