Why Volkswagen seeks to get rid of Bugatti, one of its most iconic jewels

Why Volkswagen seeks to get rid of Bugatti, one of its most iconic jewels
© CC BY 2.0 / Alang7 ™ / Render - Bugatti Chiron By Alang7 ™

The German car group Volkswagen (VW) is studying the possibility of handing over the Bugatti brand to the Croatian company Rimac Automobili, which specializes in designing high-performance electric cars.

In fact, if signed, it would be a barter agreement in exchange for greater participation of the German company in the creation of a European rival for Tesla. This move takes place just when there is a trend among automakers to electrify their vehicles.

Although the parties reached an agreement between September 7 and 13, this document has not yet been approved by a supervisory board, VW executives told the British magazine Car Magazine who preferred to remain anonymous. The transfer is expected to take place through the German company Porsche, which already has a 15% stake in Rimac.

In fact, Porsche “is in good company: other investors include Hyundai, Jaguar, Koenigsegg and Magna”, recalls Georg Kacher in his article for the magazine.

According to the media, this transfer would never have been agreed upon by the late former president of the group’s board of directors, Ferdinand Piech. Furthermore, if the supervisory board approves the deal, it is unlikely that Stephan Winkelmann will continue as Bugatti’s CEO.

Volkswagen no longer wants to spend its money and labor on so-called hobby brands acquired by Piech. Instead, all resources should be dedicated to funding the massive investment program in the future of motorsportselectrification, digitization and autonomous driving. And that’s why reaching the respective deal with Rimac – known for developing stellar technology for electric vehicles – sounds very beneficial, writes Kacher.

Rimac can be dubbed the little Tesla of Europe. Croats have made only a handful of electric hypercars in the past three years, while Elon Musk’s company has pulled more than 600,000 Model 3 and Model Y cars off the belt.

A Bugatti spokesman that is still part of Volkswagen declined to comment on reports of its handover to Rimac, but noted that the French luxury brand had made “a positive contribution” to the German group over the past two years. To make matters worse, the French manufacturer expects its sales volume in 2020 to “2019’s sales”.

“After all, Bugatti was his master’s favourite toy in a collection to which the Austrian patriarch had added such prestigious brands as Bentley and Lamborghini during the course of his reign,” he ironizes.
Bugatti may not be the only brand VW is getting rid of in the future. Lamborghini, Seat, Bentley and Ducati could meet the same fate.
“Unlike Piech, the current top management is quite obviously not that strongly attached to the prestigious crown jewels which are hard to handle and yield precious few synergies. On the credit side, analogue values like history, tradition and brand identity can be priceless assets in a conformist digital market”, highlights the author of the article.

Due to the pandemic, all negotiations with potential investors – banks, private equity companies, hedge funds – have come to a near standstill while the future of the global automotive industry is increasingly uncertain. Taking into account the huge price fluctuations in the market, the simple barter deal studied by Bugatti, Porsche and Rimac appears to be “a relatively low-risk business,” the journalist remarks.

According to the journalist, at the beginning of 2020, some 15 automobile companies were using Rimac’s technological know-how. It was a good result for a company that was founded by Mate Rimac in 2009 and which now employs more than 600 people.

“Our powertrain systems are the highest power density, and the highest energy density. If you need to have as much power in as little space as possible, you come to us,” the Croatian businessman told the media.