Seat boss Luca de Meo
The Spanish carmaker is on an expansion course.
(Photo: Seat)
If Luca de Meo In Madrid, he is hovering above things: Seat’s capital office is on the 34th floor of the Torre Cristal office tower in the north of the city. On the day of the interview, the rain clouds hang so low that you can not see the floor when you look out the window.
De Meo assures, however, that the foggy view is by no means a symbol of Seat. After completion of renovation, the direction is clear: The company wants to expand with new models to South America and North Africa and increase the return.
After many years of losses, Seat 2017 has achieved the best result of its history. Nevertheless, the return of 1.9 percent was well below the industry average. Why? The cut for mass producers is between three and five percent. We are approaching this normality. So far our market is limited to Western Europe, so we try to sell outside of Europe to gain economies of scale and improve margins.
Vita by Luca de Meo
What is your goal for the margin? I do not want to call any internal goals. But basically, we want to be as profitable as our competitors. We adopt a lot of technology from VW, but of course we pay for it. Sometimes that’s an advantage, sometimes not. But it does mean that Seat can not be compared one to one with competitors doing everything themselves.
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For the Seat sister Skoda is exactly the same. But their margin is 9.7 percent. There are several reasons for this. Skoda is self-sufficient as a seat and also produces engines and manual transmission. In addition, labor costs are lower in Eastern Europe. And Skoda has put on a more profitable segment than Seat. In the past, we’ve mostly been limited to small city cars, but we’re changing that. We are now also building premium cars and SUVs. The return on an SUV is twice that of a Seat Ibiza.
So you assume that VW holds on to Seat? Why are you asking me that? That’s not fair. We’ve been growing for five years and at the moment stronger than most of our competitors in Europe. The brand has a lot of potential, and the VW Group can benefit from us: seven out of ten of our buyers are new customers to the group, and after a seat they may buy an Audi or a VW Touran. Seat is the gateway for new customers of the VW Group.
They have the youngest customers in the industry. How old are you on average? A new car buyer in Europe is on average 53 years old, our customers are ten years younger.
Spanish VW subsidiary: Seat plans model offensive
They said they are targeting new markets beyond Europe. What are these? We look at Latin and South America, where the VW Group is so far barely represented and where we as a Spanish brand have an advantage. We also want to tackle the North African market, which is only an hour’s flight from Spain.
How far did the plans go? A few months ago, we built an assembly plant in Algeria. We now want to work more with local suppliers and expand the location.
Do you see North Africa as a promising sales market? I think so. There are many and especially young inhabitants. In Algeria, 49 percent of the population is younger than 15, which is great.
Seat is launching a big SUV this year, but it’s being built in Wolfsburg. Why? We do not produce 200,000 of them, but much less. And for that it would not be economical to build a new platform at Seat in Martorell. The pays off only from 150 000 cars per year. I’m happy about choosing Wolfsburg because it also has a psychological component: The colleagues in the head office see a seat every day.
That’s a joke, right? No, that makes a difference. For example, in Martorell we feel very connected to Audi because we produce the A1 here. That welds the teams of the different brands together – and that’s important in a large group. Seat has always been on the edge of the Empire with its problems, but now we have a good image and produce a model right in the heart of the group.
You mentioned the lower wages in the Czech Republic. In Spain, politics and trade unions call for wage increases after the crisis. Is that a danger to the location of Spain? Basically, in the car industry, the level in Eastern Europe is more akin to that of the West. At Seat, we have a framework contract until 2020 that links wages to the company’s success. If we continue to grow and make profits, I have no problem paying higher salaries. In addition, we invest four to five times as much as the industry in continuing education.
Why? The industry is developing so fast that half of its employees will do completely different jobs in 10 to 15 years. We have therefore agreed in the collective agreement that our employees sacrifice their private time for retraining and we offer them packages with which they can make a degree as experts in 3D printing or in robot programming.
In 2017, Seat invested ten percent of its revenue in research. Why so much? We are in a phase of development and growth and have to design projects to ensure that we are competitive with the new technologies.
They have their own research center in Martorell near Barcelona with 1200 engineers. Does not that duplicate with the research centers of VW? We focus on specific projects that we want to become so good that the group also benefits from it. This includes connectivity. We are a young brand and the car has to be digital, so we want to be very good at it. The results will probably be seen in one and a half years when the new Leon comes out. In addition, we are working on solutions for natural gas drives for the entire VW Group.
When does Seat build the first self-driving car? I doubt that will be relevant to a brand like Seat. For a premium brand like Audi, shoppers like to pay more when they receive the latest gadgets. But the technology for self-driving cars is still very expensive.
So it will remain a niche, I do not believe that in ten years’ time we all read the newspaper in the car instead of driving it ourselves. Google would like to turn driving time into media time, but that does not necessarily interest us as a manufacturer. Where I see a future for self-driving cars is in car sharing, when the cars themselves can drive to the customer and do not need a parking space. We recently bought car sharing provider Respiro to learn how this market works.
They said the other day that they want to go to the Champions League with Seat. To whom do you want to catch up? Our natural competitors are the Italians and the French, exactly in their markets we are still weak. So far, the brand Seat did not have a good reputation there. But now we have no old-fashioned models and want to gain market share in Europe. We also want to re-enter the Norwegian market, which will be important for e-cars from Seat. We do this with new concepts, such as direct sales via the Internet, because we do not have distribution channels there.
Did you make the sports car line Cupra your own brand, because the image of Seat is problematic? Seat had image problems. It’s changing, but it’s not over night. Building a new brand is faster and cheaper than changing the image of an existing brand. So that was a very pragmatic decision.
A clean diesel engine costs about 1500 euros more – money, which is significant in a small car. Does the diesel have a future at Seat? I do not see the diesel in small city cars, but we will continue to offer it. We will see many different drive technologies in the market over the next five or ten years. I do not think the change to electric cars is that fast.
How did the crisis affect the independence of Catalonia on Seat On the day of the first general strike after the independence referendum, we produced 240 cars less because a truck with dashboards did not come. But we were able to catch up on the following Saturday. I do not have the intellectual arrogance to interfere in these political issues. I’m a manager and I have to make sure Seat works. We thanked everyone for this attitude, because the situation is difficult enough.
Has the uncertainty affected Seat’s investment? We have an investment plan until 2019 that works normally. And right now we are working on the plan for the time after.
Theme: Volkswagen
For the time being, are you waiting for new investments – I do not want to comment on that. As I said, I will not interfere in the debate.
The VW Group is being rebuilt massively. For some time there are rumors, you could become Audi boss. Would you like that? I really enjoy the project in Spain. I’m happy here, we have big plans and I do not listen to such rumors.
Mr. de Meo, thank you for the interview.
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