VW shows faith in Bugatti with new concepts

Volkswagen wants to make sure this year isn’t the last chance to get a new Bugatti.

There are fewer than 20 left of the VW unit’s Veyron, a limited production line of 450 Bugatti cars that start at €1.46 million. Now VW is testing at least three different concepts for a successor.

VW is pumping cash into its most exclusive marque even as it plans cutbacks for its more terrestrial brands. The Veyron set industry records not just for speed, but also for losing money, according to estimates from Max Warburton, a Singapore-based analyst for Sanford Bernstein Ltd. The cost of developing the Veyron, introduced in 2005, means VW may lose €4.6m per vehicle over its life cycle, Warburton said.

“I have long struggled to understand the logic of expending this much time and effort on a Bugatti-branded product,” he said in an e-mail. “I totally get the point of building the world’s fastest car – it pushes the engineering boundaries, motivates the company and can be an image booster. But the image-boosting part is lost when it carries a brand that 95% of people don’t know is part of VW.”

NEXT GENERATION

The new Bugatti will vie for the world’s most affluent customers with Italy’s Pagani, McLaren’s street cars and the US-built Hennessey Venom GT.

The next generation will be lighter and, if tests are successful, could feature an engine as much as 25% stronger than the 1,200-horsepower motor of the current model’s most powerful version, according to the people briefed on the plans. At least one of VW’s concepts includes an electric motor to boost power and lower emissions, the people said.

Manuela Hoehne, a spokeswoman for Bugatti, said the company will give an outlook on a new model next year. She declined to comment in detail on the concept plans. VW design chief Walter de Silva told BBC’s TopGear the new model would be unveiled at the end of next year or early 2016 and will be “art.”

PREMIUM PROFITS

VW’s premium-car brands, including Audi and Porsche, contributed about two-thirds of the group’s first-half operating profit of €6.19bn. That’s one reason the company cites for investing in Bugatti: the ultra-high-end car shows people who might want to buy its other luxury brands what VW is capable of doing.

“Premium starts in the high-end segment,” Audi chief financial officer Axel Strotbek said at an event in Frankfurt last month. “You have to invest for this.”

Profits from Volkswagen, Audi and Porsche subsidise Bugatti, purchased in 1998 along with Lamborghini and Bentley nameplates under the tenure of then-CEO and current chairman Ferdinand Piech. VW doesn’t release financial details for Bugatti, and executives have said the costs are moderate compared to what their peers spend on prestige projects like Formula 1 racing.

“Bugatti boosts the technical knowledge for other VW group brands, so it’s difficult to measure this ultra-luxury marque purely in financial terms,” Roman Mathyssek, a Munich-based analyst at consulting company Strategy Engineers, said.