Market Arrogance versus Market Orientation

In his guest article for the Frankfurter Allgemeine Zeitung (“Der Betriebswirt”, September 15, 2025, p. 16), Professor Martin Fassnacht, Chair of Strategy and Marketing at WHU – Otto Beisheim School of Management, examines the strategic missteps of German car manufacturers. His diagnosis: the industry’s lack of growth is not primarily due to exogenous shocks, but to a long-standing neglect of market orientation. “Over decades, a market arrogance has taken hold while key developments were slept through. Success was taken for granted,” Fassnacht writes.

From a marketing perspective, he criticizes strategically vague brand positioning and flawed product policies. Taking Mercedes as an example, he demonstrates why the luxury strategy announced in 2022 did not match the brand’s identity and market role: “How can a brand like Mercedes, selling two million cars a year, credibly represent luxury from the customer’s point of view?” For comparison, Ferrari, an iconic luxury brand, sold 14,000 cars last year. The result, Fassnacht argues, is diluted positioning and eroding profitability. Volkswagen, he adds, is operating “without a brand claim”; a successor to “Das Auto” is long overdue to provide orientation both internally and externally.

On product policy, Fassnacht highlights a double failure in electrification, particularly at Volkswagen under then-CEO Herbert Diess and at Mercedes: first, the trend was underestimated; later, it was overcompensated with hasty transformation slogans such as “Electricity first.” The issue, he argues, was not about moving too slowly but about realistically assessing the company’s capabilities and competencies in relation to the markets. As a positive counterexample, he points to BMW, which early on aligned its production processes so that different powertrains – combustion engine, electric, and plug-in hybrid – can flexibly be manufactured on the same line.

Misguided decisions in design and model naming further compounded the missteps: the EQS “in no way resembles an S-Class,” and Audi’s even/odd numbering logic was not understood by customers or dealers.

For the next stage of value creation, Fassnacht calls for a clear prioritization of the user experience: “Cars must become ‘digital feel-good worlds’, as already seen in China.” Key purchase barriers such as range anxiety and charging infrastructure must be addressed with long-term, target-group-specific communication campaigns: “Under no circumstances should these campaigns be overly technical.” He recalls the power of evocative benefit communication, such as the legendary Audi spot showing a 100 CS quattro climbing a ski jump, and raises the question of whether Audi still lives up to its claim of “Vorsprung durch Technik.”

Fassnacht also criticizes the shift toward direct sales via the agency model. Manufacturers, he argues, overplayed their hand by overestimating their organizational capabilities while underestimating the complexity of such a transformation. In practice, execution problems have already led the Volkswagen Group to reassess its distribution models. Responsibility, he notes, extends to supervisory boards: “How could the Mercedes-Benz supervisory board have endorsed the luxury strategy?”

Despite his sharp criticism, Fassnacht outlines a realistic path back to profitable growth. First corrections are already visible: Mercedes has abandoned the luxury strategy, discontinued the EQ sub-brand, and reduced design divergence between powertrains; the range and charging performance of German EVs such as the BMW iX3 and Mercedes-Benz GLC have improved; and VW is successfully selling EVs in Europe. The prerequisites – technological competence and internationally renowned brands – are in place. The decisive factor, however, remains a consistent return to market orientation: “If German carmakers commit to consistent market orientation, better times lie ahead. But only then.”

Professor Martin Fassnacht’s guest article "Die deutschen Autohersteller waren zu arrogant gegenüber dem Markt" was published on September 15, 2025, in the Frankfurter Allgemeine Zeitung (“Der Betriebswirt”, p. 16). The online version is available here (paywall).