Segment by segment, VW goes after Daimler -- now in the US

For many happy years during Germany’s economic miracle, the competition among German carmakers was lively but genteel. Volkswagen AG provided affordable cars, Mercedes-Benz, part of what was then called Daimler-Benz, built solid luxury cars for the wealthy, and BMW catered to affluent people who wanted a sportier ride. But VW chafed under that arrangement, which gave short shrift to its engineering talents. Under Ferdinand Piëch, who went from Porsche to Volkswagen’s Audi subsidiary in the 1970s, Audi began pushing into the luxury segments.

In the first quarter of 2010, Audi did the unthinkable: it outsold Mercedes. Audi secured second-place ranking among global luxury brands in 2011, when it sold more vehicles worldwide than Mercedes for the full year. It’s now closing in on BMW, the leader. In the first five months of 2012, Audi sold 600,200 cars and SUVs, while Munich-based BMW sold 607,207 BMW-brand vehicles.

VW has already beaten BMW in the ultra luxury segment, where VW’s Bentley sells twice as many cars as BMW’s Rolls-Royce. Piëch also snapped up Lamborghini and the Bugatti marque and even developed a VW-badged luxury sedan, the Phaeton, after being appointed chief executive of the Volkswagen Group. Today he heads the company’s supervisory board.

Now, VW is eyeing Daimler’s top ranking in the global heavy truck business. Daimler sells trucks, vans and buses under the Mercedes, Freightliner, Western Star, Sterling and other brands. VW is expanding in this business, too, after acquiring Gerrmany’s MAN SE and Scania, a prestigious Swedish truck brand, in recent years.

Their fight is spilling over into the U.S. market. On Sunday, the Financial Times Deutschland reported that Volkswagen was considering buying a stake in Navistar International Corp., a struggling Lisle, Ill.-based truckmaker that counts activist Carl Icahn among its investors. VW didn’t comment, but its interest in Navistar has been rumored for at least a year, with analysts saying a deal would help VW compete against Daimler in the U.S. truck market. “Given their track record, their financial capabilities and experience, there’s little question that VW can be successful in the heavy-vehicle market,” says Michael Robinet, managing director at IHS Automotive. The rivalry among the Germans was perhaps never as friendly as it has been portrayed but it’s cutthroat now.