What is going on at TAG Heuer? (CH-80 production stopped, layoffs, repositioning)

The last Baselworld edition seemed to be a good one for TAG Heuer. We saw the introduction of a brand new, in-house developed and manufactured, chronograph movement, named calibre CH80 (initially introduced as calibre 1969). And there was a new, and very good looking, TAG Heuer Carrera that was equipped with this new in-house movement. Shortly after Baselworld we already heard that it would get a few design changes, which we showed you here. However, the time of celebration is over. First we heard that the launch of calibre CH80 was postponed. Then, we read that TAG Heuer had to let some personnel go, so we wondered: what is going on at TAG Heuer?

We already told you that we were impressed by the new Carrera CH80 – a truly inspired watch, with an in-house movement. The design was great, the specifications of the movement too. It was called to a great success. But in the middle of this celebration, the LVMH group and Jean-Claude Biver (head of watches for the group and previously CEO of Hublot) decided differently. To find out what’s going on we have to get back to the very beginning.

The LVMH Group owns (among others) three watch brands: Hublot, Zenith and TAG Heuer. It is known to be one of the largest (if not the largest) luxury groups in the world, and also owns Louis Vuitton, Dior, Moët & Chandon, De Beers Diamonds, multiple perfume brands, plenty of luxury clothes brands and more. Because of its size, LVMH has a group strategy, meaning that the brands should not cannibalize each other. Here is the main issue of what’s happening at TAG Heuer.

Short before Baselworld 2014, TAG Heuer announced a new in-house chronograph movement, and during Baselworld improved specifications were announced. Around the same time a new production plant, in Chevenez, specifically build for the manufacturing of the new calibre CH-80 was opened. New manufacture, new movement… huge investments. At the time that sounded like very good news for the industry and for watch lovers.

However, we must not forget that the LVMH group owns more watch brands. One of those brands is the creator of a very famous movement, that once was the world’s first integrated automatic chronograph: that brand is Zenith and the movement is the iconic El Primero. By launching the Carrera CH-80, TAG Heuer would be in direct competition with Zenith and its El Primero movement. Both would be in the 5k – 10k market segment and that also the segment where brands like Omega and Rolex are. Thus, huge competition, both internally and externally.

Jean-Claude Biver is no stranger in the watch industry. He relaunched Blancpain during the 1980’s (and later sold it with a huge profit to the Swatch Group), subsequently he joined the board of directors of the Swatch Group and was in charge of Omega, and in 2004 he resurrected Hublot, which grew from being a small brand to a truly successful story. Now that Hublot is part of LVMH, Jean-Claude Biver is head of the watch department and it looks like he’s creating a proper group strategy. After seeing the potential danger of competition between TAG and Zenith, he decided to rigorously stop the investments and production of the CH-80. The reason is simple: TAG was covering a very large market segment (with quartz watches from close to 1k to 100k+ spectacular chronographs) and was not doing very well. The cure: TAG Heuer has to return to its ‘natural’ market segment, ranging from 1,5k – 4,5k Euro. Since it would not be possible to deliver watches with calibre CH-80 within that price bracket, production simply was stopped.

In a recent interview Biver said he sees the three brands, based on average pricing, positioned like this:

• Entry level: TAG Heuer, priced between CHF 1,500 and 4,500
• Mid range: Zenith, priced between CHF 5,000 and 15,000
• High-end: Hublot, priced over CHF 15,000

What does it mean for TAG Heuer? First of all, the new Chevenez manufacture will be used for other movements, such as the Calibre 1887. Then, 46 employees have been fired and 49 others are temporarily unemployed. The brand will only focus on watches, and stop activities related to their luxury smart-phones and leather goods. But that also means that TAG Heuer’s R&D department, responsible for the creation of the Microgrider and Monaco V4, will also be affected. All these impressive concept-watches, and very expensive limited editions will no longer be a priority anymore – it seems logical that production will be completely stopped.

What can we expect from TAG Heuer at Baselworld 2015? Well, the production of the Calibre 1887 will certainly continue. The movement (based on a Seiko ébauche) is cheap enough to manufacture in order to keep prices under € 4,500 Euro. Using another movement from within the group, the Zenith El Primero, would not be an option, because prices would increase to north of the € 4,5k limit. Calibre 1887 has been around for some years now and has proven to be a reliable and durable movement. We expect to see more chronographs with this movement, and we also expect more watches with affordable movement from third parties like Soprod, Sellita and the likes. Both for 3 hands watches and chronographs, priced south of calibre 1887 based chronographs. The brand will return to its former market segment, focussing on younger people, more first-time-buyers and less purist watch aficionados. Last but not least, with such a strategy, TAG Heuer could easily be the brand for a smart-watch and Biver already confirmed that TAG Heuer is actually working on something.

Concluding words. We at Monochrome Watches are probably too much watch-minded, too much purist, too much watch aficionado, and therefore we think that this is not good news. However, IF the repositioning is made intelligently – meaning that the DNA of the brand is kept, with watches inspired by racing cars, like the 1970’s Autavia, Camaro or Monza – it could also bring a breeze of fresh air to the collection that is now mainly focused on ONE single watch, the Carrera. We’ll have to wait until Baselworld next year to find out what’s going on at TAG Heuer.