When Volkswagen announced that it would attempt to triple its US sales between 2009 and 2018, my fellow Daily Kanban editor Bertel Schmitt greeted the announcement with a picture of flying pigs. Long a dominant force in Europe and Asia, Volkswagen has long struggled in the profitable US market, frustrating the firm’s efforts to become the king of the global auto game. But with a new line of lower-cost sedans and the firm’s first US plant since the Westmoreland disaster, VW put some real heft behind its latest assault on the most lucrative (if no longer the largest) market for cars.
And as of the end of last year, it almost seemed like the goal was within reach; with 438,133 US VW-brand sales in 2012, Stefan Jacoby’s long-ago 2013 goal of 400k-450k sales and a profit was as good as achieved. But with 2013 winding to a close with the auto market running hot on strong credit markets, VW’s goal seems to have suddenly evaporated. With 342,000 units sold through October, VW would need back-to-back record months to even crack 400,000 units.
Automotive News [sub] reports that, whith a flat spot in VW’s product cadence, dealers are getting angry. And sure enough, a look at VW’s core model sales reveals that the brand truly is on the “roller coaster” one dealer describes.
Having endured semi-premium niche status for decades, the new, cheaper Jetta and Passat sedans were supposed to position VW in the midst of the mainstream market. And, as the graph shows, they certainly made a major impact on the brand’s sales, especially the larger US-made Passat. For a time. Unfortunately moving downmarket hasn’t proven a consistently winning strategy for VW, bringing in a strong wave of buyers which quickly turned to dramatic volatility and ultimately an undeniable downturn. Both are still selling stronger than their predecessors, especially Passat, but neither has proven it can play in the 15k-30k monthly volume level that defines mainstream C- and D-sedan demand.
VW of America’s response to criticism of its recent performance has been that recent results are building a foundation of long-term success, and even minor improvements in sales volume support that perspective… as long as the momentum continues to head up. The challenge VW faces now is a surprisingly rapid dropoff in its aging products that suggest it may have taken too strong a hand in its move downmarket, trading its cult-like following for a more fickle value-buying customer that is abandoning the brand for newer products. Now that everyone who wanted a VW but couldn’t afford one has one, its no longer clear how VW will expand its brand appeal in ways that will put Jetta next Civic and Passat next to Camry on mass-market shopping lists.
A new, more affordable Tiguan will help, as would a larger affordable SUV that could be made at a US plant. A limited and marketing-oriented launch of Diesel Amarok pickups could even bring some new buyers into showrooms. But if VW faces continued demand issues, and especially if it finds itself forced to accommodate the UAW at its Chattanooga plant, Volkswagen could find itself at square one in the US market… again. If nothing else, 800,000 units volume by 2018 remains firmly in “when pigs fly” territory.