VW Has Big Plans for U.S. Sales

Their long-term sales projections require VW to almost double their sales in the U.S. by 2011

By Brendan Moore

05.06.2007

Volkswagen has ambitious goals for increased sales worldwide, and the U.S. market is part of those global plans. VW plans to increase its sales in the States to 400,000 units annually by 2011. Considering that Volkswagen sold only 235,140 units in the United States in calendar year 2006, and, that 2007 is widely predicted to be a flat year for sales in the U.S. for just about every automaker, 400,000 sales in 2011 looks to be problematic. Add in the fact that the U.S. new-car market is more fiercely competitive than it’s ever been (which is saying a lot) and the fact that everyone else is predicting healthy sales growth in an overall market that is forecasted to grow only slightly in the next five years, and suddenly the claim of 400,000 units looks a bit fantastic. It is impossible for every manufacturer to grow in this projected market climate and so any growth must come at the expense of another car company’s shrinking sales.

But, to their credit, VW is nothing if not confident that they will reach their goal of 400,000 units. In interviews with several publications, Adrian Hallmark, EVP at Volkswagen and the brand head for VW in the U.S. has recently stated that VW occupies an enviable space for a volume-production car company; above the mass-market giants like the domestics and the Japanese, and right below the many luxury nameplates sold in the U.S. VW intends to exploit this “sweet spot” in the market as much as possible within the next five years, and in doing so, extract as many sales as possible from this unique market position.

2008 VW Tiguan
VW is not foolish enough to count on market positioning as their main driver for sales growth in the United States, but instead, points to the launch of several additional new models in 2008 and more new models in years subsequent that will propel the company towards their lofty sales goals. In 2008, VW will launch a minivan, the Tiguan small crossover, the CC Project ( a Passat-based 4-dr coupe that will surely get another name), and clean diesel TDI versions of the Golf, Jetta, and Jetta Wagon. The new Scirocco may also show up in 2008, after first being rejected by VW in the U.S a few weeks ago, and now, as of a few days ago, penciled into the U.S. lineup. There are also two new mystery models in the pipe that are scheduled to appear in the next five years. Whether these are low-end or top-end cars is unknown, but VW promises that both vehicles will be exciting additions to their respective segments. Lastly, there is a contentious internal debate regarding whether all VW models should be offered with either the TDI engine or 4-Motion (VW’s all-wheel-drive system) as an option. There is a large faction that wants both options offered on every vehicle Volkswagen sells in the United States. If this happens, it effectively creates more models within the primary models, as the usage preferences (and therefore buying preferences) of TDI and 4-Motion buyers tend to differ from regular buyers.

What VW said they were going to bring out – the VW Microbus concept from a few years ago.

Just as an aside, if you’re holding your breath waiting for the updated version of the Microbus, you can exhale now. Volkswagen says it is definitely not happening and the only thing in the VW line resembling the beloved Microbus is the new minivan which was jointly developed with Chrysler and will be built in a joint venture with Chrysler. Bad decision from this writer’s point of view, but I’m sure there is a PowerPoint somewhere at Wolfsburg that illustrates the genius of rolling out a VW-badged Chrysler minivan in a market where other manufacturers have abandoned the minivan completely.

So, will this sales goal for 2011 be met?

Boy, that’s a tough one. It’s not as if the other car companies are going to be standing around with their hands in their pockets in the U.S. while VW is trying to get all of this done. They’re going to be trying just as hard as Volkswagen to improve their sales and their market position in the U.S. From a profit perspective, VW says it can charge anywhere from 5% to 10% more than Toyota, Nissan and Honda, etc. in the same segment because prospective buyers value the German heritage of VW higher than what the Japanese cars bring to the table, but VW’s production cost differentials on most of their models are higher than 10% compared to their Japanese competition. To offset this, VW can build more of their U.S. market cars in Mexico, where VW has tremendous unused capacity, but then the rationale for that price premium starts to ebb away with some buyers.

But Volkswagen’s biggest problem in terms of making their numbers may not be the Japanese car companies. Instead, the wildcard in this calculus may be what the domestic auto manufacturers do in the next five years. GM is not the pushover it was in passenger cars, and Ford looks as if it is going to be a much tougher market force in cars as well in their near future.

To wit, General Motors is bringing over Opels (undiluted) as Saturns in model year 2008. Opel and VW fight it out like pit bulls in Germany, and Opel has been winning a lot of those battles lately. It is not unreasonable to believe that some prospective VW buyers will get their heads turned by the excellent Opel/Saturn models for sale here in the States. These are very good German cars. GM is also bringing over the Holden Commodore from Australia, which will be sold here as a Pontiac, and has gotten excellent reviews in the rest of the world. It will be priced like an expensive Jetta or an inexpensive Passat, take your pick. And, finally, GM’s new Saturn Aura and forthcoming Chevrolet Malibu should give the Jetta and Passat lineup some fits as well.

Ford is going to bring over the wonderful Focus S-Max and the Mondeo from Europe, and possibly the new Ford Falcon from Australia in the next three years. All three are vehicles that post healthy sales and garner great reviews on the global stage.

And Chrysler? Who can say what Chrysler will do in the next five years under its new, as-yet-unknown owner? They are the wildest of the wild cards.

And then, of course, there are the Koreans. And the Chinese. And the other European brands poaching VW’s turf, like Volvo with the C30 hatchback, BMW with the 1-Series, Saab with the new 9-3 and 9-5, and maybe Alfa Romeo shows up with their attractive small cars.

I think VW has a big hill to climb in terms of their 2011 sales goals. It can be done, certainly, but everything would have to go right for them. They cannot put a foot down wrong anywhere.

COPYRIGHT Autosavant.net – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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9 Comments

  1. GM has never made anything worth buying, same with Ford, so that’s not going to hold VW back. But cars from the other Europeans or a big hit by one of the Japanese could really throw their plans off big-time.

  2. GM and Ford have never made anything good? What world do you live in?

  3. As a big VW fanatic, I hope we have a lot more VW cars to buy in the next few years, but realistically it’s hard to see how their going to do it. I just don’t see those kinds of sales increasess for them.

  4. I would DEFIINITELY take that Microbus. Very cool. I wonder if the Chrysler clone will have that body on top of the Chrysler minivan platform?

  5. Somone at VW is smoking weed. Don’t see how these numbers are going to happem. I’m a supporter of VW, but this seems like somoene’s pipe dream.

  6. Volkswagen’s got some great cars coming, and more stuff we don’t even know about. They’re not idiots and if they think they can make 400,000 they must have good reasons to think so.

  7. Would “unfounded optimism” count as a good reason?

    As the article says, it’s not like VW’s competitors are sitting still. Everyone is trying harder and harder, rolling out new models and improving existing ones, in hopes of getting a larger slice of a pie that isn’t growing.

    400,000 units is basically a year’s worth of Toyota Camry sales (448,445 in 2006). VW didn’t sell more than 100,000 units of any one vehicle in 2006 except for the Jetta (103,331 units) and their total US sales were 329,112 for 2006. I just don’t think it’s feasible in such a short timeframe.

  8. Has been an VW enthusiast for years and I think, reaching their goal of 400,000 units is somewhat very impossible to achieved with their current status on sales for the past years… Maybe if they had improved their products such as the VW fuel injection, etc and customer relation trough services offered by their car dealers maybe I can strongly agree with Adrian Hallmark statement of reaching the goal…

  9. Eeeegad! I love some of VW’s designs both past and present, but c’mon… REALLY? Hard to imagine they are the only player in that ‘sweet spot.’ It’s not like Volvo or Audi are staying still. BMW/Mini is stepping up. What with the new Morris Traveller model?

    At the risk of sounding like a cynic… If VeeDub couldn’t manage bigger #’s in the last few years…
    What makes them think they will in the next few years as (I agree) the competition might get even MORE fierce. Granted, the newest GTI gets high praise- especially from owners, but I don’t see these numbers becoming a reality either.

    Players like Fiat coming back? Brilliance? Even some hot new GM models might be coming? Plus, Toyota/Lexus and Honda/Acura are posting VERY solid sales… Your points are all well founded IMHO.

    I think they might need that Microbus AND the Scirocco to BOTH help revive the brand into new design leaders. If they pull off their projected numbers, hey I’ll applaud them. Cheers.

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