VW Has Big Plans for U.S. Sales
By Brendan Moore
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.
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.
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