Some time in June, somewhere in this great land of ours, some person bought a lone VW Passat sedan—and that was it for the month for Volkswagen's midsizer. Flash forward to July, with the 2012 Passat starting to trickle into dealerships, and volume took a healthy jump northward of more than 1,000 percent, with 1,183 of the re-envisioned Passats delivered. There's a good likelihood we'll be seeing similarly massive growth for the car through the rest of the year, too, both because VW sold so few Passats last year and because the new car is uniquely tailored to scoring an increased number of customers in today's marketplace, and I don't mean just because it's been redesigned, re-priced and re-contented specifically for American customers.
I'm also thinking that market conditions will help accelerate and focus a change in customer expectations that has been building for a while now on the car side. The short story: Generally speaking, fuel-efficiency concerns—from the automakers and the public alike—are pushing people into smaller-sized cars, but the perception that bigger is better is still strongly ingrained among buyers, and the reality that bigger is more profitable is still the case for most automakers.
So even though the overall trend is for smaller cars, the concept of a "premium-ness" hierarchy in which vehicles get "better" as one moves up to bigger segments won't be changing any time soon. It's just that all the segments are sort of bumping up in quality and features, so that today's subcompacts are as well-equipped (or better) than yesterday's compacts, with today's compacts filling the place previously held by midsize sedans, and the current midsizers acting as each automaker's flagship sedan. Significantly, this also helps explain the success of brands like Ford and Chevrolet, who are raising ye olde bar in terms of what folks get in—and the amount they pay for—vehicles that used to be inexpensive.
Now, this bit of analysis certainly doesn't apply to everyone, but it does give a pretty good idea of what's going on among the mainstream brands, as well as those like VW that want to become mainstream brands.
The Volkswagen Advantage
What will especially help VW in this scenario is that, in theory, it can do things the easy way: Because it already has a reputation as a semi-premium brand, its new strategy of reconfiguring the Jetta and Passat "down" to the level of their competition creates a more attractive prospect for buyers, who are getting access to that reputation at a lower cost than before. Customers of brands like Chevy and Ford, on the other hand, are in the position of paying more than they might have usually expected for their vehicles, although, just to be clear, those new vehicles are worth their higher prices.
Which helps explain why the Jetta had another triple-digit gain in sales in July, selling 14,513 units for a 120.9 percent increase. That's about 10,000 fewer than the Chevrolet Cruze achieved last month, but a mere 376 sales behind the Ford Focus. True, one of the reasons for the Focus' relatively tough month was a production issue with its dashboard that is hampering supply, but the numbers are the numbers. The Blue Oval needs to iron out these wrinkles ASAP to hold onto its momentum in the suddenly hot compact segment, and also to help solidify its existing lineup before it has to reboot the Ford Fusion.
Time for the Next Mid-size Makeover
Yep, even though it seems like just yesterday that the redesigned Hyundai Sonata went on sale and shook up the midsize segment, the next new generation of midsizers is already on its way to complete the revolution the Sonata started. The Passat is here and soon will be followed by an all-new Chevrolet Malibu that looks like it will be the class of the class, as well as a redone Toyota Camry that took back its title as the No. 1 car in America last month even as it is reaching the very end of its life cycle. The Nissan Altima and Honda Accord are also in line for fresh models in the 2013 model year.
Many of these new midsize sedans are going to offer the kind of packages found on the leading fullsizers, with no compromises made on quality, content or performance just because of the vehicles' dimensions. For something like the Accord, that's business as usual, and the still-impressive current Malibu already has set the tone for Chevy buyers. But again, the 2012 Passat has the best of both worlds, with a premium rep and affordable pricing already in place.
I still don't think VW will be able to double its U.S. sales by 2013, but I'm confident it will double its U.S. Passat sales by then. In fact, when you consider Volkswagen sold only 10,168 Passats for the entire year of 2010, the company could reach that goal by the fall.
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