Chalk up another victory for the new Volkswagen Jetta: Not only has Volkswagen’s new compact sedan become a true force with which to reckon in its segment, but it’s also having a noticeable “halo effect” on the rest of the automaker’s U.S. lineup; enough, in fact, that VW is now showing a positive balance sheet here for the first time since 2003. True, technically, it’s only VW’s sales ops that are in the black—not its manufacturing or financial services, according to reports from Automotive News—but it does represent an important step forward.
The news also gives us an opportunity to check in on VW’s progress toward achieving “400,000-450,000” annual sales in this country by 2013, a goal announced at the beginning of 2010. At the time, Volkswagen had just closed the books on a year in which a 4 percent sales decline was considered a strong performance, and had finished with sales of 213,454 units for 2009. Thus, VW was talking about doubling its annual sales in the span of fewer than five years, and this was during a time when a number of automakers were struggling to even survive.
Yet the company is now on pace to finish 2011 with nearly 310,000 sales, which would be roughly a 20 percent annual increase, the same as VW achieved in 2010. And all Volkswagen has to do to approach the 450,000-sales mark for 2013 is continue to earn sales at that same rate. That shouldn’t be so difficult once the Americanized Volkswagen Passat gets up to speed, but an incident at the recent Frankfurt Motor Show in Germany, as well as trends in the lux market, providing further fascinating insight regarding VW’s sales goals.
(And yes, I know that high sales don’t necessarily guarantee profitability—but they sure help matters.)
A New Korean Conflict
One of the more talked-about video clips from Frankfurt shows Martin Winterkorn—CEO of the entire Volkswagen Group, which also includes Audi, Lamborghini, Bentley and a host of other upscale marques—checking out the interior of the new Hyundai i30, aka, the Elantra Touring. Winterkorn is clearly unhappy with the (high) quality of the car as compared to his company’s products, and especially with the fact that Hyundai was able to eliminate some kind of “rattle” noise when adjusting the i30’s steering-wheel position. The upsetting part being that, apparently, VW hasn’t been able to address the problem in its own vehicles. Actually, the company had, but as one of Winterkorn’s minions indicates, it was “too expensive.”
Now, the overall picture here doesn’t look good for Volkswagen. You’ve got the company’s head honcho seeming to admit that the interior of a relatively inexpensive car from an upstart automaker has a quality advantage over his own meticulously German-engineered products—and it has to do with its interior, a facet of the vehicle that has, traditionally, been a particular area of expertise for VW. Worse, the reason Volkswagen doesn’t offer the solution is that it costs too much money.
But as interesting as it was to get this brief insider’s look at the auto industry, it has surprisingly little to do with the outside world. Back here in the U.S., the Volkswagen brand saw sales increase 10.4 percent in August and has achieved a 20.7 percent growth rate on a year-to-date basis, while Hyundai, for all its new-found momentum and technical skills, attained a 9.1 percent sales jump last month on its way to a 21.3 percent sales improvement for the year to date.
Volkswagen’s Luxury Division
Further, there’s an oft-overlooked reason why the Volkswagen division’s strategy of “dumbing down” some of its products has gotten off to such a strong start, although it does fit in with the VW Group’s strategy of Americanization: Those more discerning drivers who prefer a traditionally German driving experience from a VW product are moving to Audi. That is, the Volkswagen Group’s presence here in the U.S. is evolving more explicitly into the traditional two-brand model, with one for mass-market buyers (e.g., Ford and Toyota) and one for premium drivers (e.g., Lincoln and Lexus).
Of course it helps that Audi, the brand that believes Vorsprung durch Technik, has Vorsprunged itself to eight consecutive months of volume records (and set new benchmarks in 12 out of the last 13). In addition, its sales were up 11.1 percent in August, and Audi’s year-to-date growth rate stands at a robust 15 percent—meaning Audi has outperformed the industry in both measures.
Twisting together these many disparate threads into one solid string of events, we can see that, despite a certain amount of pushback on the European front, Volkswagen is successfully adapting itself to the new U.S. market by following a noticeably old-school U.S. approach—which helps explain why the company is now reported to be working on a seven-seat crossover for the American market, too.
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