US Car Sales Loser--VW

VW has stated that it cannot overtake GM (NYSE: GM) and Toyota (NYSE: TM) as the world’s No.1 car company without a large expansion of its US sales. The German company should have at least one advantage. Most of its vehicles are light and fuel-efficient. Some which run on clean diesel get particularly good mileage. However, April car sales show that, if anything, VW’s efforts are in reverse and its chance to do well in the US have begun to fade.

Total light vehicle sales in the US rose 17.9% to 1,157,794 in April compared to same month last year. There were 27 selling days this April compared to 26 in the 2010 period. VW’s sales rose slightly faster, by 23.4% to 28,542. But, it was substantially outdistanced by other small vehicle companies. Kia sales were up 56.7% to 47,074, Hyundai sales jumped 40.3% to 61,764. Even GM (NYSE: GM) boasted about its 26.6% rise to 232,538. The No.1 car company in the US said its results were buoyed by sales of light, fuel-efficient cars.

The core of VW’s problem in America is that Americans do not think much of its cars. VW did poorly in the most recent JD Power 2010 Initial Quality Survey, scoring only two stars out of five. It was also thrashed in the Power Dependability by Brand survey.

VW’s cars are cheap. Most models sell for under $30,000. But, that segment of the market is competitive and will become more competitive as fuel prices remain high.

So, VW’s plan to expand in America is probably doomed. GM and Chrysler, battered just three years ago, have surged back into the domestic market and each makes money.  South Korean car companies are leaders in growth rates most months. Japanese firms Toyota (NYSE: TM) and Honda (NYSE: HMC) need to defend their turfs in the economy segment of the market. That will be hard for them until they can reopen plants shuttered by the earthquake in their home market, but Toyota says it will be back to full production by year’s end.

VW has not been able to force its way into the US market and its presence become less tenable as each month passes.

Douglas A. McIntyre