VW continues to be the top manufacturer in Europe, where car sales in general have fallen because of deep and continuing economic problems. VW’s bright spot is that it competes with General Motors Co. (NYSE: GM) for the top spot in China, the world’s largest car and light truck market. However, vehicle sales in China, once expected to grow rapidly for years, may be undermined by efforts to lower terrible air pollution levels there.
VW’s sales problem in America is due mostly to two things. The first is that its reputation for quality is poor. It falls at the bottom of the quality scales in important research, carefully watched by consumers, such as J.D. Power.
VW also has a limited line of cars and light trucks, which are aimed at the lower end of the market in terms of price, as well as the portion of the market that includes high-mileage vehicles. Unfortunately for VW, models like its Jetta, Golf and Passat compete with some of the top 20 selling cars in the U.S. market. Honda Motor Co. Ltd.’s (NYSE: HMC) Accord and Civic, Toyota Motor Corp.’s (NYSE: TM) Corolla and Camry, and Ford Motor Co.’s (NYSE: F) Fusion and Escape all fall into this group.
The major solutions to VW’s problems require years of effort. First, it will have to broaden its model line to one closer to its European stable. It also will have to ramp up marketing spending. And finally, and perhaps most difficult, it will have to manufacture cars that have quality reputations closer to those of Toyota and Honda. In this regard, Volkswagen has a very long way to go.
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