Volkswagen's Sales Disaster Continues

Cars and Drivers

Published: May 27, 2014 6:37 am

In a week, the auto industry will, company by company, issue data on May sales in the United States. There will be a few constants. General Motors Co. (NYSE: GM) will keep it position as the top company based on sales and market share. Pickups will dominant the list of top-selling models. And the disaster that is Volkswagen‘s sales in America will continue.

VW sold 118,154 cars and SUVs in the first four months of the year, a drop of 10.4%. This slide is like the one last year. VW’s market share in the United States has fallen to 2.2%. High-end luxury brand Mercedes sells nearly as many vehicles.

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VW has said it believes it can become the top-selling auto manufacturer in the world. This would include sales of its luxury brands Audi and Porsche. VW has two advantages to reach its goal. The first is that it has the top market share position in Europe. The second is that it vies with GM for the lead position in China, which is the world’s largest car market. However, without substantial success in America — the world’s second largest market — it almost certainly is not going to reach its goal.

VW has not suffered from the recall problems that have plagued GM. And it has a reasonable line-up of cars, albeit a fairly small one. It has positioned itself at the center of the low-priced, high-mileage part of the market. Its Jetta model is priced below $17,000. It gets an estimated 34 mpg on the highway. VW’s Golf is priced under $18,000, and its 2015 model is highly likely to offer mileage that is just as good or better. The only premium model VW offers is its Touareg SUV, which has a base price of about $45,000.

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VW’s Achilles’ heel is that its cars often get poor quality ratings. In the most recent J.D. Power Vehicle Dependability Study, VW rated well below average. Consumers often use this kind of research as a guide when they purchase new cars.

Most troubling for the company is that VW management has not articulated a viable plan to improve its fortunes in America. Its current position at the bottom of the market share ladder in the United States will continue.

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