VW’s U.S. Sales Problems Continue to Worsen

In May, VW sold 32,163 vehicles in the United States, down 15.4%, according to the company. The drop is worse than that for the January to May period, in which sales fell 11.5% to 150,317.

Among the bad news for VW is that the sales slide happened across almost its entire product line. Sales of its Golf brand dropped 41.3% to 1,793. Sales of its top-selling Jetta dropped 12.5% to 13,915. Beetle sales dropped 26.6% to 2,729. And Passat sales fell 12.8% to 8,955.

Management’s comments about May centered on the future, which makes sense given the present dismal state of sales:

“Though we saw an increase in our consumer traffic and closing rates over the last two weekends, May ended as expected with the impact of certain models in run-out,” said Mark McNabb, chief operating officer, Volkswagen of America. “With the launch of the much-anticipated Golf and Golf GTI, as well as the introduction of an even more fuel efficient diesel engines in the Volkswagen line-up, we are confident we will broaden the appeal of our product portfolio as we head into summer.”

The future does not only depend on new products. VW has to overcome several difficulties. Among these are that, according to Kelley Blue Book (KBB), VW continues to have problems with downward pressure on prices. In May, VW’s average transaction price was $25,909. That is off 2.7% from April, and down 0.1% from May 2013. Each of those numbers is worse than the industry average.

KBB also reports that Jetta’s share of the “compact car’ segment in May was only 5.5% and falling rapidly. Segment leaders Toyota Motor Corp.’s (NYSE: TM) Corolla and Honda Motor Co. Ltd.’s (NYSE: HMC) Civic each have share of more than 14% and are growing based on the measure. Passat had a 3.7% of the “mid-sized car” market. Again, the number continues to slide rapidly, compared with April and with May 2013. Segment leader Toyota Camry has a 20.5% market share, which is rising.

VW also has quality problems, which are likely to hurt consumer perceptions. In the 2014 J.D. Power Vehicle Dependability Study, VW ranks well below the industry average of 133 problems per hundred vehicles. VW’s number is 158. For industry leader Lexus, the figure is 68.

The senior management of Volkswagen Group insists that it can move into the position of the number one car manufacturer in the world. To do so, it will have to pass General Motors Co. (NYSE: GM) and Toyota. While VW is the leader in market share in Europe and battles most months for the top spot in the world’s largest market, China, it cannot afford to fail in America. And, for the time being, that is what VW is doing.

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