Commentary

VW Picking Up Speed En Route To No. 1 Slot

For a while there, Volkswagen seemed to be one of those brands sputtering along on the fumes of its glory days. Think Small and carry a big marketing wallop from the glory days of print advertising, and all that. But sales are way up this year in the U.S., the automaker continues to build on its long presence in China and, well, is world domination really that wacky an aspiration?

“We are on the right path to becoming the world’s leading automaker by 2018 -- in both economic and ecological terms,” VW CEO Martin Winterkorn told analysts late last month in reporting rising vehicle sales and profits despite global economic woes.

Sales are up 24% in the U.S. this year, more than double the overall industry. Volkswagen is also committed to introducing new models to the China market every year, where it has sold a record 1.9 million vehicles on the mainland through the first 10 months of 2011. Auto Service World, meanwhile, reports that a 2012 Passat recently purchased from Bill Matthews Volkswagen in St. John's, Newfoundland & Labrador was the 45,389th vehicle sold this year by Volkswagen Canada, breaking the annual sales record for the company set last year.

advertisement

advertisement

Christine Tierney of the Detroit Newswrites that most analysts predict a long “three-horse race" for the No. 1 position, as consultant Maryann Keller puts it, among General Motors, Toyota and Volkswagen. But right now, it’s definitely VW gaining on the outside.

"The real question is, who's got the momentum," Edmunds.com president Jeremy Anwyl tells Tierney. "It's Volkswagen. Volkswagen has been putting into place building blocks for growth."

Indeed, TheStreet.comreports that VW has been trending as a hot search term on the Internet (along with the always-trendy Warren Buffet and Rio de Janeiro), particularly due to its announced intention to outpace the expected 8% to 10% growth in China's car market in the short term (more about this later).

Tierney points out that the German company has strong and experienced management, as well as a wide selection of models, and technologies and brands targeted to different niches. “VW has shown itself to be a deft manager of its brands, transforming its premium Audi marque into a formidable competitor to the Germany's long-established luxury brands Mercedes-Benz and BMW,” for example.

Volkswagen Group of America CEO Jonathan Browning tells the Los Angeles Times Jerry Hirsch in a Q&A this morning that there’s a plan in place to approach the 12% market share that the automaker enjoys in the rest of the world instead of the 3% - 4% if scrapes by on here. And although the stated goal of reaching one-million VWs and Audis sold  here by 2018 may be “tough marching orders,” as Hirsch puts it, VW has high hopes for its new factory Chattanooga, where it is ramping up to a 150,000-unit capacity.

“We can upgrade that within the existing footprint of the plant up to 220,000 to 250,000, and we have built this plant on just half the site,” Browning says.

The secret behind the 63% jump in Jetta sales this year is a reduction of the entry-level price, Browning says –- but it has not had a negative impact on the bottom line. “The average transaction price is consistent with the previous model, but the entry price point has brought new business in. The revenue [per sale] has stayed very much where we had it previously,” he says.

China Daily’s Zhuan Ti reports that VW is outperforming the market in China, with sales particularly picking up in South China, where Japanese carmakers have traditionally held sway. Market share has increased from 12% to 15.8% there since 2009, when the introduced its "South China Strategy." (Overall it has nearly 19% of the Chinese market, according to Reuters.)

VW has a four-pronged approach to increasing its presence in the South, according to Ti, which gives some insight into its global thinking:

  • First, in sales and marketing, where it set a target of stronger regional market performance, against the traditional Japanese dominance.
  • Second, in customers and services, where Volkswagen announced an upgrade of the entire retail network across the South, to improve customer satisfaction there.
  • Third, in products and technology, where Volkswagen decided to bring out more innovative models with the latest technology to meet customer needs in the region.
  • And, finally, in contributing regionally, where Volkswagen made a stronger commitment to sustainable development.

The company will start producing electric cars in China in 2014, starting with two models with a range of 100 to 200 kilometers. It intends to start mass-producing them four years later.

"Our goal is to be the most successful, fascinating automobile manufacturer in the world and the leading light when it comes to sustainability,” says Karl-Thomas Neumann, president and CEO of Volkswagen Group China. “We aim to be number one by 2018 -- both economically and ecologically."

Vroom, vroom.

Next story loading loading..