The $16,000 Jetta: VW's New Entry-Level Assault on Toyota and Honda

The Volkswagen Group (including Audi) is profitable, but Volkswagen's U.S. arm is not -- it's been struggling with low sales of its entry-level cars, such as the Golf and the Jetta. For 2011, VW made the bold and probably smart move of lowering the price of admission for the new Jetta, introduced in New York yesterday, to $16,000 (from $17,735). It's also consciously trying to court a more youthful image, which is why it introduced the car in New York with a pop star and a celebrity chef.

Picture a Jetta with a surfboard sticking out of the trunk, camping gear in the back seat, and two twentysomethings up front listening to an iPod through the auxiliary input. During the weekday, one or both is headed for a high-tech job in the city. That's the new and influential consumer VW is going after with the $16,000 Jetta. And that price buys a well-equipped car with air-conditioning, CD, power locks and keyless entry. Power comes from a 115-horsepower four in the entry-level model, but there are three other choices, including a diesel TDI (35 percent of sales now), a five-cylinder R5 (currently the most popular Jetta engine), and a turbocharged TSI (for the GLI model).

Stefan Jacoby, CEO of Volkswagen of America, in New York for the Jetta introduction, sees a return to profitability in the 2012 to 2014 time frame, with a volume of 400,000 to 450,000 vehicles. The new $16,000 Jetta is a big part of that strategy, because it will be competitive with a $15,450 Toyota (TM) Corolla and a $15,655 Honda Civic, and it could lead to mass-market volumes. The company's long-term goal, which looks pretty distant now, is (with Audi) to sell a million cars annually in the U.S. by 2018. An all-new Beetle, coming next year, will be a big help in reaching toward that goal.

The new Jetta, which played second fiddle at the Times Square introduction to singer Katy Perry in a turquoise plastic miniskirt, aims to beat Japanese compacts at their own game. Jacoby spent three years running Mitsubishi's European operations (2001 to 2004) and he presumably learned something there about how to market entry-level cars.

This is a segment of the market that has proven notoriously difficult for many western carmakers. VW, with two successful generations of the Beetle, certainly knows more than most. But its lineup needed a kickstart, and a new and lower-priced Jetta -- conservatively styled but with enough branding cues that your local "punch buggy" spotter is unlikely to miss it -- could be just what the accountant ordered.

Jacoby was a low-key presence at the Manhattan event, attracting less attention than celebrity chef Mario Batali, who gave a cooking demonstration. But he did point out to the crowd that VW has been in the U.S. market for 55 years, and has "done well by standing out from the pack with a sense of fun." The Katy and Mario Show, attended by international media, seemed an effort to align the Jetta brand with fun, though the car does not naturally project that quality. It's an attractive but somewhat buttoned-down small sedan.

VW will hammer the fun point, however, and by the summer of next year the turbocharged TSI version will add a choice for performance buffs. There's also a hybrid Jetta coming by 2012 that will incorporate a 1.8-liter turbo engine and reportedly achieve a combined 41 mpg. If it's as attractively priced as the entry-level Jetta, it should attract a considerable following. And it might even be fun to drive, too.