Volkswagen Makes Big American Push: Good Luck With That
Everyone in the U.S. knows Volkswagen. Millions of Beetles sold in the 1960s and '70s ensured that. But few American want to buy VWs, it seems. The German carmaker thinks it can change all that and is making a run at the U.S. market. But it's not gonna be easy. And it may be impossible.
Very big and all grown up
At CNBC, auto writer Phil LeBeau ponders the VW-in-America question (as well as the fortunes of Fiat):
[I]n the summer of 2011, [Fiat and VW] are showing signs of life in North America. Today, Fiat is launching a marketing campaign in the U.S. As its new 500 model slowly, but steadily rolls into more showrooms across the country. Meanwhile, VW has announced it will add a second shift at its new plant in Chattanooga, Tennessee. That plant is still ramping up production.I'm not worried about Fiat -- now that it's combining with Chrysler, it will have the leverage that being joined with the number three U.S. automaker will provide. VW is a different story. The U.S. market is pretty large -- you expect 15 million new vehicles to be sold here every year -- and jam-packed with automakers. VW has only about 2.5 percent of that.Separately, the news from these auto makers is not huge. Still, they show the optimism both companies have in their ability to finally grow sales in North America.
For years, they have struggled here either because of poor quality (Fiat in 70's) or a lack of models designed to win over American car buyers (Volkswagen in the 90's and early 2000's). In short they either wrote off trying in the U.S. or did it half heartedly.
Aiming to double up
VW wants to increase that to around 6 percent, but when you look at the competitive environment, it's a tall order. Still, the company isn't daunted. It's opened a new plant in Tennessee and has a marketing plan, which focuses on positioning VW as mass-market German engineering.
I've already written about why this pitch isn't going to fly with consumers. But there are other issues at play.
For example, companies like Subaru and Mazda have share that's comparable to VW's. OK, they may not be able to serve up a poor man's BMW. But it has to get it's share from someplace, so it has to be looking at the low-hanging fruit.
Passing smaller Japanese companies may not be so difficult. But then VW runs into Nissan and Hyundai, which together own about 13 percent of the U.S. market. At this juncture, both carmakers have built solid customer loyalty, while VW is just getting started. Each also produces a better lineup than VW.
Too much thinking
VW is huge, powerful, and globally ambitious, so I don't want to completely write it off. But the challenge of the U.S. market right now is that you need to a range of great cars and trucks and the ability to sell lots of them. It's both a quality game and a numbers game.
VW, unfortunately, will be a German brand in a market that's thinks "luxury" when it considers the Teutonic motoring experience. This is the reason why VW-owned Audi has been so successful.
Given its history, I don't think VW wants to sell itself as "better than Hyundai." It sees its natural foes as Toyota (TM) and General Motors (GM). But it's going to have to earn that title bout. And the long slog up the market ladder may not be one that VW is at all prepared to make.
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