Volkswagen sales take US detour on road to world domination

January 10, 2014 10:29 am | Updated May 28, 2016 09:32 am IST - Detroit

The United States is key to Volkswagen’s global ambitions with the company’s European home market still languishing in the eurozone crisis. File photo

The United States is key to Volkswagen’s global ambitions with the company’s European home market still languishing in the eurozone crisis. File photo

German carmaker Volkswagen has its sights set on overtaking automotive industry leaders General Motors and Toyota in global sales by 2018, but has egg on its face after the aggressive plans hit a roadblock last year in the crucial U.S. market.

Rivals must have felt a degree of Schadenfreude — the uniquely German term for spiteful joy at the misfortune of others — when VW saw its 2013 U.S. sales dip even amid a rally in the world’s second-largest car market.

At the North American International Auto Show a year ago, a massive Volkswagen billboard outside the sprawling convention hall showed an open Beetle convertible on a warm beach bathed in golden sunlight — in stark contrast with Detroit’s frigid weather — with the message: “2013 is already looking up”. Instead, VW sales in the U.S. dropped by 7 per cent to 408,000 cars.

Its market share contracted even more sharply, as the U.S. market grew by 8 per cent to 15.6 million units, according to estimates from market researcher Autodata.

The 2014 Detroit auto show opens to the press Monday and continues through January 26.

The U.S. market is projected to grow this year to well over 16 million units, bringing the industry nearly back to pre-crisis levels after five years of economic recovery. Only the fast-growing Chinese market is larger at nearly 18 million cars sold.

Luxury car brands in the U.S. enjoyed especially strong sales growth, including Volkswagen’s high-end subsidiaries Audi, Porsche, Lamborghini and Bentley.

Martin Winterkorn, VW’s managing chairman, had predicted 2013 U.S. sales for the Volkswagen Group to well over 600,000 - a threshold that was reached only with the sales boost that the luxury brands delivered.

The United States is key to VW’s global ambitions with the company’s European home market still languishing in the eurozone crisis. Even an escape from recession for the currency zone is not expected to boost car sales, with the most optimistic forecasters seeing only tepid economic growth.

“The U.S., alongside China, is a core market for the German manufacturers, and can decide success or failure,” car market researcher Stefan Bratzel said.

He predicted that capturing the mantle of world’s largest carmaker would be a struggle for VW unless the firm, based in Wolfsburg, Germany, regains its traction in the U.S. market. General Motors and Toyota have been trading the title of largest carmaker back and forth for several years.

With another year of 2-per-cent economic growth under its belt and a consensus for a 3-per-cent expansion in 2014, the U.S. economy is frothy compared to dour Europe, making it a ripe target for carmakers from around the world.

As always, numerous new models are slated to be introduced next week in Detroit, and displays at the show are expected to be even bigger and gaudier than last year.

The VW core brand needs a new model to have a chance at a runaway sales success: The current version of the Passat on the U.S. market is three years old, and the Jetta has gone four years without a serious overhaul.

Next week, VW will be pushing its new Golf in Detroit, but compact cars remain a relative niche market with American consumers.

VW’s “Crossblue” sport-utility concept vehicle got rave reviews at its introduction a year ago in Detroit. But nothing has reached the market, though the company needs a mid-sized SUV aimed at the U.S. market.

Car industry analyst Ferdinand Dudenhoeffer questions if VW has a clear strategy for the United States.

“If you fail in the U.S.,” car industry analyst Ferdinand Dudenhoeffer said, “you can’t be the world market leader.”

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