Volkswagen bets on SUVs as it aims to restore trust – USA TODAY
The biggest auto show of the year represents a critical opportunity for Volkswagen Group to begin regaining its customers’ trust after a devastating emissions scandal. But it’s unlikely to find much sales success unless it can find more ways to plug the holes in its car-heavy model lineup.
The automaker enters 2017 with a list of models that doesn’t match up well with customer demands. Once big-selling car models such as the Passat and Jetta, traditionally the core of the German automaker’s lineup, are slumping with gas prices remaining low.
VW will take the first steps toward better balancing its product line at the North American International Auto Show in Detroit with a preview event Sunday and a press conference Monday where it will introduce a redesigned Tiguan crossover, which is getting bigger and better.
With Tiguan and a recently revealed new seven-seat SUV called the Atlas, VW has a chance to reassert itself in the world’s most lucrative automotive market. The company will also unveil an electric vehicle concept at the Detroit show.
“They’ve got a lot of work to do,” AutoTrader.com analyst Michelle Krebs said. “What’s their hook gonna be now? It used to be German handling, craftsmanship. They’ve got to find their hook that’s not diesel.”
VW continues to reel from its diesel scandal, in which it admitted to rigging cars to beat emissions tests. It is paying about $11 billion to buy back diesel vehicles vehicles and compensate owners.
Volkswagen said in late 2016 that it would launch an “SUV offensive” in the U.S., seeking to capitalize on the highly profitable segment. The redesigned Tiguan and new Atlas will be key players in that strategy.
But that offensive will take time. While awaiting the Tiguan and Atlas to hit full speed, Volkswagen is lavishing discounts on cars to help dealers move inventory.
December incentives per Volkswagen vehicle soared 20%, compared to a year earlier, to $4,392, according to TrueCar. The industry average was $3,673.
Although December vehicle sales rose 20.3% as a result, compared to a year earlier, the brand’s 2016 sales were down 7.6% in a year in which the U.S. auto industry notched another all-time record for sales.
The discounts are draining the bottom line, which is already ailing after VW agreed to buy back or repair nearly half a million 2-liter diesel vehicles and another approximately 80,000 3-liter models in settlements with consumers, the U.S. government and California regulators.
“Consumers are perfectly willing to look the other way … if the deal is there,” said Joe Wiesenfelder, executive editor of Cars.com. “But once again that’s more money that Volkswagen is going to have to put out” to revitalize its U.S. presence.
A Volkswagen spokesperson was not available to comment for this story.
One factor that could ironically work in Volkswagen’s favor is the buyback program, which is already underway for owners of 2-liter four-cylinder diesel cars from the 2009 through 2016 model years. Although VW owners are not obligated to spend their buyback money on a new VW car, there’s a good chance many will.
The problem is Volkswagen doesn’t have many alternative energy vehicles to sell to buyers who purchased their diesel cars in part for environmental purposes. It recently bolstered the battery-powered range of the e-Golf electric car by nearly 50%, from 83 miles per charge to 124. But its projected range trails the similar Chevrolet Bolt electric, which began sales in recent weeks and can travel 238 miles on a charge.
Volkswagen’s roadmap calls for 30 electric models globally by 2025, including what it described as “local production” of an electric vehicle for sale in North America beginning in 2021.
But VW must recognize that diesel aficionados who often prize power and driving capability aren’t necessarily seeking the same attributes as electric car fans, Wiesenfelder said.
“Certainly some people are just efficiency-minded, and those people might make the transition, but it would be unwise to think of EV buyers and diesel buyers as the same,” Wiesenfelder said.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.