Volkswagen Group: Struggling in the U.S., Succeeding Everywhere Else – Forbes
It’s no secret Volkswagen’s U.S. efforts have struggled over the past couple years. In 2012 the brand sold 438,134 vehicles, while in 2014 that number dipped to 366,970. This slide contrasted industry growth at over 5% annually. We’ve also seen shopper traffic at Kelley Blue Book drop 14 percent over the last 12 months. These figures might have U.S. customers and analysts thinking the automaker is in serious trouble, but is that an accurate perspective? Consider two impressive milestones Volkswagen Group Volkswagen Group (including Audi Audi, Bentley, Bugatti, Ducati, Lamborghini, Porsche Porsche, Seat and Skoda) hit for the first time in 2014: 10 million global vehicle sales and €200 billion in revenue. With things going so well globally why are we not seeing the fruits of VW’s labor in the U.S., and how long before the automaker’s success is reflected here? After recently attending a series of meetings at Volkswagen headquarters in Germany we came away with a clear picture of the automaker’s U.S. strategy, and why it makes sense from a long-term perspective.
Perhaps the biggest key to Volkswagen Group’s global plan is reflected in its MQB platform. This is the Group’s strategy for shared modular construction of automobiles across its many divisions, creating efficiencies in production methods regardless of vehicle size, type, or brand. For instance, the current U.S. Audi A3 and Volkswagen Golf share the same MQB platform, allowing lower development costs and shared parts. In 2014 the Volkswagen Group sold 2 million vehicles on modular platforms. By 2018 it expects to sell 7 million vehicles utilizing MQB, all produced at maximum speed and cost efficiency. The current Golf was Volkswagen brand’s first MQB vehicle offered in the states (we took a close look at it last summer), and its been extremely well received. Beyond winning multiple high-profile awards VW sold 8,120 Golfs in the first two months of 2015, a 141.6% increase compared to the first two months of 2014.
As stated, Volkswagen as a global brand and automotive group has seen plenty of success in 2013 and 2014. Its long-term strategy initially focused on Europe and China, and by 2019 production capacity in China will reach 5 million units per year. Why put so much emphasis on China? Because beyond being the largest automotive market VW’s Chinese division has seen operating profit triple and sales volume increase by 15.7% yearly since 2007. And in Europe the Volkswagen Passat, also built on the MQB platform, won European Car of the Year for 2014 and accumulated over 100,000 orders shortly after being released. Volkswagen clearly saw opportunity in these regions as a priority, and the numbers suggest its strategy worked.
Where does this leave the U.S. market? According to top VW executives, it’s as important as ever. Volkswagen plans to go on the ‘offensive’ by finally revamping its aging SUV/CUV lineup, currently consisting of the Tiguan and Touareg. In late 2016 a 7-seater SUV, built at the Chattanooga plant, will launch. We were the first people outside Volkswagen to get a look at the production version, and we came away impressed. It’s a bolder, more aggressive styling language for Volkswagen, and one that should engage the U.S. shopper. Klaus Bischoff, head of VW design, said size and proportion are roughly similar to the Audi Q7. We also got a look at the next Tiguan, which will be redesigned in 2017. The new model will gain 10 inches in overall length, essentially moving it out of the compact CUV segment and into the midsize category. Finally, Volkswagen CEO Martin Winterkorn stated a new compact CUV, based on the Golf platform, would reach production around 2018. It will be based off the T-Roc concept seen at this year’s Geneva show. This means Volkswagen will both expand and completely revise its SUV lineup in the next few years. The company will also shorter its redesign and mid-cycle refresh timeframes, a shift Volkswagen admitted is necessary in the highly competitive U.S. market.