News Column

Volkswagen's Struggles Continue in American Market

July 2, 2014

By Mike Pare, Chattanooga Times Free Press, Tenn.

Volkswagen is having a tough time in the U.S. market with sales of Passats and Jettas. (file photo)
Volkswagen is having a tough time in the U.S. market with sales of Passats and Jettas. (file photo)

U.S. sales of Volkswagen's Chattanooga-made Passat fell sharply in June along the rest of the German automaker's monthly results as the company continues to struggle in the American market.

"VW hasn't gotten over the threshold of being a niche brand," said Jesse Toprak, chief analyst for Cars.com, on Tuesday.

Volkswagen of America posted June sales that were down 22 percent from a year ago as both the Passat and Jetta reported lower figures.

Passat sales fell 33.6 percent in June to 7,222. Jetta posted sales of 12,090, off 18.4 percent in the month.

A bright spot for Passat was that diesel sales were 32.1 percent of the total, the company reported.

VW sold 28,827 vehicles in the U.S. last month compared to 36,957 a year ago. For the first six months, VW's U.S. sales are off 13.4 percent.

Kelley Blue Book analyst Karl Brauer said VW is in between models and is selling vehicles designed five years ago for the U.S. market.

In addition, he said, the company needs a new midsize sport utility vehicle for the market, an SUV that Chattanooga is the frontrunner to land in terms of production.

"It will be a big boost to sales," Brauer said.

Toprak, too, said VW has a lack of product in SUVs. Compact SUVs are the fastest growing segment in the U.S. and midsize sales are doing well, he said.

"Lack of product in the SUV segment is a major competitive disadvantage," Toprak said.

While the VW brand is struggling, the carmaker's upscale brands are selling well.

Porsche had its best month and first half in the U.S. ever, and Audi set records for the month, the second quarter and first half of the year.

VW's results come as U.S. auto sales grew at the fastest pace in eight years in June, surprising the industry and setting it up for a strong second half of the year.

Sales rose 1.2 percent over last June to 1.4 million cars and trucks, according to Autodata Corp.

GM, Toyota, Hyundai and Nissan all saw increases over last June. Honda sales were flat, while sales at Ford and Volkswagen were down.

June's annualized sales rate -- which estimates annual sales if they stayed at the same pace every month -- was 16.98 million. That was the fastest pace since July 2006 and higher even than May, which also surprised the industry with its strength.

May sales were helped by five sunny weekends and the Memorial Day holiday, which got June off to a slow start. But Ford's U.S. sales chief John Felice said sales picked up at the end of last month as automakers started promoting Independence Day sales.

Analysts saw plenty to like in June. Forecasting firm LMC Automotive said automakers are carefully balancing production with demand, which has helped them maintain profits and cut back on big incentives that can eventually hurt resale values.

TrueCar estimated incentive spending rose 1.6 percent in June to an average of $2,735 per vehicle. Both GM and Nissan lowered incentives by 12 percent from last June.

While incentives may be lower by some auto makers, buyers are taking advantage of good lease offers and low interest rates. The average interest rate for a 60-month new car loan is 3.18 percent. Three years ago, that was closer to 5.5 percent, according to Bankrate.com.

GM's sales were up 1 percent over last June despite a continuing parade of recalls. GM's total safety recalls for the year reached 29 million vehicles on Monday, when the automaker announced six new recalls of 8.4 million cars. Two of those recalls were for ignition switch problems, the same issue that began the company's recall crisis in February.

Toyota's sales rose 3 percent as the Camry and Corolla sedans both posted double-digit gains. Sales of the new 4Runner SUV were up 42 percent.

Ford's sales dropped 6 percent as the company cut back on discounts for the F-Series pickup, which is the best-selling vehicle in the U.S. Ford is trying to limit sales of the outgoing F-Series as it prepares to close its truck plants and change over to a new, aluminum-sided F-150 pickup, which will go on sale late this year. F-Series sales fell 11 percent in June to 60,560.

Other automakers said:

-- Chrysler's sales jumped 9 percent on strong demand for the new Jeep Cherokee SUV and other models. It was the company's strongest June since 2007, with gains for the Jeep, Ram, Dodge and Fiat brands.

-- Honda's sales were flat. Sales of most models declined, including the Odyssey minivan and CR-V SUV, but sales of the Accord and Civic sedans were up.

-- Nissan's sales were up 5 percent on strong sales of the new Rogue SUV as well as higher car sales. Sales of the Sentra small car were up 68 percent.

-- Hyundai's sales rose 4 percent on the strength of the new Sonata sedan, which jumped 29.5 percent.

-- Subaru's sales were up 5 percent on strong demand for the new Forester, which was up 30 percent.

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The Associated Press contributed to this story.

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Contact Mike Pare at mpare@timesfreepress.com or 423-757-6318.

Original headline: VW posts lower U.S. sales amid rising overall market


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Source: (c)2014 Chattanooga Times/Free Press (Chattanooga, Tenn.) Visit the Chattanooga Times/Free Press (Chattanooga, Tenn.) at www.timesfreepress.com Distributed by MCT Information Services


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