Volkswagen to drop prices, aims to compete with Toyota (US Market)

[siko]

Volkswagen to drop prices, aims to compete with Toyota

The Wall Street Journal has confirmed what's been alluded to in the past, but this time, it's from the top. Volkswagen's CEO Martin Winterkorn plans to price its U.S. offerings more aggressively in a bid to better compete with the likes of Toyota.

Currently, the Jetta starts around $17,000, while a comparable (?) Corolla is about $2k less. Same goes for the Passat and Camry segment, where the VW's mid-size sedan has close to a $4,000 premium over its Toyota counterpart.

Interestingly, Winterkorn admits, "We have definitely added too many technical items that (American) customers don't want to pay for." What those particular features are escapes us, but as long as they work, that's all that matters.

[Source: Wall Street Journal via Autoblog.com]

 

[siko]

Full WSJ article...




Volkswagen Takes Aim at Toyota in U.S.

WOLFSBURG, Germany -- Volkswagen AG's chief executive plans to narrow the global sales gap that separates it from Japan's Toyota Motor Corp. by ramping up competition in the U.S., partly by pricing its vehicles more aggressively there and by curbing costly frills many Americans don't want.

The comments by Martin Winterkorn are the latest sign of the company's new emphasis on growth after years of job cuts. They also hint at the tensions he faces 10 months into his job as CEO of Europe's largest auto maker by vehicles sold.

The moves could put added pressure on the U.S. auto market, which has seen weak sales and has been roiled by Detroit's restructuring efforts. (See related article.)

Mr. Winterkorn is making the transition from running VW's premium Audi business to running a volume car maker whose fortunes depend on striking the right balance between adding new features and controlling costs. That includes re-evaluating the features on VW-brand vehicles in the U.S., where Volkswagen has said it wants to sell about one million cars by 2018 compared with about 330,000 last year.

"We have definitely added too many technical items that [American] customers don't want to pay for," Mr. Winterkorn said in an interview. He cited Volkswagen's tendency to equip U.S. models with external mirrors that fold inward to account for narrow streets and tiny parking spaces. "Who needs that in the U.S.? The streets there are so wide," he said.

By tailoring its cars more to U.S. tastes, he said, it could offer future versions of its Jetta and Passat below what they sell for now. The Jetta starts at about $17,000 in the U.S., while the Passat starts for roughly $23,900. Toyota's Corolla is priced about $15,200, while the larger Camry starts at about $20,000.

Between now and 2010 -- when many industry analysts expect auto global demand to rise 12% to 15% -- Volkswagen is betting it can increase its sales by roughly 30%, from about six million this year to eight million in 2010. Although Volkswagen's targets have drawn skepticism, Mr. Winterkorn says the growth is possible partly because of a new, more centralized management structure that he says allows quicker decisions.

Between now and 2010, Volkswagen plans to add 12 models to its global lineup. The company is keen on launching more vehicles in new segments, such as a new compact sport-utility vehicle called the Tiguan. Mr. Winterkorn said much of the sales growth at Toyota, which sold 8.5 million vehicles last year, has come from its expansion into nontraditional segments, such as SUVs, pickup trucks and multipurpose vehicles, which are similar to minivans.

"We of course hope to take [customers] from the Japanese and surely the Americans" in the U.S. market, Mr. Winterkorn said. After losing more than €2.5 billion ($3.5 billion) in North America over the past five years, Volkswagen is considering building its first plant in the U.S. in nearly 20 years. Importing cars from Europe is costly, given the strong value of the euro against the dollar. "We want to illustrate that we take the U.S. seriously," Mr. Winterkorn said.

He also complained that the weakness of the Japanese yen gives Toyota cushion to equip its exports to Europe with features.

Although his team has vowed to revive the VW Phaeton, a $68,000 luxury sedan pulled from the U.S. market after poor sales, he said that he is accelerating efforts to defend Volkswagen at the low end of the market. He cited its new up! concept car, a prototype of what it hopes will be a new family of small, fuel-efficient models that can be built on a common platform and sold in emerging Asian markets and Western Europe.

 

[bmer]

So they are dropping prices by reducing standard equipment. I wonder how well that will work.

 

[siko]

So they are dropping prices by reducing standard equipment. I wonder how well that will work.

I think that wmight work on lower end models (Jetta, Golf, etc), but it might backfire on the Passat.

Then again, the Passat is overpriced like hell (at least in Canada). To give you an idea, a fully loaded 3.6 4Motion is 52k, the same price (+/- 500$) as a same-equipped 328xi !? True that the Passat is more powerful, but c'mon, same price!?

 

[bmer]

I think that wmight work on lower end models (Jetta, Golf, etc), but it might backfire on the Passat.

Then again, the Passat is overpriced like hell (at least in Canada). To give you an idea, a fully loaded 3.6 4Motion is 52k, the same price (+/- 500$) as a same-equipped 328xi !? True that the Passat is more powerful, but c'mon, same price!?

Yeah, Passat's position in the market is quite unique. In principle it's a mid-size car but the high-end models are actually competing with the entry-level luxury cars.

 

[Kowalski]

52K for the Passat Variant 3.6 4Motion?

 

[Centurion]

I think that wmight work on lower end models (Jetta, Golf, etc), but it might backfire on the Passat.

Exactly. I doubt that the US population which is used to high engine displacement, leather seats and good amount of standard equipment will happily embrace a bare 1.6L Passat.

VW need to press their prices like crazy on their SUVs, Jetta and Passat if they want to take a shot at Toyota.

 

[siko]

52K for the Passat Variant 3.6 4Motion?

Not even the variant, just the sedan... base is 48k.

If you don't believe me, go here:
VW.ca - Passat

 

[Merc1]

Are stripped-down VWs the way to gain more U.S. sales?

Volkswagen is looking to cut costs and sell its cars on such a level that it will better be able to compete with competition from Toyota in the U.S., according to a recent Wall Street Journal report. Aggressive pricing and the elimination of features that are non-essential to the North American market are key components to VW's plan.

VW is aiming for annual sales figures of one million vehicles by the year 2018 in a market where it sold approximately 330,000 units in 2006. Reportedly, Volkswagen CEO Martin Winterkorn has stated that he feels VW has too many technical features on its cars in the U.S. that are not needed, citing electronically folding mirrors as one example.

Winterkorn would like to offer the Volkswagen Jetta (pictured top) and Passat (pictured bottom) sedan variants at prices closer to rivals such as the Toyota Corolla and Camry. Essentially, that would involve chopping thousands off the German sedans' current sticker prices. The Jetta and Passat start at around $17,000 and $23,900 respectively, while the Toyota Corolla and Camry list around $15,200 and $20,000.

Volkswagen has claimed it can increase global sales by roughly 30 percent by the year 2010 -- an increase from six million units to eight million. Winterkorn says that despite increased worldwide automotive demand that has been predicted in years to come, a more efficient management system is at the root of the growth potential. VW is slated to add 12 new models to its global lineup by 2010, including SUVs, pickup trucks, and minivan-type vehicles. Volkswagen is also considering building its first U.S. production plant in nearly 20 years due to expensive U.S. importation costs brought on by the weak dollar to euro conversion rate.

Are Volkswagen's goals realistic and just what does the German automaker need to focus on if it wants to be a true competitor to Toyota in the U.S.? Will stripped-down VWs be able to sell against Japanese automobiles at the same price point?


Are stripped-down VWs the way to gain more U.S. sales? | Car News Blog at Motor Trend


M

 

[Merc1]

I've been saying this for years, but I'm not so sure VW can do it. Their dealer network needs help badly. The sales experience and more importantly the service is awful. I still think a VW should carry some sort of premium over your typical Asian car, but not one the size of their current offerings. They're brilliant cars, but overpriced for the common buyer and luxury car buyers don't want a VW. A really hard spot for VW to be stuck in. I want a Jetta as my everyday car, but a new one costs more than every other car of similar size and specification. VW has never, ever been serious about the U.S. market and it really shows now, they haven't made money here in years. If the other captive VW brands and VW itself outside of the U.S. weren't doing as well as they are, VW would have left the U.S. market by now I think. I think VWoA can be fixed, but it is going to be hard. Think about it, VW is the only non-premium German car brand sold here, a very tricky position that requires extraordinary skill to manage correctly. 1 million vehicles a year in 11 years, I can't even begin to see that. It would require a total re-think of what a VW is in the country and at least a half-dozen all-new models (not including updates of all current models).

M

 

[Kowalski]

52.000 Canadian dollars is equivalent to £26.300 which is about the same as a fully loaded 5-door Golf R32 with DSG gearbox.

Selling a 1.6 Passat would be suicidal because driving a Passat 1.6 is suicidal...

 

[Kowalski]

One car that Volkswagen should definitely strip it down and sell for at least U$$ 12.500 is the New Beetle.

The current price is U$$16.500, which frankly, is far too much for what in essence has always been the same car in the past nine years since it was launched.

 

[siko]

52.000 Canadian dollars is equivalent to £26.300 which is about the same as a fully loaded 5-door Golf R32 with DSG gearbox.

You can't quite compare prices of different markets, especially not NA vs Europe since you guys pay way more then us.

But for a 52k Passat, in Canada can get you a base 335i Sedan (49,900) or loaded 328i or a base C350 (47,900)... making the Passat insanely overpriced in my mind, which was my point.

 

[Osnabrueck]

Seems like a sound enough idea - Drop sticker, hide costs elsewhere.

VW is at a natural disadvantage here - given the Euro/Dollar exchange rate. Hopefully VW is able to package their cars more attractively, but I start to wonder if we'll just end up with repugnent VWs that lack the special touch that warrents their purchase in the first place.

 

[NarutoRamen]

umm, exactly what are they stripping down to compete with toyota? So far, they offer exactly the same features but for more price. Now if they get rid of some basic stuff to compete with Toyota, wont that just make it so that VW and Toyota's are the same price but Toyota is better equipped as standard? That probably the dumbest thing VW can do.

 

[Sunny]

What is even worse is that there is a big perception that German cars are not reliable and expensive to own and maintain - and while that doesn't hurt the premium companies much, it definitely hurts VW.

 

[phaeton]

Well 1 million units is achievable I think.

* With all new Gol (Fox) or Polo as entry car

* Shanghai VW-VWoA Camry fighter

* Pickup targeting Frontier (Navara) and Tacoma (HiLux) class

* a 4wd to target Xterra and 4Runner (rumoured) high probability to production if based on pickup.

* Minivan (won't be a sales sensation but it adds up )

* Tiguan

* Eos

Then when you plus sales of next generations of Rabbit, GTI, Jetta, Passat, Passat Coupe, Phaeton and Touareg (and even New Beetle possibly).

It all adds up.

With Porsche making VW even more lean and efficent and reliable, VW IMO is on the road to do greater and better things everywhere including US.

As mentioned above the only other problem is Dealer Service.......VW may need to buy into dodgy dealers like they have done in other countries to turn things around.

 

[Kowalski]

You can't quite compare prices of different markets, especially not NA vs Europe since you guys pay way more then us.

But for a 52k Passat, in Canada can get you a base 335i Sedan (49,900) or loaded 328i or a base C350 (47,900)... making the Passat insanely overpriced in my mind, which was my point.

I think can see your point now.

Yesterday I paid a visit to the Volkswagen's USA website; I configured a Passat 3.6 V6 4Motion and I was surprised that for U$36.000 you still don't get SAT/NAV and nearly every option is accompanied of the "Luxury" or "Sport" package; not to mention the other useless optional extras such as "Hi-def-body" and "Ground effect" which consist of a whole black front fascia and silly side-skirts.

Why would you need that? Why would you want to make your Passat to look boy-racerish and ugly?

Speaking of which, "my Passat 3.6" had the Luxury PKG and if I wanted SAT/NAV, Bi-xenon headlights I had to add with the Sport PKG. Whiskey Tango Foxtrot... Why is that for crying out loud?! Why Am I forced to buy something I want accompanied of something I don't want?!

 

[siko]

Why is that for crying out loud?! Why Am I forced to buy something I want accompanied of something I don't want?!

Yeah I hate that too... but it's the oldest trick in the book. VW is know for that (at least here), as are all the Japanese manufacturers.