published Sunday, March 18th, 2012

Sales driving Volkswagen dealer expansions

The present service department at Village VW will soon have more space with a new service building on seven acres behind the showroom on International Drive.
The present service department at Village VW will soon have more space with a new service building on seven acres behind the showroom on International Drive.
Photo by Tim Barber.
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With sales of the Chattanooga-made Passat in the fast lane, Village Volkswagen officials are ready for construction work expanding the local dealership to end.

The business is spending more than $2 million as it goes from 17 to 27 service bays, beefs up its parts department and adds a car wash and detail shop in the 12,700-square-foot expansion.

"If we had known the plant was coming to town, we would have built it differently" four years ago, said general manager Dale Smith about the Highway 153 dealership.

Village Volkswagen is among more than 60 VW dealerships across the country to upgrade their stores to meet growing demand, said Carsten Krebs, Volkswagen Group of America's corporate communications director.

Nearly 10 percent of VW and Audi stores nationally are investing $155 million in expansions, he said.

"At the same time we are aiming to win new dealers," Krebs said.

The German automaker has set a lofty goal of nearly tripling sales in the United States to 1 million vehicles by 2018, and the new Chattanooga plant is seen as a key to the company hitting its mark.

Shannon Harper, vice president of Harper Volks-wagen in Knoxville, said a $1.4 million upgrade to that dealership was completed late last year.

The showroom was about doubled to 5,000 square feet, and it bought another half-acre of adjacent land on which to store vehicles, he said.

Often, Harper said, automakers "blow a lot a smoke" when their officials talk about hitting sales projections.

But with VW injecting an estimated $4 billion into getting its new Chattanooga plant up and running and the all-new Passat on the road, the automaker's goals seem more like reality, he said.

"They're serious about it," Harper said. "We felt like Volkswagen is really putting their money where their mouth is."

SALES UP

Smith and Harper said sales are way up at their stores, tracking the national figures VW is reporting.

Earlier this month, the company announced the Passat helped fuel a big gain in February sales in the United States over a year ago. VW posted a 42.5 percent spike as the company sold 30,577 vehicles and experienced its best February in 39 years.

Smith said Village had a record 2011 in sales and revenues. He's hopeful of a repeat financial performance this year at the dealership that will finish its expansion this spring.

In 2011, the company sold 722 new Volkswagens and 97 Audis, he said. Smith said the dealership expects to receive 240 more new vehicles this year than last.

"The way January and February were -- both were records of any prior year -- we're well on our way," he said. Smith declined to give out dealership revenue figures.

Harper said the Knoxville store's new investment has paid off so far. He said sales volume has more than doubled this year.

Also, availability is tight for some VW products, officials said.

Harper said he'd like to have two months' supply of the Passat, but he has less than one month's on hand.

Smith said that with fuel prices rapidly rising, the wait for the fuel-efficient diesel Passat is about four months if a customer ordered today.

"We'd like to see that narrowed," he said.

TIGHT AVAILABILITY

Steve Mead, of Oak Ridge, Tenn., said he ordered a Passat diesel-powered TDI Premium from Harper Volks-wagen in October and was slated to pick it up earlier this month. However, the hail storm that struck the Chattanooga area on March 2 damaged the car, and he was told he'd have to wait until mid- to late April before the next one would arrive, he said in an email.

Having already sold his wife's car, he said he couldn't wait and bought a Toyota Camry instead. Mead said the dealer "did call back and offer to sell me any gasoline Passat on their lot at dealer invoice price."

Harper said his dealership "can't get enough of the diesel."

Smith said there's talk about VW adding a new, larger sport utility vehicle or crossover to its lineup, possibly made in Chattanooga.

"There's a real need," he said. Smith said he has heard it would be larger than the Tiguan SUV but less expensive than the larger Touareg.

Jonathan Browning, Volks- wagen Group of America's chief executive, said last year that VW's car lineup is designed for American drivers and that the company anticipates rapid increases in sales to continue.

"Our dealers across the country are preparing aggressively for these higher volumes," he said.

Browning said many dealers have been "urging us for years to make a total commitment to this market. Now that we have done so, they are dealing with the challenge of a significant increase in customers and sales."

about Mike Pare...

Mike Pare, the deputy Business editor at the Chattanooga Times Free Press, has worked at the paper for 27 years. In addition to editing, Mike also writes Business stories and covers Volkswagen, economic development and manufacturing in Chattanooga and the surrounding area. In the past he also has covered higher education. Mike, a native of Fort Lauderdale, Fla., received a bachelor’s degree in communications from Florida Atlantic University. he worked at the Rome News-Tribune before ...

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