published Saturday, November 2nd, 2013

Passat, VW sales slide in October

Factory workers perform diagnostics on a Passat before it is taken through a dyanometer in the assembly section of the Chattanooga Volkswagen Plant in Chattanooga, Tenn.
Factory workers perform diagnostics on a Passat before it is taken through a dyanometer in the assembly section of the Chattanooga Volkswagen Plant in Chattanooga, Tenn.
Photo by Doug Strickland.

Volkswagen's Chattanooga-made Passat hit a low point in U.S. sales for the year in October -- a month in which all of the German automaker's models but one posted a drop compared with a year ago.

Passat sales slid 13.1 percent in October from a year ago to 7,258. That pushed total sales for the mid-size sedan into negative territory for the year, off less than 1 percent, the company reported Friday.

Overall, VW's lineup recorded an 18 percent decline last month to 28,129, even as the U.S. auto market's sales jumped about 8 percent.

Jonathan Browning, Volkswagen Group of America's chief executive, said the company is making comparisons with big increases the last three years in the United States., having doubled sales over the period.

"This is a long-term journey," he told reporters and analysts in a conference call, adding that sales are slated to surpass the 400,000 mark for the second consecutive year. That has happened just once before over the past four decades, Browning said.

He cited "very slow" traffic in its showrooms in early October because of the federal government shutdown. Also, the company is phasing out the Routan minivan and its old model Golf.

For the year so far, total U.S. sales are off 4 percent to 342,962, according to VW.

VW's current numbers will make it difficult for the carmaker to reach its goal of selling 800,000 vehicles by the end of 2018, said Jesse Toprak, senior analyst for Truecar.com.

"It seems quite unrealistic at this point," he said.

Still, a recent survey of auto industry executives in Booz & Co.'s annual confidence survey last month showed that 60 percent believe VW and sister company Audi are likely to increase market share over the next five years.

That was the second highest response, behind only Hyundai and Kia. Among those surveyed, 63 percent expect the Hyundai brands to pick up market share through 2018.

Toprak questioned VW's pricing and styling in the U.S.

"They're still a bit overpriced compared to the competition," he said.

While styling works globally for VW, it doesn't appear to be catching on in the U.S. to the extent for the automaker to become a volume seller, Toprak said.

Karl Brauer, senior analyst at Kelley Blue Book, said an aging product line is holding back Volkswagen's U.S. sales. That being said, he noted that VW sales are struggling across every nameplate.

"Overall sales for the year are off by just 4 percent, but that's in a new-car market that's up by more than 8 percent," he said in an email. Only VW's Beetle posted a higher October sales figure than last year, up 4.8 percent.

Toprak said VW isn't a major player in the sport utility vehicle market, which hurts sales figures. Last month in the U.S., for example, the larger SUV market outpaced the sale of small cars, he said.

The introduction of a seven-seat SUV, such as one that could be made in Chattanooga, makes sense, the auto analyst said.

"It can only help them," Toprak said, adding that VW's Tennessee plant would appear to be the best place to assemble such a vehicle for logistics and other reasons.

VW has called Chattanooga the front-runner for producing the SUV. A decision could come as early as this month.

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

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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