Atlas, SUVs boost U.S. Volkswagen sales in 2018 as truck sales rise, car sales drop

Despite a 32 percent drop in sales of the Chattanooga-made Passat last year, Volkswagen of America boosted overall sales during 2018 by more than doubling its sales of SUVs, including its new Chattanooga-made Atlas.

VW ended the year with a strong 5.8 percent jump in sales during December, including record sales of its Atlas and a slight upturn in Passat sales last month.

A Volkswagen employee walks around the outside of a vehicle inspecting different parts at the Volkswagen Assembly Plant Thursday, Aug. 31, 2017, in Chattanooga, Tenn.

"Our sales over the past year showed that we're moving in the right direction in meeting consumer demand," said Derrick Hatami, executive vice president of sales and marketing for Volkswagen of America. "SUV percentage of sales more than doubled for the brand in 2018 and more than quintupled over the past five years."

Scott Keogh, CEO of the Volkswagen Group of America, conceded that VW "was a little bit late to the SUV game" as American motorists have increasingly shifted from sedan passenger cars into SUVs and trucks.

"But I think we've responded very strongly," Keogh said Thursday in announcing the sales results for 2018. "We had our best Atlas sales month ever in December and our Tiguan sales totaled over 100,000 units, becoming our No. 1 seller neck and neck with the Jetta."

Volkswagen enjoyed its first full year of sales of its 7-passenger Atlas SUV last year, more than doubling sales from the previous year, and VW is preparing to add a 5-seat Atlas model this year. Both the 7-passenger and 5-passenger models of the American-oriented SUV models are made at Volkswagen's Chattanooga assembly plant.

With gas prices falling below $2 a gallon at most U.S. service stations - and as low as $1.68 per gallon at some stations in Chattanooga Thursday - motorists are moving away from smaller passenger cars and buying more trucks.

In Hamilton County last year, more than two thirds of all vehicles sold were trucks or SUVs. A decade ago, most vehicle buyers purchased cars, not trucks.

Truck and SUV sales rose last year to the highest level since 2005 in Chattanooga, but car sales fell for the seventh consecutive year in Hamilton County.

Dodge Ram pickup trucks are on display on the lot at Landmark Dodge Chrysler Jeep RAM Monday, Jan. 5, 2015, in Morrow, Ga. Buoyed by a resurgent economy, holiday sales, cheap gasoline and a love affair with pickup trucks, Americans headed to car dealers in droves last month, pushing full-year sales to what's likely to be the highest level since 2006. (AP Photo/John Bazemore)

The automakers are preparing for sedan sales to shrink further in the new year. Ford sales chief Mark LaNeve said Thursday the automaker anticipates the all-new Ranger midsize pickup will offset some of the sedan sales slip. But Ford also announced Thursday it would report its sales figures quarterly rather than monthly, as it expects some volatility as it moves to prune its sedan models from the vehicle lineup.

GM sales dipped slight last year, while FiatChrysler sales rose on the back of Jeep and Ram sales, which were up 17 percent and 7 percent for the year, respectively. FiatChrysler reported the biggest yearly gain in sales among the major auto makers, but all of the manufacturers said reported a shift toward trucks among vehicle buyers.

Overall, automakers beat U.S. sales expectations in 2018, reporting an increase of 0.3 percent over a year ago to 17.27 million vehicles.

The increase came despite rising interest rates, a volatile stock market, and rising car and truck prices that pushed some buyers out of the new-vehicle market.

Industry analysts and automakers said strong economic fundamentals pushed up sales and should keep them near historic highs in 2019.

"Economic conditions in the U.S. are favorable and should continue to be supportive of vehicle sales at or around their current run rate," Ford Chief Economist Emily Kolinski Morris said after the company and other automakers announced their sales numbers Thursday.

That auto sales remain near the 2016 record of 17.55 million is a testimonial to the strength of the economy, said Mark Zandi, chief economist at Moody's Analytics. The job market, he said, has created new employment, and wage growth has accelerated.

"That's fundamental to selling anything," he said. "If there are lots of jobs and people are getting bigger paychecks, they will buy more."

Rising interest rates and vehicle prices could create more headwinds for auto makers, although VW officials said they hope their revamped models and the new 5-passenger Atlas will help boost sales for VW in the year ahead.

"The picture doesn't look quite as rosy for 2019," said Jessica Caldwell, analyst with Edmunds. "While the economy is still relatively strong, rising interest rates and vehicle prices could force many buyers into the used market, or even price them out of buying a vehicle completely. If the economy weakens or tariffs push prices even higher, things could go south for the auto industry very quickly."

The Associated Press contributed to this report

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.