Back in 2009, the Volkswagen Auto Group (VAG) set out to achieve 800,000 Volkswagen passenger vehicle sales per year in the United States by 2018. Presented as a way to make VAG the largest in the world in terms of volume and profitability, the plan has yet to pan out; the brand sold 366,970 vehicles in the U.S. during 2014 — less half of the original 800,000 goal. In fact, sales of the Volkswagen brand were down 10 percent in the United States for calendar year 2014, making it difficult for some Volkswagen dealerships to stay in the black. But that should soon change.
During recent dealer meetings, VW executives delivered some welcome news to U.S. dealers, telling them to expect a slight increase in sales in 2015 along with bigger gains in 2017 as Volkswagen launches two new SUVs, an extremely-fast growing segment in which the brand has performed extremely poorly, to put it mildly.
Not only were dealers happy to hear that sales are expected to increase, but they were relieved to hear that the company is now refocusing on profitability of its dealer base in the United States, having “softened” the 800,000 sales by 2018 objective. In other words, the German automaker is sticking by its long-term sales goal of selling 800,000 Volkswagen-branded vehicles per year in the U.S., but it was apparent in its message that the objective is not a “make it or break it by 2018” scenario. Instead, improving dealership profitability in the intermediate term is also part of the task at hand.
“It’s still on, they just softened the date,” Mike Sullivan, who owns two Los Angeles-area VW dealerships, said of VW’s 800,000-unit sales goal. “The point is if you get some of that logical, steady growth, it will develop. It doesn’t matter if it’s in ’17, ‘18 or ‘19. The point is growth and profits.”
The message was a welcome one, since a reported 25 to 30 percent of Volkswagen U.S. dealers struggle to stay profitable month to month. According to dealers managers and owners, the brand has taken several steps to improve dealer profits, including a revamped dealer bonus structure and extended facility construction timelines. Other items that were hinted upon but have yet to be launched or discussed in detail include additional profit-focused initiatives that could come out this year.
In addition, Volkswagen announced plans to add 100 new dealers in the U.S. to grow sales during the North American International Auto Show. The announcement sparked concerns from current dealers who feared that the new stores would end up competing against each other for the same customers in the same markets. During the sales meeting, however, VW Group of America President Michael Horn stressed that the new dealerships will be in markets without a VW dealership, meaning existing dealers won’t see new competitors in their backyard.