Can Volkswagen USA Succeed With SUVs?

Timothy Cain
by Timothy Cain

SUV sales are exploding in the United States. It doesn’t just seem as though the quality, origins, price, power, credibility, and style of a utility vehicle matter not one whit — it really doesn’t.

Critically panned and antiquated SUVs such as the Jeep Compass and Jeep Patriot are selling better than ever. The original Audi Q5, on sale since 2009, is on track for its seventh consecutive year of growth. Sports car builder Porsche now produces 60 percent of its U.S. sales with the Macan and Cayenne. The Buick Encore, a questionable Chevrolet Sonic-based subcompact crossover, is easily Buick’s best-selling model. Sales of the Ford Explorer are on track to rise to a 12-year high.

Easy peasy. Build it and they will come. Too small? No problem. Too big? Not an issue. Too ugly? More power to you. Impractical? Ignore the U in SUV; it won’t hold you back.

It’s therefore a great time for Volkswagen to finally release an SUV in the heart of the market.

Tarnished by a diesel emissions scandal that essentially erased one-fifth of its potential U.S. sales, Volkswagen rapidly approaching inconsequential status in America, forever lacking a broad SUV/crossover lineup. An affordable three-row crossover with a name that suits an American audience and development that takes seriously the expectations of the U.S. market should, theoretically, be the answer.

Yet what’s past is prologue. Everything Volkswagen has “accomplished” in the U.S. SUV/crossover arena to date suggests a lack of understanding of the market. As a result, only a relative handful of Touaregs and Tiguans have been sold in the U.S. in the entire history of Volkswagen’s SUV effort.

These are their stories.

TWAAAAHR-EGG?


Originally hoping for 45,000 annual U.S. sales, the Volkswagen Touareg was launched as an upmarket competitor for the Acura MDX, BMW X5, and other premium SUVs at a time when Volkswagen, full of Phaeton dreams and Passat W8 delusions, believed the company should become Audi.

Touareg volume peaked at 27,706 sales in its first full year on the market, 2004. U.S. Touareg sales then plunged in five consecutive years. Between 2004 and 2009, Touareg volume slid 84 percent. Recovery in 2012 — when Touareg sales jumped 140 percent from its 2009 low — was followed up by declines in 2013 and 2014, flat-lining in 2015, and a one-third drop through the first six months of 2016.

The Touareg was never going to sell like a Ford Explorer or Chevrolet TrailBlazer or even the between-sectors Acura MDX. But the Touareg, whether the 2004-2010 first-generation example or the 2011-onward second iteration, wasn’t just a flop relative to Volkswagen’s rival mainstream brands. The Touareg is also markedly less popular than similarly priced luxury SUVs.

Through the first-half of 2016, the Volvo XC90, Audi Q7, Infiniti QX60, Lexus RX, and Mercedes-Benz GLE are up 33 percent to 126,230 units: 15,919 XC90s, 14,741 Q7s, 20,972 QX60s, 49,412 RXs, 25,186 GLEs. Touareg sales are down 33 percent to only 2,203 units, 45 more sales than the Lincoln MKT managed during the same period but far less than even rare utilities such as the BMW X6 and Land Rover LR4.

TIGUAN


The Touareg was Volkswagen’s first effort, but not its most common. The Tiguan launched in 2008 with hopes for higher volume in the small SUV segment. (Eight years later, North America is still months away from availability of the second-generation model.) Unlike its Touareg strategy, Volkswagen initially aimed high with pricing, but not to the extent that the Tiguan was entirely out of sync with the Honda CR-V and its mainstream rivals.

Also unlike the Touareg, the Tiguan recently rode the wave of SUV excitement despite its old age, small cabin, and premium-fuel-only gas tank. After sales fell to a four-year low in 2014, U.S. Tiguan volume jumped to an all-time high in calendar year 2015.

But an all-time high for the Tiguan is nevertheless a frighteningly low figure for a vehicle operating in such a high-volume category. Only 35,843 Tiguans were sold in America last year — 212,756 in the nameplate’s history — while 11 competitors produced more than 100,000 sales, six topped the 200,000 mark, and three generated more than 300,000 calendar year sales.

Meanwhile, Tiguan growth has continued apace in 2016 as sales of almost every Volkswagen nameplate crumble. Tiguan sales are up 50 percent, year-over-year, though the Tiguan owns less than 2 percent of its category and sales of all other Volkswagens in America are down 26 percent as the market tracks toward a second consecutive record year.

TERAMONT?


Volkswagen is, therefore, tapping into growth in the compact SUV/crossover market, but the brand has missed the rush to subcompacts (not that the undersized Tiguan is much larger) and found itself on the outside looking in as consumers once again began snapping up Ford Explorers, Toyota Highlanders, and even Dodge Durangos.

Subcompact crossover sales are up 63 percent this year, an increase of nearly 100,000 sales, as the market expanded rapidly without assistance from, for example, Volkswagen.

The aforementioned Ford/Toyota/Dodge three-row trio alone earned 18,151 additional sales in the first-half of 2016, year-over-year, for a total of nearly 250,000 units.

Volkswagen, meanwhile, sold 22,759 total utility vehicles between January and June.

No doubt, only a look at rivals will lead Volkswagen to believe that there’s a future for the brand in America’s vast SUV/crossover market place. Volkswagen surely can’t look back at its own U.S. history as a reason for hope. As the passenger car market fades and demand for Volkswagen’s own cars all but dry up, the future of the brand in America relies very much upon the Teramont, or whatever Volkswagen will call the Chattanooga-built SUV, and the next Tiguan.

Early indicators suggest Volkswagen knows the new SUVs won’t have it easy, and success won’t be instantaneous. “This brand needs some years to really recover and step up then from there to a further profitable growth,” says Volkswagen’s North American CEO, Hinrich Woebcken.

We’ve seen what the Tiguan and Touareg can do with “some years.”

[Image Source: Volkswagen]

Timothy Cain is the founder of GoodCarBadCar.net, which obsesses over the free and frequent publication of U.S. and Canadian auto sales figures. Follow on Twitter @goodcarbadcar and on Facebook.

Timothy Cain
Timothy Cain

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  • Mchan1 Mchan1 on Jul 25, 2016

    CUVs have been the rage for awhile now. Haven't seen too many Touregs in my area but lots of Tiguans. I like the Tiguans despite it being overpriced and relatively cramped as Tall drivers should avoid the Tiguan! If VW would fix the ergonomics and roominess and lower the price, considering that the 'stripper' base version costs Too much, the Tiguan could sell more and be competitive against the Rav4 or CR-V. Right now, it's Overpriced for what you get (almost nothing in content that matters) and it's a gas hog, even though it handles relatively well in the snow with AWD.

  • Lorenzo Lorenzo on Jul 26, 2016

    Teramont? No. Here's another suggestion: When aviation pioneer Hugo Junkers was forced to design planes for the Kaiser in WW1, he came up with the world's first all-metal monoplane, the J-1. German critics, not realizing it was the wave of the future, called it the "tin donkey", or Blechesel. they've been using unpronounceable names, so stick with it, and this time put some history behind it. It would be fitting, since Junkers died not far from Wolfsburg, while under house arrest by the Nazis, who wanted him to sell his factories and aircraft patents for pfennigs on the Reichmark. He died of a heart attack during a marathon "negotiating" session (browbeating) on his 76th birthday.

  • Joe This is called a man in the middle attack and has been around for years. You can fall for this in a Starbucks as easily as when you’re charging your car. Nothing new here…
  • AZFelix Hilux technical, preferably with a swivel mount.
  • ToolGuy This is the kind of thing you get when you give people faster internet.
  • ToolGuy North America is already the greatest country on the planet, and I have learned to be careful about what I wish for in terms of making changes. I mean, if Greenland wants to buy JDM vehicles, isn't that for the Danes to decide?
  • ToolGuy Once again my home did not catch on fire and my fire extinguisher(s) stayed in the closet, unused. I guess I threw my money away on fire extinguishers.(And by fire extinguishers I mean nuclear missiles.)
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