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How Will VW Handle Surging Crossover, SUV Sales? Automaker Will Add 5-Seat SUV

Volkswagen told journalists who have been gathered in New York City to cover the Auto Show there that they will be adding a new five-seat SUV to the production runs at Chattanooga.

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A couple of years ago, just as the Dieselgate scandal was beginning its liftoff, some VW executives told the automaker’s 650-dealer body that they – the dealers – would soon have an American-sourced and built SUV with which to compete. VW made the promises as it sought allies in what could have become a knock-down-drag-out confrontation for the soul of the automaker.

This was a fortuitous moment for dealers

The timing couldn’t have been better. VW dealers were unhappy with the direction the company had been taking. They were also upset with its entirely top-down management and product planning style. In the U.S. market, in fact, the dealers were nearly unanimous in their belief that the American Region deserved autonomy. The dealers were equally as united in their belief that Wolfsburg and its planning drones didn’t know U.S. tastes or marketing trends and that Germany had no idea of the wants and desires of the American buyer.

It was only a matter of time before things began moving. Wolfsburg – headquarters – lead one side Wolfsburg which was sure that it was the only enclave of the automaker that knew anything about marketing in the first place and that, in particular, they knew how to market to Americans.

That the sales numbers didn’t honestly support that view, didn’t stop headquarters from wagging the dog, so to speak. Even as they kept this opinion, there were at a loss in explaining why hatchbacks had to have model names that began with the letter G.

Likewise, they couldn’t explain why crossovers and SUVs (Touareg) had to have model names with the initial T. Even larger; they couldn’t understand why the vehicles that their marketing research told them would be hot-sellers were not.

On the other side of the argument were American dealers, the dealer council and an increasing number of senior executives who were watching Dieselgate grow into a fire-breathing monster and who also realized their self-inflicted diesel scandal would not go away. They saw it as the major issue that it was to become.

American view of U.S. market prove correct

As things were to develop, the American dealers and their support were proven right. Indeed, even VW headquarters, in a belated and somewhat back-handed compliment was forced to admit that they needed the American dealer body and to gain its support; they had to yield autonomy to Chattanooga, Tenn., where VW was adding substantially to the manufacturing plant there. Wolfsburg needed happy dealers and targets that they could sell here. Like pulling teeth from chickens, VW vets in Germany had to admit their stance was wrong. For the first time, the U.S. was allowed to make its marketing plan, product choice, and product naming decisions.

The result of this major decision was to become the three-row Atlas. Now, hoping that marketing lightning will strike twice, VW has plans for a second Chattanooga-built SUV, a five-seater. VW is again looking to its American marketing team to develop and sell a midsize, five-passenger crossover. Hinrich Woebcken, chief executive of the VW Group of America, told reporters at the kickoff to this week’s New York International Auto Show, that the automaker is experiencing surging demand for larger vehicles and it plans to add another new SUV to the build runs at Chattanooga, Tenn.VW to add five-seater as second Chattanooga SUV.

Though telling gathered reporters of the automaker’s planned five-seat SUV for Chattanooga, Woebcken gave no further hints as to when production would begin. The new SUV will join the seven-seat Atlas which goes on sale next month. Woebcken told reporters that the focus of Volkswagen in America would change. VW-U.S. will be known as the family-friendly automaker offering larger, U.S.-built SUVs.

The changed marketing orientation comes at an especially auspicious time for VW. For years, it has played a cat-and-mouse game with Toyota as the top automaker in the world. For whatever reasons, Toyota has seen its car sales fortunes drop off somewhat, solidly propelling VW into the catbird's seat. It is now the world's number one automaker. As the number one, it has decided to make a few changes.VW shakes up marketing as it takes number one sales spot.

Those plans tie in with planning already occurring across the industry. The plans see crossover and SUV sales expanding while car sales continue to slide. At the moment, the numbers back up those expectations as the share of crossovers and SUVs among total U.S. light vehicle sales hit nearly 40 percent in 2016. The increase was a full 7.4 percent jump from 2014.

Woebcken had no information on whether the automaker would be adding workers to the lines at Tennessee to build the new SUV.

VW Provides Some Program Snippits

The VW executive had some other interesting information for journalists. It was:

  • VW will sell four separate SUVs in the U.S. later this year with the current Tiguan carrying the rebadged Tiguan Limited name, and there will be a larger version of the Tiguan.
  • The automaker announced its new flexible new-car warranty.
  • VW will add at least three more electrics, including an SUV, although this is part of the settlement the automaker agreed to in its Dieselgate settlement

Sources: Automotive News, Reuters

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