By 2005, Volkswagen’s market share in the United States had fallen to a barely noticeable 1.3% and the company’s outlook was less than stellar. Sales remained relatively flat in the years that followed, but in 2007, Volkswagen of America moved into its new U.S. headquarters in Herndon, Va. and the company reinvested in its American operations. Despite falling sales through the recession, market share continued to grow and by 2012, VW’s share had reached 3.0% and the brand notched 438,133 deliveries, its highest mark since 1973. Volkswagen, the third-largest automaker in the world, became a Cinderella story in America and it looked like the company’s dream of achieving 800,000 U.S. sales would easily become a reality.
The company had reason to be confident and optimistic, particularly with its new Jetta, Beetle and Passat models making significant sales improvements in recent years. Heading into 2013, VW announced that it expected moderate sales growth of roughly 11%, but things have taken a turn for the worse this year. After only six months of the year had passed, with sales having fallen 1.0%, the brand reduced its sales target from 486,000 units to 440,000.
Per an Automotive News article published in July, incentive plans tied to the company’s aggressive sales objectives pressured dealers to employ sales tactics that resulted in strained relationships with both the dealer network and consumers. At the start of 2013, VW implemented alterations to its stair-step performance bonus program, but the changes had the undesired effect of causing friction between the organization and the dealers at the expense of consumers whose dealership experience was worsened. By July, the automaker decided to unravel some of its revisions, but by then the damage had been recorded in the winter release of NADA’s bi-annual dealer satisfaction survey as a record 75% of VW dealers responded and placed the automaker below the rest of the industry with regards to dealer policies.
Incredibly, Volkswagen of America is on a dismal streak of seven straight months with year-over-year sales decreases and it is not due to a shortage of vehicles. VW’s October month-end days’ supply of 115 days was the third-highest of all mainstream brands, bettering only struggling Fiat and Mitsubishi. Through October 2013, the German brand’s average incentives spending increased by 21%, behind only Hyundai, yet the Korean automaker’s spending is 44% less in comparison and is the third-lowest among all volume brands. Currently, VW is the sixth-highest spender with regards to average incentives after being only the ninth-highest at this time a year ago.
This month, the automaker sold 18% fewer units than last year, finishing with 28,129 deliveries. The year-over-year percent sales decline was the worst in the entire industry and occurred despite the market growing by 10.5%. For the year, the brand is down 4.0% while the overall auto sales grew 8.3% and the only model in VW’s product portfolio with positive growth is the Beetle. Nine out of 10 models in the lineup are down from last year and combined for an 8.4% drop. With the end of the year in sight, the current state of the automaker’s U.S. operations leaves little reason to be optimistic in the New Year. Of course, America loves a nice comeback story and things can certainly turn around for Volkswagen in 2014, but unlike in Cinderella’s fairy tale ending, Prince Charming has yet to appear on the horizon.