How Will VW Sell 800,000 Units in America?

Volkswagen has laid down the gauntlet for its U.S. sales, proclaiming a goal to sell 800,000 vehicles by 2018. At its third annual fleet preview event last week in Las Vegas, Volkswagen laid down its plans to get there.

If 2012 is any indication, the company is on track. Volkswagen Group (including Audi, Bentley, Bugatti and Lamborghini) sold more than 580,000 units in the U.S. last year. That was good for a 3% market share, its best in 29 years stateside.

Globally, Volkswagen had its best year since 1973, selling 9 million vehicles worldwide. VW’s 11.2% growth rate outpaced market-wide sales increases in every market, and in Europe, VW gained share in a shrinking market. VW sold a whopping 2.8 million vehicles in China last year, by far its largest market.

Is VW expecting to outpace these sales gains? “The target this year is to keep a stable position,” said Thomas Meuser, general manager of fleet sales and remarketing at VW, adding that “fleet sales are an essential part of that path” to 800,000 sales.

On that path is the growth of the dealer network. Volkswagen counted 617 dealers in the U.S. in 2012 and will add about 28 dealers by the end of 2013. Increasing dealer capacity is just as important. In 2009, VW dealers sold an average of 368 vehicles; in 2012, that figure nearly doubled to 710 vehicles sold.

Meuser offered some trends that speak positively to fleet concerns such as residual values and order-to-delivery times (OTD). Some 75% of VW’s vehicles sold in the U.S. were sourced in America last year, up from 60% before the Chattanooga, Tenn., plant was opened in 2011 to produce the Passat. The OTD for the Passat is 46 days, one of the lowest averages in fleet. VW OTDs range from 46 to 100 days (Tiguan – 70, Golf and Touareg – 90).

VW is “actively preparing the network to protect residuals,” Meuser said. VW products realize a very high lease share, and at 83%, VW claims the highest CPO (certified, pre-owned) share of any non-luxury automaker, doubling the average. Only 10% of its lease maturities are sold at a physical auction.

The automaker has upped its fleet share in recent years, but intends to keep fleet at 10% of total sales. Since opening its fleet program in the U.S. in 2011, fleet sales have grown 109%, though on small comparative numbers. Rental fleet sales make up the great majority; however, the share of commercial fleet has been taking a bigger piece of the pie. VW will cap rental fleet sales, with no cap on commercial fleet.

This year’s fleet preview put us in between the new model release cycle. But what VW lacked in new product to show off, it made up for by a “powertrain offensive.” VW is debuting three new four-cylinder engines in less than a year.

Late last year the automaker introduced the 1.4L TSI (170 hp) turbocharged hybrid powerplant on the Jetta hybrid and followed that with the new gasoline 2.0L TSI turbo (210 hp) in March. A new 1.8L TDI diesel engine debuts this fall.

Turbo is the name of the game. Whereas turbo was once all about performance, explained Doug Skorupski, manager of product strategy, it’s now about efficiency. The naturally aspirated engine is replaced with direct injection and turbo charging, which allows for an engine displacement reduction without a loss of power or torque. Turbo is standard on the Jetta, a first in the compact segment, and the new 1.8L TSI gets 15% better fuel economy with the same horsepower compared to the outgoing engine. VW claims that in model year 2014, more than 50% of its fleet will have turbo technology.

In terms of new models, VW did show off the all-electric e-Golf, which will hit the market late next year as a 2015 model. Don’t expect fleet sales (not soon).

But for fleets that want to conserve some carbon dioxide and the fuel bill, Volkswagen has seven diesel models for you. In 2012, VW sold 90,295 diesels for 72% of light-duty diesel market. Take rates for the diesel engine are high: about 50% on the Golf and Touareg, and 86% on the Jetta Sportwagen. Why? Look to a range of 609 to 795 miles, real-world fuel economy figures that exceed EPA numbers and retained values after 36 months that average about four points higher than VW gas models.

Oh, and with diesel, there’s no need to drive “gingerly” to get better MPG. On a road course at the Las Vegas Motor Speedway, we once again got to put VW models to the test. Nothing beats hot-lapping a turbodiesel Golf with a stick, with its aggressive torque and agile cornering. It’s a perk of the job.

Originally posted on Business Fleet