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VW ends premium pricing strategy in U.S.

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VW ends premium pricing strategy in U.S.

Automaker cuts cost of Jetta to compete with rivals from Japan

Diana T. Kurylko

Automotive News Europe -- June 21, 2010 06:01 CET

Volkswagen AG is dumping its premium pricing strategy in the United States and will instead compete head-on with Japanese competitors in the compact and mid-sized sedan segments.

The new approach begins with the redesigned 2011 Jetta sedan, which goes on sale in the U.S. in October. The new, slightly larger Jetta will start at about $16,000, down from $18,435 for the current Jetta. The base model includes stability control and air conditioning.

The base 2010 Toyota Corolla starts at $16,200 and the base 2010 Honda Civic at $16,405.

The Jetta, VW's top-selling model in the United States, will replace the smaller Golf as the brand's least expensive car in the U.S. The Golf starts at $18,370.

In the past, VW maintained as much as a 10 percent pricing premium over competitive vehicles. In recent years, the difference has been lowered to 5 percent and less.

VW lowered the Jetta's price "because it is our bread-and-butter car and the potential in sales is sizable," said Mark Barnes, COO of VW of America.

He said VW aims to increase U.S. Jetta sales to 150,000 in a full year. Last year VW sold 108,427 Jettas, down from a peak of 145,604 in 2002.

Breaking price barrier

The new pricing strategy surprised dealers.

"This will really help draw buyers," said Jack Daniels, owner of Jack Daniels Volkswagen in Fair Lawn, New Jersey

VW's Chattanooga, Tennessee-built mid-sized sedan goes on sale in September 2011. Barnes said VW will price the sedan to compete with the Honda Accord and Toyota Camry, which means a base price of about $22,000. The Accord starts at $21,805 with shipping.

VW plans to sell about 150,000 of the new mid-sized sedans annually.

By repositioning its sedans, Barnes said, VW finally will "break the price barrier and the belief that VW is an expensive car."

VW division has ambitious plans to increase U.S. sales to 400,000 vehicles in 2012 and 800,000 in 2018, up from 213,454 last year.

Although sales were up 35 percent through May to 104,961 vehicles, Barnes said VW division likely will increase 2010 sales by only about 10 percent. Last year, sales got a big boost in July and August from the federal government's cash-for-clunkers program.

Read more: http://www.autonews.com/article/20100621/COPY/306219947/1294#ixzz0rV33rxqh

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I think it'll be Hyundai that might bear the brunt of this. You might be fed up with Toyota, bored with Honda, and wary of Nissan. You won't drive a domestic because "they" said they're not reliable. That leaves Hyundai/Kia and VW. If they're priced the same, would you rather say you drive a Hyundai, Kia, or a Volkswagon?

Hyundai's rocket like growth could be stunted.

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looking at those interior pics of the new Jetta, I am not so sure. New Jetta may be cheaper, but it sure looks dull. If Jetta sales increase, it would only be because of price. I really myself am not enamored with VW to the point I would choose one over one of the newer Hyundais.

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Soooooooooo...VW has been one of the lucky few to develop and sustain a strategy where it convinces people to pay more for less because VW is a "premium" aspirational brand, even though reliability is absolute $h!...and now they abandon this strategy?

Here's what we have: mass market pricing, continued poor reliability, loss of aspiration...I predict sales go up for a little while then tank.

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VW sounds like old GM: lower prices and quality in the name of market share. But as we know, more sales doesn't equate to hire profit margins.

Well when they decide to go big, that is the only solution companies come up with. Toyota and now VW. Even by the looks we can see how VW has cheapened the new Jetta and now the quality downslide will follow. VW has made intentions clear that it wants the #1 crown, did not specify its drawbacks.

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Soooooooooo...VW has been one of the lucky few to develop and sustain a strategy where it convinces people to pay more for less because VW is a "premium" aspirational brand, even though reliability is absolute $h!...and now they abandon this strategy?

Here's what we have: mass market pricing, continued poor reliability, loss of aspiration...I predict sales go up for a little while then tank.

likely. VW rode the interiors bandwagon for awhile. Now they give that up. The powertrains are not new. The styling is mired in the same look for the last 30 years.

they appear to be giving a lot of content for the price. Notice how last year they changed their warranty again though.

it will be interesting to see if the diesels magically get cheaper. this could just all be smoke and mirrors. Remember, no one who buys the VW stuff really wants that groaner iron 5 cylinder. They want the turbo or the diesel and VW wants the buyer to upgrade and pay 5 grand or more, more. Are they saying that Jetta diesel will lose 2 grand off its sticker now too or will that still be way the f up in the stratosphere as it is now?

Think about it, you think they will give you a Jetta diesel 2011 for 20,995? If so, SIGN ME UP! the car automatically wins the value equation. NFW though. The Golf TDI is how much? I know the Golf TDI has more $h! on it, but there is a legion of fans who want a simple Golf or simple Jetta with the oil banger for only a max of a couple grand more, equally specced to the gas version, and VW refuses to do that.

-----edit----my bad, I see VW is bringing back the 2.0 four cylinder in the base models. makes sense, just hope its a decent engine. i guess the Cruze will be close in power to the Jetta now.

This is the continuation of the pursuit of marketshare at the expense of profits.

LOL "mitsubishi tried that too"

Edited by regfootball

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VW sounds like old GM: lower prices and quality in the name of market share. But as we know, more sales doesn't equate to hire profit margins.

Well, I don't know; you could say VW is adapting their products to local markets, like they've successfully done in China. After years of shoving down European market cars down American throats, they've attracted a number of enthusiasts who appreciate VW driving dynamics, design, and build quality - but they've never captured the mainstream market. Let's just hope the new American models don't come at the expense of award-winning cars like the CC and GTI.

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It was a misguided strategy to begin with. Glad to see The People's Car will once again be taken literally by the company itself. And those VW driving dynamics pow mentions above are an extremely endearing quality. For those that have not driven a Volkswagen over any length of time, you cannot understand.

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slowly but surely, US and Asian cars are adopting the taut driving dynamics of the German cars so their advantage there or time frame of that advantage is a closing window of opportunity for them.

i really think for VW it's a decent move to become even more of a global automotive superpower, but i hope this is not the beginning of the watering down and I certainly hope the mail it in interior on the new Jetta is not the new defacto standard for VW interiors.

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So many ppl are working from home nowadays. Maybe VW's interior designers are doing just that. And they mailed in a typically elegant and functional design that went into the new Jetta.

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