Volkswagen Focuses on SUV Sector for Growth in U.S. Market

As it strives to triple sales in the U.S. within the next seven years, Volkswagen AG will expand its footprint in the lucrative SUV sector. The move is designed to help the German automaker compete for market share with domestic and import automakers including General Motors Company and Toyota Motor Corporation.

The company’s U.S. chief, and former General Motors executive, Jonathan Browning said Volkswagen will focus on the compact SUV segment but added, “Over time, I think there’s also scope for growth in terms of a larger SUV within the portfolio.”

The German Automaker currently sells the compact Tiguan and full-sized Toureg SUV in the U.S. Last year U.S. sales of those models totaled 20,946 and 4,713 respectively. Combined industry sales of SUVs in the U.S. reached 3.3 million units in 2010. The Honda CR-V was the best-selling model, with sales of 203,714 according to analyst Ivan Drury.

By 2018, Volkswagen hopes to increase its total U.S. sales to 1 million vehicles annually. Of those sales, VW estimates that up to 20 percent will come from its Audi luxury brand.

To facilitate sales, VW plans to begin production at its new Chattanooga, Tennessee facilities in April. According to Browning, a former General Motors executive, the new mid-sized sedans built at the plant will begin arriving in U.S. showrooms during the third quarter. The new model will be Volkswagen’s first-ever vehicle built specifically for the U.S. market. VW will unveil a production model at the 2011 North American International Auto Show in Detroit this week.

Browning said the new model to be produced at the Chattanooga plant should account for “approximately the same proportion” of U.S. sales as the Jetta compact model. Last year, the Jetta accounted for about half of Volkswagen’s U.S. sales.

Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch- Gladbach said “VW is simply not a player in the American SUV segment. Their models aren’t being recognized as sufficiently competitive.”

Volkswagen, including its Audi unit, sold 358,500 vehicles in the U.S. in 2010. General Motors Company sold 22.2 million vehicles domestically while Ford Motor Company saw domestic sales rise to 1.97 million units. The world’s largest automaker, Toyota Motor Corporation, sold 1.76 million vehicles in the U.S. last year.

Browning said, “We’ve got plenty of ideas in terms of new product entries,” and added, “It’s very important that we build a balance of our product portfolio in the U.S.”

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