Volkswagen has Big Plans for U.S. Auto Market

Volkswagen AG has set its combined U.S. sales goal at one million units per year by 2018.  The figure includes roughly 800,000 VWs and 200,000 Audis, and is about three times what the company sold last year.

In order to meet the goal, Volkswagen intends to produce a lot more cars in the U.S.  The automaker has decided to build a new mid-sized sedan model as well as a small car or an SUV at its new Chattanooga, Tennessee plant. The sedan will go into production next year, but plans for the small car or SUV have not been finalized yet.

Purchasing director for Volkswagen, Tom Loafman, says that the company has begun planning for the second product even before it has begun building the first one. He spoke about the matter during the CAR Management Briefing Seminars last week.

Loafman also mentioned that the huge Chattanooga facility may be the site chosen for a new engine plant the company would like to build in North America to supply the Chattanooga and Puebla, Mexico plants. Other possible locations for the engine plant include a separate greenfield site or the current VW factory complex in Puebla.

The $1 billion Chattanooga project is how Volkswagen plans to reach the $1 million sales goal by bringing down costs of its U.S. products and boosting capacity high enough to produce the vehicles it wants to sell. Last year, VW brand sales totaled 213,454 units.

The company hopes that the new mid-sized sedan will be direct competition against popular family sedans like the Nissan Altima and the Honda Accord. “We haven’t been able to compete well in that segment,” says Loafman.

VW also plans to compete with the European imported Passat, which sells for around $27,000 in the U.S. They plan to produce cars at the Chattanooga plant that will cost much less, similar to the less than $20,000 Honda Accord.

The price difference is partially due to the dollar-euro exchange rate, which makes the price in the U.S. higher. This is why Loafman and his staff decided to source much of the new car’s content in North America. He says the sedan is now about 63% U.S.-sourced and one fifth of those suppliers are new to Volkswagen.

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