Cheap Leases Won't Save Volkswagen, But A Wagon Might

Illustration for article titled Cheap Leases Won't Save Volkswagen, But A Wagon Might

Why drive a Corolla when you can have a German sedan for less than $100 per month? Bloomberg reports that Volkswagen Jetta leases are $89/mo in some areas of the country, but is it really a deal if it’s a car no one wants? Perhaps VW should shred the cheap car image and look to a longroof to regain some sales.

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We already know that Americans don’t buy wagons, but that isn’t totally true. Americans really love some wagons especially if they can call that wagon a crossover. So what’s a brand like Volkswagen to do that has a wagon, but can’t get traction with the sales stats? Jack it up and make it a crossover.

It seems every week I get a customer interested in buying a new Outback. I have spoken with dealerships in a few areas of the country, many of which are saying they are pre-selling their Outbacks before they even arrive at the dealership. Some dealers have waiting lists and are finding buyers willing to pay full sticker price. Think about that for a second...there are buyers in this age of internet shopping that are paying full MSRP for an Outback. Depending on your local market you can probably find a better deal on limited edition WRX STi. Cars.com reports that Subaru Outbacks are only sitting on dealer lots for an average of 12 days. Despite the crazy demand the Outback was not the “hottest” wagon in April, that title actually went to the all new Volkswagen Sportwagen. On average, VW’s longroof sits on the lot for nine days before someone snatches it up.

Yet Volkswagen is still way behind in terms of sales. According to GoodCarBadCar.net, in April the VW sales were down 2.7 percent compared to last year. Meanwhile Subaru sales are up almost 18 percent and the brand is on track to sell a half-million cars in the US. That isn’t much compared to giants like Honda and Toyota, but Subaru is a relatively small automaker with limited resources compared to the global leviathan that is Volkswagen. We have discussed at length VW’s struggles in the US market despite a few pretty stellar cars. Both Subaru and VW built their market share by offering something a little different than the more common import choices. While both brands attempted to give their products more mainstream appeal, only one of the automakers found success. It all came down to one word...crossovers (or wagons that act like crossovers). Volkswagen put all their eggs in the sedan basket, while Subaru understood that that American buyers want to ride higher and brag about the safety of having AWD.

With the current popularity of the Sportwagen, Volkswagen is sitting on a golden wagon-crossover opportunity, but they are taking their sweet time bringing it to market. The Sportwagen Alltrack (they should probably just drop the “Sportwagen” name) is really nothing more than a lifted Golf wagon with some body cladding. But that is all the Outback ever was...a lifted version of the Legacy wagon that looked more “rugged.” It worked and people can’t get enough of them. The Alltrack is based on the MK7 Golf which has already garnered high praise for its upscale interior and “sporty” driving dynamics. This lifted wagon version would make for a great alternative to the Subaru, especially for folks who don’t want to wait or pay full price for the Outback. The Alltrack would have similar cargo space than, better fuel economy, and possibly a lower starting price.

Whenever I have a customer that is looking for a nice family vehicle and doesn’t want a monster SUV, I mention the Sportwagen. Most of the time the reaction is, “That’s nice but we aren’t really into wagons.” If the conversation changed to, “How about this 30k German crossover that can get over 40 MPG?” you would have more folks visiting the VW dealers.

For Volkswagen to dig out of this hole, it needs a small crossover and needs it badly. The Tiguan was a noble effort, but it couldn’t cut it and designing an all new CUV from scratch is time consuming and expensive. Since AWD versions of the Golf Variant (Sportwagen) are already available in Europe, the Alltrack crossover is basically ready to go. As to why Volkswagen is taking so long to actually sell the damn thing, while Subaru runs away with record sales is another question all together.

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If you have a question, a tip, or something you would like to to share about car-buying, drop me a line at AutomatchConsulting@gmail.com and be sure to include your Kinja handle.

DISCUSSION

stoke
stoke

2 things:

1. Cheap leases are a good thing if they’re driven by strong residuals on the back end, not by a big lump of incentives on the front end. They’re the reason BMW sells a million 3 Series sedans - you can get a decent one for three years for something like $349 a month, which is pretty darn reasonable when never you get out of warranty. And every three years, the buyer is back in the showroom and the dealer has an opportunity to sell/lease them a new one. It can be a very healthy source of business if the brand has the discipline to do it the right way.

2. VW needs a truly competitive range of small-ish crossovers, not a slightly lifted Golf wagon. The Sportwagen Alltrack is too small to really compete in the CR-V/RAV4/Escape/Forester segment, and it’s got the wrong form factor for the new subcompact CUV space that includes the HR-V, Crosstrek, Juke and Renegade. The former is the biggest SUV segment in terms of sales, and the latter is the fastest-growing. Sales results show conclusively that people don’t want wagons, and even if they did, the Golf isn’t big enough to compete with the Outbacks or other crossovers like it. Likewise the Tiguan; it’s too small, too expensive and not fuel-efficient enough.

VW certainly missed the mark in the near term by focusing on sedans. However, they’re not dumb and they’re certainly not poor; they will figure it out once the product development cycle catches up to the super-fast growth of the SUV market.