Here's How Volkswagen Will Try To Figure Out The American Market (Again)

Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.

1st Gear: Never Give Up

For years now we've heard people from Volkswagen say they just haven't "figured out the American market yet." The automaker blames its drop-in-the-bucket U.S. market share on this lack of understanding. It's surprising to hear, given how well the other German brands do in America (including VW's own cousins at Audi) and the fact that it's been here longer than almost everyone else. There was a time in America when an "import car" pretty much meant a VW. Now it's trying again—again—to crawl back to that kind of market dominance.

Automotive News has a deep-dive on this revised strategy, led by Hinrich Woebcken, a German who lived in the U.S. as an exchange student for a time. He credits the experience with putting him on the path to a career in cars, and giving him more perspective than some of his German colleagues at a company where, historically, whatever Wolfsburg thinks is what reigns supreme.

It'll be yet another re-tooling of VW's American strategy after going upmarket, going beige and clean diesels all didn't work out. From the story:

Woebcken also wants to reposition the brand downward in the U.S., ending the decades of pricing premiums it levied in part because its vehicles were "German-engineered." In January, Volkswagen cut the U.S. price of its redesigned three-row Tiguan by as much as $2,180, depending on the trim level. The same month, the brand introduced a redesigned 2019 Jetta — its top-selling U.S. nameplate — starting at $100 less than the outgoing Jetta, even though the redesigned version has significantly more standard technology.

Woebcken's plan also includes localizing sourcing for Volkswagen's two North American assembly plants to hold parts costs down and increase profitability.

Most importantly, it means shortening Volkswagen's long product cycles and bolstering the brand's crossover offerings to better meet the desires of American consumers, who have fled from the midsize and compact sedans that dominate Volkswagen's lineup. Woebcken, who also is in charge of the brand's operations in Mexico and Canada, has promised that Volkswagen will "introduce two new cars every year" to North America, including plans to make two-row versions of its three-row crossovers, the Tiguan and new Atlas, within the next year.

Finally, there is the company's electrification strategy, which will start in 2020 with the I.D. Crozz crossover and ultimately extend to at least four models, including an electrified Microbus called the I.D. Buzz. Volkswagen Group's global platform strategy will enable the brand to democratize the costs of the electrified vehicles, pushing prices down to levels that make them competitive with internal-combustion vehicles.

Additionally, VW stretched the warranty on its cars to try and shed the expensive-to-own, unreliable image it had cultivated over the years.

Can more new cars, better pricing and eventually EVs work this time?

2nd Gear: The Tesla Model 3 Needed A 'Breather'

All eyes are on Tesla Model 3 production and whether or not the startup automaker can actually meet its ambitious self-set goals for the volume-seller EV. But for at least a few days in February, Tesla needed to hit pause, Bloomberg reports:

Model 3 production was idled from Feb. 20 to Feb. 24 before resuming at the company's assembly plant in Fremont, California, Tesla confirmed Sunday. The automaker currently makes the Model S sedan, Model X sport utility vehicle and Model 3 at that site, and batteries at a plant known as the Gigafactory east of Reno, Nevada.

"Our Model 3 production plan includes periods of planned downtime in both Fremont and Gigafactory 1," a Tesla spokesman said in an emailed statement. "These periods are used to improve automation and systematically address bottlenecks in order to increase production rates. This is not unusual and is in fact common in production ramps like this."

It may be, but expect it to be analyzed and scrutinized to death by the various Tesla-watchers.

3rd Gear: The New Honda Accord Is A Slow-Seller

It's hard not to be impressed by the new 2018 Honda Accord. I tested one for a week in New York and gave it high marks. It's one of the best-equipped, best-driving "normal" cars you can buy right now.

But sedans are selling slowly compared to big trucks and SUVs right now, and even the Accord—traditionally a car that sells well no matter what—is off to a slow start. Via Automotive News:

Dealers love the storied sedan, saying it's a formidable package that tops the rival Toyota Camry. Some even say it's Honda's most impressive car to date.

Even so, Honda dealers are struggling to sell it, as dealers everywhere struggle to sell midsize cars. Some have resorted to turning down shipments from Marysville.

The whirlwind of activity at the plant, therefore, is turning out to be the last action that many Accords see for some time. Once they reach dealer lots, Honda's award-winning sedans are forced to sit.

Inventory levels stood at a 104-day supply on March 1 — high by any standards, let alone Honda's typical sparse count.

But why, you ask? A lack of lease deals, as directed by Honda. And dealers are mad!

Dealers around the country blame a lack of enticing lease offers.

Consumers are looking for deals, but they aren't finding any for the Accord, an improved specimen that carries a higher sticker price — $24,460 with shipping — than the previous generation. This means consumers who leased a 2015 model, for instance, are returning to stores now to find that their monthly payments will be considerably higher if they want another one.

One dealer, who declined to be named, said Honda is abandoning buyers who only lease.

Dealers say this is unacceptable as they contend with the Camry. Toyota has amplified Camry sales with regional 36-month lease specials for its lower-end LE trim.

Accord sales are down 13 percent this year, and the segment as a whole is down 15 percent. Sounds like Honda needs to ante up with the deals.

4th Gear: Volvo, BMW Warn U.S. Over Trade Tariffs

We know the Trump trade tariffs will likely increase the cost of new cars. But now, European automakers say they could hurt investments in the U.S. as well. Volvo is reportedly considering scaling back its planned factory in South Carolina as a result. From the Wall Street Journal:

However, raising tariffs on imported cars could prove trickier than on steel and aluminum imports and could have unexpected effects. If European car makers react by cutting investments in their U.S. plants, it could even hurt U.S. car exports.

That is because Germany's big auto makers— Volkswagen AG , BMW AG and DaimlerAG , which makes Mercedes—have built factories in the U.S. and Mexico in recent years that are geared to export to Europe and China, not just to sell to Americans.

The German manufacturers employ around 36,500 Americans at their factories in South Carolina, Alabama and Tennessee. If U.S. exports face retaliatory tariffs and it becomes more difficult or uncompetitive to export cars from the U.S., European auto makers would likely have to shift those jobs to Mexico or bring them back to Europe.

"Should we face tariff barriers, it will have an impact on jobs in the United States," BMW CEO Harald Krüger told reporters at the Geneva Motor Show this week.

And from Volvo:

Volvo's plan is sell half the cars it builds in Charleston in the U.S. and to export the other half to Europe and China. However, Volvo fears that a trade war would change the economics of the plant, making it impossible to export cars from the U.S. if they faced retaliatory duties in Europe and Asia. That means Volvo would scale back the Charleston operation.

"If the factory in South Carolina could not export, it would be half the size. It would not employ 4,000 people anymore but just 2,000," Volvo CEO Håkan Samuelsson told reporters this week. "That is the direct impact for America of trade restrictions."

Shit! This trade stuff is turning out to be complicated!

5th Gear: Your Diecast Cars May Be Worth A Lot More Than You Think

It's a big year for Hot Wheels and Matchbox cars—the brands turned 50 and 65 this year, respectively. And as The Detroit Free Press points out—citing research from GoCompare—there are some rare cars that are better investments than actual cars.

The champion — now and probably forever — is a toy Hot Wheels never even sold because design problems derailed it. A pink 1969 rear-loading VW Microbus Beach Bomb would fetch $100,000 to $150,000 from collectors, according to Neal Giordano, founder of the North Carolina Hot Wheels Association, and author of books and price guides on die-cast cars.

In a goof countless auto engineers will sympathize with, the rear-loading Beach Bomb's design looked great, but it was a disaster on the road: Its high center of gravity caused it to fall off Hot Wheels' orange track as it raced around curves.

They have a list of the top 10 most valuable toy cars in that link. If you have one, you should send it to me. I'll take very good care of it, I promise.

Reverse: Fiat Scion Born

On this day in 1921, Giovanni "Gianni" Agnelli, the glamorous, powerful Italian business tycoon who turned Fiat, his family's car company, into an international conglomerate, is born in Turin, Italy. Agnelli was named for his grandfather, who founded Fabbrica Italiana Automobili Torino, later known as Fiat, in 1899.

[HISTORY]

Reverse: Will This New American Strategy Work For VW?

Or is there something else the troubled German automaker needs to try here?