VW Group won’t cut prices just to widen market share in US market

Article by Christian Andrei, on May 9, 2015

Volkswagen Group will not be reducing its prices to increase its market share in the U.S., according to Christian Klingler, Volkswagen Group's board member for marketing and sales. After first quarter results were announced, Klingler told analysts that VW, which took advantage of a weakening euro, prefers to sacrifice share than throw more money to sweeten the deal on its vehicles.

He clarified that there won’t be any major changes in its pricing strategy. Last Friday, VW revealed that its U.S. brand sales declined by 2.7% for the month of April with 30,009 vehicles sold. For the year to date, VW sales dropped 7.5% with sales of 109,248 vehicles. For April, the overall U.S. market increased by 4.6% and has grown 5.4% for the January to April 2015 period.

In addition, Klingler revealed that the brand followed its long-term strategy of protecting margins or restricting losses as much as it is able to do so in countries where it is having some issues, like Brazil. He explained that the company considers it the “right strategy” for the long term. VW brand’s worldwide profitability had marginal improvements year on year, from 1.8% in the first quarter of 2014 to 2.0% this year.

VW was able to benefit from the weak euro but he said that it wasn’t all that significant, adding that the impact is “not extremely strong” since a big volume of its cars come directly from the market in North America.

Edmunds.com revealed that in May 2014, the incentives per VW brand vehicle amounted to $3,132. In January, it fell to $1,840. In February, VW spent nearly $2,200 on incentives for each vehicle but this is still around 6.5% below the industry average.

From the moment that VW began producing a U.S. version of the Passat in Chattanooga in 2011, there has been a decline in the share of imported vehicles in its model range.

In 2014, just around 46,000 VW brand vehicles were made in Europe and sold in the U.S., fewer than 13% of overall volume. Klingler maintained his prediction that VW brand’s U.S. sales would be "roughly on the same level" as last year, when volumes dropped to almost 367,000 vehicles, representing a 10% decrease from 2013.

Topics: vw, united states

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