VW changes course in the US

aldebaran

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VW goes after volume, cuts Jetta price
Automaker will try moving upmarket in U.S. at later date

queryvar="vw,goes,after,volume,cuts,jetta,price";Automotive News / June 19, 2006 - 6:00 am



2007 Jetta costs less than the '06
WOLFSBURG, Germany -- Volkswagen is abandoning its strategy of moving the Jetta upmarket and will remove content from the compact for the 2007 model year, slashing the price $1,410.

Adrian Hallmark, executive vice president of Volkswagen of America Inc., said lowering the price of the Jetta, VW's biggest seller in the United States, is part of the brand's return to its volume image. VWoA will abandon attempts to move sharply upscale, at least for a few years, Hallmark said.

"If we are going to be a volume player, we have to play the volume game," Hallmark said at a press event here. "If you look at the price-volume relationship, the decision is really clear."

VW dealers agreed to reduce profit margins to support the move.

Hallmark confirmed that 2007 Jetta prices will begin at $17,105, including shipping. The cheapest 2006 Jetta starts at $18,515, including shipping.

Hallmark said the base 2007 Jetta will not be a totally stripped model. VW can't remove features such as antilock brakes or extra airbags. Those items are standard in Europe and would cost too much to remove, Hallmark said.

VW dealers agreed to take a cut in profit margins on the base Jetta as well as the entry Rabbit compact, said Hallmark. He would not disclose the size of the cut but said it is "not more than 1" percentage point.

Hallmark said VWoA also cut its profit margin on the two cars.

Rabbit sticker cut

The Jetta price cut follows similar action on the Rabbit, the next generation of the car that's called the Golf everywhere else in the world. It will go on sale this summer with a base price of $15,605, including shipping. The base 2006 Golf sells for $16,660, including shipping.

The new pricing reflects Volkswagen of America's decision to compete with volume brands, including Toyota, Honda, Mazda and Mitsubishi, Hallmark said.

That represents a turnaround from VW's strategy when it launched the larger, redesigned Jetta in the spring of 2005. Len Hunt, Hallmark's predecessor, said at the time that the Jetta "can actually bridge three segments" -- premium subcompact, premium mid-sized and entry-luxury.

In Germany, VW's efforts to become more of a premium brand "worked far better than in the U.S., where it did not work as well," Hallmark said.

The problem in the United States is that the Jetta's price was comparable to that of larger sedans such as the Toyota Camry, he said.

Jetta sales peaked at 145,000 units in 2001. This year, the first full year of the redesigned vehicle, VW expects to sell about 105,000 units, Hallmark said.
 

Charm

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my opinion: BIG Mistake

The thing I always sell to my friends about VW when I got my 2002 is that they choose more standard features over profit margins. Safety and Luxury equally. My car only had 2 options, available: Leather(cold weather) and Sunroof/Rims
Do you all remember that up till recently Honda and Toyota, the most respected Japanese competitors to VW, both did side airbags as a FACTORY option on both their camry/accord and corolla/civic lines?
To the lamen, that means that at their corporate offices they had little focus groups and made life/death decisions based on research on how many cars to build at the factory with side airbags and charge 500$ at the dealer. Say all of a sudden americans started wearing helmets when they drove and found no value in side airbags, customers would be forced in paying the 500$
And lets not forget that VW has airbags in the seat as standard too.
If you wanted Disc brakes on a civic you needed to get the EX edition.
And as a valet driver from 2003-4 I parked an EX, gunned it and slammed the brakes, and there was no comparison
If the customer does their homework with an open mind, then VW was a no-brainer, back in 2002.

So in conclusion, I think a better solution to VW would have been
A: sell the Jetta/golf city (the MKIV) and put those new pleather seats
B: sell the Polo or Lupo to have a lower price point, I saw in Top Gear they have a new model called Fox, it was selling for 9000 pounds
C: bring over Skoda or Seat and sell the cars based on the polo, just like toyota/scion: they are selling the Xa and Xb based on the ECHO/Yaris platform and the new one is on the Avensis(european only) chasis.


I REALLY hope that the options they pull are not the Pleather seats or the beautiful two tone alloy rims. This is whats sets VW apart.
Really, the PLEATHER seats are a revolution in their own right in the compact car industry
 

mavapa

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About time. In the past VW has appeared either to have no clue about the American market or to have no concern about it. Trying to move upmarket was a mistake for them, at least here. Nameplates matter here. That's why Honda, Toyota and Nissan have Acura, Lexus and Infiniti here; people won't spend that kind of money unless they think they are getting a better nameplate. "VW? That's an economy car, isn't it?"
 
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jgilliam1955

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It's about Time

VW to compete had to do this. The cars take twice as long to build & they cost more. I know most people do not consider buying a VW when buying a new or used car. I did not until someone told me about the VW diesels instead of a hybrid. I have been telling everyone about VW since then. About 90% were suprised about the Diesel vs Hybrid information. Also most consider the cost to much when you can buy a Honda.
Maybe this will allow VW to get back in the game. Where I live there are only 2 dealers & we have over 400,000 people. But there are tons of dealerships belong to all the others.
 

PlaneCrazy

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I think this is a good move; VW was narrowing the gap too much with Audi. Phaeton? Phooey! Give me value, not a prestige car with a value brand. Nothing prevents them from offering more equipment at a higher price. The Golf/Jetta City is already a reality and is coming, to Canada at least, for the 2007 MY. I saw it on VW's order system this week at the dealer when chatting with the salesman. Note though that even these $15k/18K (CDN) "strippers" will have ABS, front/side airbags, 4-wheel disc brakes; even ESP is available as an option, something not found on Japanese strippers.

I think this has been a strong positive for VW: just because you can't afford fancy, doesn't mean you don't deserve to be safe. VW's marketing should play this up: after all, Volkswagen means "People's car". Maybe you can only afford roll-up windows, and VW can supply that in a Jetta City, but that doesn't mean you can't afford decent brakes, ABS, ESP and passive safety features.

The "full Jetta" can have a lower-content entry-level price point, but they can still continue to offer packages up to what they currently have. It will still be a decent car, and in 2008 will become a great car again when diesels come back.
 

MrMopar

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About time, those price points on the New Jetta were getting absurdly high for a car made in Mexico.

Things like leather and electronic stuff like stereos and auto-climate-controls do cost real money to build into a car, but I'm not buying their entry-level car at the old price point. With wages as low as they are in Mexico, VW can afford to drop the price a bit. It's not like the Passat, built in Europe with the unfavorable exchange ratio of the USD/EUR.

I know that VW builds cars with solid build quality, but for every customer who looks for that in a car there are 9 other people that don't care and buy by price. Those people cross shop at Honda and Toyota. Even if the Japanese cars have steel that is a bit thinner and not galvenized, every bit that the entry price for the New Jetta edges closer to $20,000 is another reason that someone might choose a Civic or Corolla.

If you want sales volume, price competitively. VW can keep offering all the accessory packages to keep their markups for people who want to spend more cash on luxuries like leather and 6-disc CD changers, but there has to be a stripped model to offer something to the hair-shirt buyers out there.
 

truman

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At least VW won't have to take their franchises down market to match the new strategy.
 

Driver_found

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I thought they were built by Mexican robots, and machines don't care about wages.

-Mike
 

aldebaran

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They will create a stripped down base model that will sell for less. Then, they will have the options for whoever wants more comfort/luxury.
The chopped down model will be Pkg 0 in 07 lineup if I understood it well.
Probably more things will be optional starting with the MY06, rather than standard like now.

Charm said:
my opinion: BIG Mistake

I REALLY hope that the options they pull are not the Pleather seats or the beautiful two tone alloy rims. This is whats sets VW apart.
Really, the PLEATHER seats are a revolution in their own right in the compact car industry
 

aldebaran

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This is interesting since the full options Toyota Avalon costs more than the base Lexus 3000.
Talking about nameplates...

mavapa said:
About time. In the past VW has appeared either to have no clue about the American market or to have no concern about it. Trying to move upmarket was a mistake for them, at least here. Nameplates matter here. That's why Honda, Toyota and Nissan have Acura, Lexus and Infiniti here; people won't spend that kind of money unless they think they are getting a better nameplate. "VW? That's an economy car, isn't it?"
 

aldebaran

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Where I live there are 4 dealerships within a 25Km radius serving about 500,000 people in 4 cities. But here is Canada.

jgilliam1955 said:
VW to compete had to do this. The cars take twice as long to build & they cost more. I know most people do not consider buying a VW when buying a new or used car. I did not until someone told me about the VW diesels instead of a hybrid. I have been telling everyone about VW since then. About 90% were suprised about the Diesel vs Hybrid information. Also most consider the cost to much when you can buy a Honda.
Maybe this will allow VW to get back in the game. Where I live there are only 2 dealers & we have over 400,000 people. But there are tons of dealerships belong to all the others.
 

TDIMeister

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Driver_found said:
I thought they were built by Mexican robots, and machines don't care about wages.
And who operates the robots and machines?? Are they artifically intelligent that they work completely on their own?

Modern manufacturing plants may be highly automated, but each still employs thousands of people from managers to line operators to janitors.
 

Dimitri16V

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Just got back from local dealer, Rabbit is $ 18,500 . There was a Jetta V TDi with a surcharge of $ 1,000 bringing total to $ 24,780 :eek:
 

torifile

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Dimitri16V said:
Just got back from local dealer, Rabbit is $ 18,500 . There was a Jetta V TDi with a surcharge of $ 1,000 bringing total to $ 24,780 :eek:
You're close enough to philly to make it worth the trip to Langhorne VW. Don't let dealers gouge you.
 

Dimitri16V

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torifile said:
You're close enough to philly to make it worth the trip to Langhorne VW. Don't let dealers gouge you.
I already have an 01 and an 04. The 01 Golf decided to drop the window in the door and happened to be at the dealer. My wife won't let me get another car :D

Langhorne VW needs to be commented for running an ad about the Jetta TDI on a billboard on I-95 N.
 

TooMuchBoost

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PlaneCrazy said:
I think this has been a strong positive for VW: just because you can't afford fancy, doesn't mean you don't deserve to be safe. VW's marketing should play this up: after all, Volkswagen means "People's car". Maybe you can only afford roll-up windows, and VW can supply that in a Jetta City, but that doesn't mean you can't afford decent brakes, ABS, ESP and passive safety features.
You are crazy! Let VW make people think I hike, take yoga and have a low ego emission because that is what sells car in the US!:rolleyes: :rolleyes: :rolleyes:

Your point is exactly why the g/f bought a cheapie 2.5 06 Jetta. It scored at the top of a legitimate crash tests (gov't tests are a joke), it was well equipped for $17K, got good gas mileage and moves out of its own way.

Since I felt that I didn't owe VW anything plus the g/f gets A/Z plan from Ford we were going to trade her 04 F-150 in on a Fusion...until the side impact results came out. The primary objective was a safe and nice economical car to commute 10 miles per day in. The only reason we even looked at one was simply because we happen to drive by a closed dealer on a Sunday night while talking about buying her a car. Sadly, it was never a consideration because VW marketing sux.

I've spent a lot of labor and money on my car but I'll sell it in a second if VW keeps up with these ignorant commercials. IMO these commercials are worse than the first Infiniti commercials where all they showed was the stupid clock.

VW is known for economical cars which have been pretty safe as of late and they need to get that message out. There are scores of better cars than the current VW's (even if some cost more) and the last thing VW needs to do is snub the 95% of the population that has no intention of owning a VW because IMO VW has very little to brag about in the last 5 or 10 years as far as I can tell.
 
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Pelican18TQA4

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I just hope VW still offers the premium options that enthusiasts have been whining for since the MkIV was introduced. I love VW because, in my opinion, they're the nicest cars out there for the money. They're like affordable BMWs, with FWD instead of RWD.
 

bhtooefr

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Yeah, guys, the funny thing is, the base Rabbit has more content than, oh, the base Civic (c'mon, the Civic doesn't even have factory radio or AC, IIRC).

Oh, and it costs the same, IIRC. ;)

Granted, MPGs are a little different...

(Then again, I think the best comparison is between the Mazda3i sedan and the Rabbit hatch, due to price... and both are pretty good on content...)
 

b100koczur

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I'd love to see more basic offerings in the american market. Basic, safe, and mechanically sound transportaton.
Brian
 

TDIfor

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Hmmmm... turning Volkswagen into a "People's Car"????

IMHO, if VW plans to go head-to-head with Japan Inc., its gonna get its head handed to it on a platter. For one thing, there is that niggling JDPower and Consumer Reports ranking which place a VW somewhere around Yugo.

Why dont we get the bugs sorted out first, before we push to become a mass-merchandiser of automotive motivation?
 

KentSzabo

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Too bad there won't be a Diesel Rabbit until the 2009 version in the Summer of '08 when they will have the Common Rail engine. I guess I will need to get another 100K miles out of my '02.
 

KentSzabo

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No problem at all at, 104K miles it still gets 48.58 MPG and does not burn any oil I was just hoping to add another one to the fleet..
 

DRbillZ

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Upscale didn't work. How many luxury cars did VW sell? Not many.

VW can make a KILLING in the U.S. market right now selling economy cars. The TDI is perhaps the biggest seller they could have if they get it under the crappy EPA laws and start ADVERTISING FUEL MILEAGE!! hint hint dummies!
 

eddie_1

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typically german going from one extreme to another. i actually like the GLS type trim and few audi type stuff thrown in. how does reliability factor into this. does cheaper mean even worse reliability now? ~ed
 

bhtooefr

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As I understand, the goal here is reliability at the cost of luxury.

Whereas the Mk4 was luxury at the cost of reliability.
 

bhtooefr

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Well, there were enough bad ones that there were enough unlucky people that got mad and started complaining...

The Mk5 is an attempt to reduce the number of bad ones. :)
 

TheLongshot

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bhtooefr said:
Well, there were enough bad ones that there were enough unlucky people that got mad and started complaining...

The Mk5 is an attempt to reduce the number of bad ones. :)
When you get any new model for a vehicle, you are going to have problems. It is why I'd probably never buy the first year of a new model. Eventually, they did shake out most of the bugs in the A4, and my 2003 has been a reliable vehicle, not suffering from any of the bugaboos earlier A4 models suffered from.

Jason
 
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