VW reinvents Beetle to boost US sales

The German carmaker's ambitious goal to triple domestic sales relies on the stylish new Bug, a redesigned Passat and a new Tennesee auto plant. Includes video.

By InvestorPlace Apr 18, 2011 10:25AM

By Jeff Reeves, editor of InvestorPlace.com


investorplace logoWith more than 21 million cars manufactured under the Beetle nameplate in the past 60-plus years, it's a bit shocking to consider the iconic Volkswagen car has seen only two major design schemes. Such big numbers on so few changes are proof of the compact car's resonance with motorists worldwide.


But with only 300,000 vehicles sold in the U.S. last year -- a mere 2.5% of the 11.6 million automobiles Americans purchased in 2010 -- Volkswagen has a long way to go before it is a serious player in the domestic auto market.

Post continues after video:

That's why Volkswagen has tweaked the styling of its flagship Beetle for just the third time in history, with a sleek extended roof line, a trendy interior and a longer body to appeal to the next generation of American drivers. But will this hip new Bug be enough to meet VW's ambitious sales goal amid weak consumer spending and high gas prices?

For starters, it's worth noting that auto sales are still off considerably from high-water marks set before the financial crisis, and it's an uphill climb for everyone. Annual sales in 2007 topped 16 million, and 2008 sales topped 13 million. With 11.5 million cars sold in America last year, there is just a smaller pie to divvy up among major automakers.


However, fiscal restraint may give the Beetle a leg up in the era of high gas prices. With a fuel efficiency of about 22 mpg city and 31 mpg highway, the car is an economical drive for many commuters.


Then again, the fuel-efficiency angle swings both ways. While 20% of VW consumers are into diesel-powered cars, the false perception of the fuel as dirtier than unleaded gas continues to turn off many Americans from diesel Jettas, Passats and Beetles. If Volkswagen expects its European success with diesel to cross the Atlantic into U.S. showrooms, it's got another think coming.

But on the whole, the stylish reinvention of the iconic compact car could prove an important move for Volkswagen in its quest to triple its current U.S. auto sales footprint to 1 million by 2018. But it's not the only one. A redesign of the Passat sedan is also in the works, and Volkswagen is building goodwill with American consumers with a Chattanooga, Tenn., auto plant that will be up and running sometime this summer.


The timing of the U.S. push also comes as Japanese automakers Honda (HMC) andToyota (TM) continue to be hamstrung by supply-chain woes in the wake of the recent tsunami and nuclear crisis in Japan. If those leaders can't keep up with demand -- Honda sold 1.2 million vehicles in the U.S. last year, while Toyota sold 1.7 million -- that will create opportunities for Volkswagen.


But it could be an uphill climb. General Motors (GM) and Ford (F) have both taken a page out of the European compact car book with plans for the Cruze and the Fiesta, respectively, to appeal to shoppers looking for chic but fuel-efficient cars of modest size. And with both the Chevrolet Cruze and Ford Fiesta starting at a few thousand bucks less for their basic models, Volkswagen hopes style will give its compact Beetle the edge.


Judging by VW's powerful history with the brand, that could be the case. As for whether it's enough to catapult Volkswagen to one of the front-running U.S. auto stocks, that remains to be seen.

Jeff Reeves is editor of InvestorPlace.com. Write him at editor@investorplace​.com, follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.

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Apr 18, 2011 12:08PM
31 MPG for the Beetle? Thats it? For a 4 banger? The 305 Horsepower Mustang V-6 gets 31 MPG! I'll take the American Muscle, thank you.
Apr 18, 2011 12:15PM
How about bringing back the VW Wesfalia Camper Bus? Now that's a classic.
Apr 18, 2011 12:17PM
If they made a modern VW Thing I would buy it in a heartbeat.
Apr 18, 2011 1:01PM
My 2001 WS6 Trans Am is rated for 29 MPG HWY and that was 10 years ago.  Best part is I get nearly the same mileage as the VW and I don't look like a total flamer driving it.
Apr 18, 2011 12:39PM
Hey Steelerfanfl. What's it like to be a complete idiot? Your VW, BMW, Porshe comments are beyond stupid.
Apr 18, 2011 12:43PM
I can't believe VW calls 22/city, 31/hwy good gas mileage. My full size 2001 Toyota Avalon gets that. When are the oil companies, auto makers and Congress going to wake up to providing a decent size car with excellent gas mileage. Chevy Volt is on the right track so far.

Apr 18, 2011 12:55PM
All of these body and style changes can't make up for the different engine....if they would return to the rear, air cooled engine I would be a fan again ...guess I am old fashioned but I had one many years ago and it was an amazing little car.  Fun to drive and great on gas, easy to maintain...probably multitudes that disagree but thats just my opinion
Apr 18, 2011 1:35PM
They have the car crammed back in a corner where the camera cannot pull back and give us an actual look at the car. As usual, VW sucks a at advertising their cars. Almost no one knows of all the fantastic features on all VW vehicles because they never give any useful information in their advertising. They when lots of awards for the cuteness of their ads but cuteness is only good for selling cars to teenage girls.

Note to VW: Fire anyone who has had anything to do with your advertising for the past 10 years and hire a company that know how to sell a product.
Apr 18, 2011 1:25PM
However, fiscal restraint may give the Beetle a leg up in the era of high gas prices. With a fuel efficiency of about 22 mpg city and 31 mpg highway, the car is an economical drive for many commuters.

22/31? That's it? Nothing has changed in the last 40 years other than the body style... I got mid 30's on the highway in my 1969 VW Karman Ghia (Wolfy) with the 1300cc boxer.


Besides, the older Kraut-Buggies were built a helluva lot better, less problematic, and were easier to work on. I'ld take one of them long before thinking about these new ones.

Apr 18, 2011 1:16PM
Good lord I have a 2007 Impala with a tad over 110 K and its getting better than 29 mpg on the highway, and that's with a 6 cylinder auto and air,, and now they say this little shyt shaker is getting GOOD gas mileage, with 21 to 30 mpg...., Give me  brake
Apr 18, 2011 12:57PM
22/31 is good, not great. A lot of new cars are as good if not better. The styling looks nice and will get some customers that way but VW will have to battle its reliability record to make a big push in the USA. I wish the government would do more to promote clean diesel as it could save a good bit of fuel a year, but old perceptions die hard.
Apr 18, 2011 12:56PM

VW didn't sell a boatload of their last generation Bugs, which did look a lot like their original Bug. Guess the warm, fuzzy feeling just wasn't there any more for enough Americans or other auto buyers around the world.


There are a limited number of markets where a $18K economy car is going to make it. If it were a $9K economy car, then you could sell it in more markets where the median income is way lower than in the US and Canada and Europe. There is a whole lot of competition in the compact, economy market. This sounds more like automotive mental masturbation on VW's part than a possibility. Good luck VW!

Apr 18, 2011 12:48PM
Apr 18, 2011 12:56PM
Diesel... really? Someone tell this American V W CEO that diesel is more costly than gasoline right now in America. Great product strategy.
Apr 18, 2011 12:46PM
The 2001 Toyota Avalon gets 18 City/27Highway/21 Combined. Look it up!
Apr 18, 2011 1:21PM
I can't understand why computer controlled fuel injected vehicles don't seem to get any better mileage than non computer controlled plain old carbureted vehicles. Gas mileage sucks, but it does look kind of Karmen Ghia'ish.
Apr 18, 2011 12:27PM

The problem with the Mustang is that it doesn't REALLY get 31 mpg. The VW ACTUALLY does.

It's been that way with Ford, GM and Chrysler for years, but the government turns a blind eye on that and lets them claim the EPA estimate. It's based on faulty data. I'll stick with my foreign cars, thanks. Ford, GM and Chrysler brought hell on themsleves and they can die for all I care.

No more bailouts, please and thank you.

Apr 18, 2011 12:55PM

cel1- People like you is the problem with this country, all the people out there buying Fournier cars. If your american buy american, If your a nazi buy a V.W.

Apr 18, 2011 12:28PM
If i had  a list of card that I would NEVER drive, ANY VW is at the top of the list along with BMW's. Why? becuast everyone who drives one thinks they got a ****ing porsche. Keep up the great sales VW, hopefully we wont see any of these pieces of **** on the road in the near future.
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