Why Volkswagen is Investing in SUVs, And Why it Says it Won’t Give Up on Sedans

Whether you like SUVs or not, you will have not doubt noticed that they dominate the road. So even if it comes as a disappointment, it shouldn’t really come as a surprise that VW is investing more and more in light utility vehicles like Atlas and the Tiguan. But VW was kind enough to share some of the actual figures behind their decision making.

We’ll go deeper into specifics farther down, but what ultimately really matters is that while the industry is contracting (VW predicts a 0.8% drop in industry-wide vehicle sales in 2019) VW’s sales are growing. In 2019, they’ve grown 4.20 so far this year. Which is nice.

Unfortunately for the readership of this site, that’s not thanks to cars, whose sales have fallen by nearly 8% in 2019. Volkswagen’s light utility sales, meanwhile, have grown by 18%.

And that’s not a flash in the pan. Volkswagen has been outperforming the market since 2017 when a big old SUV we know as the Atlas debuted.

And when the new Tiguan came in to support the bigger Atlas, the brand’s sales swung from car-dominated to SUV-dominated almost overnight.

And you can feel your feelings about that, but the lion’s share of those sales aren’t coming from Golf buyers. They’re coming from Mazda buyers. The Tiguan and the Atlas account for 84% of VW’s conquests.

So not only are the SUVs selling like hotcakes, they’re bringing wholly new sales to the charts.

And since SUVs cost more, VW’s average transaction price has risen more than $4,000. Which means not just more sales, but more money per sale, too.

So it shouldn’t come as a surprise that VW is doubling up on SUVs. Along with the Atlas Cross Sport, the brand will introduce a little cross sporty version of the Tiguan to capitalize on America’s compact SUV love affair.

 

It will be shorter and cheaper than the Tiguan and VW says that it should size up somewhere in between the Jeep Compass and the Subaru Crosstrek.

With all of that said, though. The Jetta still sells better than any other VW. And while passenger car sales fell nearly 10% in 2019, VW’s passenger car sales fell less than 8%.

That helps to explain why VW still wants keep its toes in the passenger car segment. Because although SUVs are eating up more and more of the market, sedans still make up a sizeable chunk.

Volkswagen predicts that in 2021, the market will be hungry for 1.6 million compact sedans like the Jetta and 1.9 million midsize sedans like the Passat. Not to mention the 1.35 million other cars like the Golf.

There’s also the question of brand identity. We aren’t the only ones who like the GTI and if a brand goes without a halo product for too long, they end up like pre-Supra Toyota. Even Ford is keeping the Mustang around.

With VW only planning to offer two electric SUVs and a wagon, though, it’s hard to have that much faith in VW’s dedication to passenger cars.