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VW Brand to Invest $3.3 Billion in Quest for US Relevance

Jan. 15, 2018
“We want to gain market share and grow from a niche player, to a truly relevant brand in the United States.”

Volkswagen AG, unveiling a version of the revamped Jetta sedan, said it’ll invest more than $3.3 billion in North America to help lift the brand out of irrelevance in the U.S.

The spending through 2020 will mostly go toward new models, including two more planned sport utility vehicles designed to finally turn VW’s fortunes, after lingering at less than a 2% share in the world’s second-biggest car market. About $1.2 billion of spending will go to the U.S. directly, Volkswagen said Sunday in a statement ahead of the North American International Auto Show in Detroit.

“At long last, we want to get it right,” Herbert Diess, head of the VW marque, told reporters after showing off the $18,545 vehicle that last year was the brand’s biggest seller in the U.S. “Last year, we’ve already significantly cut our losses” in North America, he said.

The bread-and-butter sedan marks a pause in VW’s strategy of adding more popular SUVs to woo buyers, after its product line failed to crack the American market for years. Last year, the German carmaker started sales of a long-wheelbase version of the Tiguan and the large Atlas SUVs, pledging to more than double U.S. market share in the coming year to 5% in the years to come. It plans to break even on operating profit in North America by 2020.

‘Relevant Brand’

“We want to gain market share and grow from a niche player, to a truly relevant brand in the United States,” said Hinrich Woebcken, the head of VW’s North American business. Last year, the brand’s market share advanced to 2% from 1.8%, led by sales gains for its new SUVs.

Finally making products Americans want to buy is part of a broader revival for VW’s namesake brand. The world’s largest automaker is still battling the fallout from 2015’s diesel-emissions scandal and needs to stem rising spending to stay on top of a seismic industry shift toward battery-powered vehicles and new digital services. The nameplate accounts for more than half of the Volkswagen group’s global deliveries, and it develops key technology for sister divisions, including Audi, Skoda and Seat.

As Volkswagen faces a litmus test for its products, Subaru Corp. showed that gaining footprint can be done in the competitive U.S. market. The Japanese automaker expanded sales for the 10th consecutive year, even as industrywide demand slowed, with models like the Crosstrek and Outback SUVs. It now outsells the VW brand by an almost 2-to-1 margin.

By Elisabeth Behrmann

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