VW Global Results Point to Disappointing Car Sales

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The Volkswagen Group means to become the world’s largest car manufacturer as measured by unit sales. That means it will have to push ahead of longtime leaders General Motors Co. (NYSE: GM) and Toyota Motor Corp. (NYSE: TM). Based on VW’s latest earnings numbers, its hopes are an illusion. The German firm reported:

The Volkswagen Passenger Cars brand sold 3.5 million cars in the first three quarters, down 3.8 percent on the prior-year period (3.6 million). The brand’s operating profit of €2.1 billion (€2.9 billion) was weighed down by lower sales volumes and upfront expenditures for new technologies.

Those numbers are not even close to enough to make up ground on Toyota and GM. One of the primary reasons is that VW continues to have a small and falling presence in the United States, the world’s second largest car market, coupled with its disastrous results in Europe. Its only impressive accomplishment is that it leads sales in the People’s Republic, which is the world’s largest car market. In the United States, through the first three-quarters of this year, VW sales are down 2.6% to 314,883. That is against an increase in sales of all car companies, which rose in the same period by 8.3% to 11,786,536. VW’s share of the American market fell from 3% in the first nine months of 2012 to 2.7% this year.

VW has two major disadvantages in the United States. The first is its awful reputation for quality. The carefully monitored Consumer Reports research on vehicle reliability is littered with VW models, particularly given the very small number of models it sells in the U.S. The reports showed that the VW Beetle, GTI and Touareg were on the “least reliable” vehicle list. As a brand, it rated number 20, out of a total of the 30 brands measured “less important.” Still a drawback is the number of models VW makes — 10 — which is hardly enough to compete with other global car companies that offer many more.

VW cannot be a success worldwide because it has done so very poorly in America.