Can Volkswagen Buy Back Customers for $10,000 a Car?

There are news reports — or better to call them rumors — that Volkswagen will offer U.S. customers special incentives to get them to buy its cars. The incentives on diesel models may be cash, but the amount will have to be extraordinary to bring people into its dealerships.

One of VW’s most difficult problems is the number of models offered by competitors that get mileage and have features as good as those it offers in its cars, which is why its U.S. market share has run just above 2%. This was a problem before VW’s emissions scandal, and now it is much worse. VW only offers six basic models: Passat, GTI, Jetta, Beetle, Tiguan and Touareg. Based on VW’s data, some of these sell just a few thousand cars a month. Each and every other large global manufacturer that sells cars in America has a more diverse line, as well as prices that match or better VW’s by model. VW sells no car that is special.

VW management has to be grappling with the question of how much is enough to get any American to buy a diesel model of its cars. The diesel vehicles range in price from $20,000 to just about $30,000. VW will need to take a loss on every diesel car it sells.

VW has to help its dealers, which already are being hurt financially by the size of their diesel inventory. This means incentives almost certainly will have to be extended to both dealers and consumers. Any discounts will not include dealer participation, because that would add to their financial burden.

What does it take to sell a $25,000 car that no one wants? A few thousand dollars off is not enough. Other manufacturers already offer that on many models to clear out 2015 inventory. The VW offers will have to be extraordinarily deep. How deep? To catch the eye of consumers, it may have to be close to $10,000 — or perhaps more.

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