VW cuts Jetta prices to regain volume

[nadepalma]

Source: http://www.autoweek.com/apps/pbcs.dl...03/1041/SEARCH

Dialing it Back
Volkswagen cuts Jetta price in effort to regain volume; upmarket move to come later
By DIANA T. KURYLKO | AUTOMOTIVE NEWS
AutoWeek | Published 06/19/06, 8:03 am et



WOLFSBURG, Germany -- Volkswagen is abandoning its strategy of moving the Jetta upmarket and will remove content from the vehicle for the 2007 model year, slashing the price $1,410.

Adrian Hallmark, executive vice president of Volkswagen of America Inc., said lowering the price of the Jetta, VW's biggest seller in the United States, is part of the brand's return to its volume image. VWoA will abandon attempts to move sharply upscale, at least for a few years, Hallmark said.

"If we are going to be a volume player, we have to play the volume game," Hallmark said at a press event here. "If you look at the price-volume relationship, the decision is really clear."

VW dealers agreed to reduce profit margins to support the move.

Hallmark confirmed that 2007 Jetta prices will begin at $17,105, including shipping. The cheapest 2006 Jetta starts at $18,515, including shipping.

Hallmark said the base 2007 Jetta will not be a totally stripped model. VW can't remove features such as antilock brakes or extra airbags. Those items are standard in Europe and would cost too much to remove, Hallmark said.

VW dealers agreed to take a cut in profit margins on the base Jetta as well as the entry Rabbit compact, said Hallmark. He would not disclose the size of the cut but said it is "not more than 1" percentage point.

Hallmark said VWoA also cut its profit margin on the two cars.

The Jetta price cut follows similar action on the Rabbit, the next generation of the car that's called the Golf everywhere else in the world. It will go on sale this summer with a base price of $15,605, including shipping. The base 2006 Golf sells for $16,660, including shipping.

The new pricing reflects Volkswagen of America's decision to compete with volume brands, including Toyota, Honda, Mazda and Mitsubishi, Hallmark said.

That represents a turnaround from VW's strategy when it launched the larger, redesigned Jetta in the spring of 2005. Len Hunt, Hallmark's predecessor, said at the time that the Jetta "can actually bridge three segments" -- premium subcompact, premium mid-sized and entry-luxury.

In Germany, VW's efforts to become more of a premium brand "worked far better than in the U.S., where it did not work as well," Hallmark said.

The problem in the United States is that the Jetta's price was comparable to that of larger sedans such as the Toyota Camry, he said.

Jetta sales peaked at 145,000 units in 2001. This year, the first full year of the redesigned vehicle, VW expects to sell about 105,000 units, Hallmark said.

Hallmark says the Phaeton luxury sedan, which won't be sold in the United States starting in the 2007 model year, and the Touareg SUV both failed as premium products there.

VW will regroup and try to hit higher price points with the minivan from the Chrysler group that VW will rebadge. That vehicle goes on sale in 2008, Hallmark said.

VW is considering a new entry-level vehicle, he said. It also will try to move the brand upmarket with coming vehicles such as the Eos hardtop convertible, due this year.

Next year, a station wagon version of the Jetta goes on sale as well as a performance version of the Rabbit called the R32. A face-lifted Touareg also debuts in 2007. A compact SUV based on the Concept A vehicle shown at this year's Geneva auto show is expected in 2009, Hallmark said.

VW needs such vehicles before trying to bring back something in the price range of the Phaeton. VW priced the Phaeton at $68,655 for a V-8 model, including shipping and a $1,300 gas-guzzler charge.

Said Hallmark: "Instead of going for the penthouse, we need a few floors below."

[gm_scott]

So I guess this is what happens when VW wants to go upscale. It kinda makes me think about Saturn, lets just hope stuff like this wont happen to them.

VW will regroup and try to hit higher price points with the minivan from the Chrysler group that VW will rebadge.

Holy, I hope Chrystler wouldn't let them do that. I hope they are just saying the same platform will be shared

[nadepalma]

If you ask me, VW has gotten TOO far away from what the brand originally stood for. The whole idea of moving more and more upscale has almost defied the values that founded the company. I'm glad to see that they want to try and make the Jetta more competitive (as well as bring the pricing more inline with what the Rabbit is expected to sell for), but you almost have to wonder if it's gonna work.

Regarding the "abandon moving upmarket -- for now" comment, they should just forget the idea. If VW really wants to compete and gain volume they should do so by just sticking to their roots and stop chasing near-luxury buyers. But that's just my opinion.

[griswold44]

Going upmarket was a big mistake.

[dindak]

Bout time. The car is way overpriced.

[nadepalma]

Originally Posted by gm_scott

So I guess this is what happens when VW wants to go upscale. It kinda makes me think about Saturn, lets just hope stuff like this wont happen to them.

I don't suspect that the same thing will happen -- Saturn is going to move upscale, but I think they understand their customer. I don't suspect they'll try and price cars out of everyone's price range the way that VW has been for years.

An example? My cousin got a last generation Jetta sedan ('03 I think) with cloth seats, the standard engine (a POS 2.0L that made 115 hp), but had a few options like a sunroof and a CD changer. The cost? A little over $20K BEFORE she included tax, title and fees -- that's INSANE for what you get. Yeah, folks can argue that it has a nice interior, good ergonomics, styling, etc -- and that's nice but ultimately subjective. But considering that the Jetta is made in Mexico and didn't have anything all that special in it, what is she paying $20K to get?

Now factor in the fact that VWs are notorious for electrical problems and don't exactly have stellar quality/reliability records and the picture gets more grim.

But hey, it wasn't my $20K that got put down.

[cfch3399]

Good. How many upscale-wanna-be models do we need? Not that many. These companies, GM included, have to get realistic about what customers can afford.

[mgescuro]

Originally Posted by gm_scott

So I guess this is what happens when VW wants to go upscale. It kinda makes me think about Saturn, lets just hope stuff like this wont happen to them.

But if you take a look at the Saturn Aura pricing, they have really undercut Passat.
THe Passat 3.6L starts at $30,000. Plus Saturn has thier customer service numbers to back them up.

So long as Saturn keeps themselves "euro" in look and driveability, they will be just fine. But they need to be wary of POntiac, as they sort of overlap in some areas.

[rueben44]

Well it is about time the realized the problem was their pricing. Don't worry about Saturn they are not trying to sell a 60K car as well as a 40K suv and another 40K car when they are supposed to be about being a people's car. Maybe I will reconsider a GLI Jetta that is the only one I like.

[JazzyChef]

I would have bought me a new 2007 VW Rabbit (Golf) if I my extended warranty on my blazer wasn't up. That blazer cost me a lot of money over the 2 and a half years that I had it. If I didn't have that warranty I would have sold the car 3 months after I bought it.

[JazzyChef]

I forgot to add that the white Jetta in all those new commercials is wicked hot!!! Man I feel jealous every time I see one now

[Perian]

GM had better respond to this with reference to the Cobalt, G5 and Astra.

I'm thrilled they cut the price of XM and the LT package for 07, but it's going to take a lot more to compete.

I saw the Rabbit at the NYIAS and it scared me - what a fantastic vehicle at an unbelievable price point.

[Tiger]

VW is offering some SERIOUS value now. Plus their new stuff is VERY impressive. Nice job.

[jokuvaan]

I read one VW forum and it seems that technical problems are headache again in new cars. Massive model launch program might backfire.

[kenman923]

That thing was overpriced anyway.