It’s widely believed that Volkswagen named its early car models after famous winds from around the world. Scirocco and Bora are both good examples, and Golf and Jetta are thought to be derived from the German words for the Gulf Stream and Jet Stream.
It’s ironic then that mixed winds are now blowing through the German carmaker’s global empire.
A marked decline in sales in Russia and South America, combined with a continuing malaise in the U.S. market, means the core brand of the Volkswagen Group is increasingly feeling the severe after-effects of shrinking markets in many parts of the world. Yet sales at home and especially in China are motoring along nicely. The overall result? A turbulent year.
For the second consecutive month, global revenues for the Volkswagen brand have been almost stagnant as sales grew at a sickly 0.2 percent compared to the same period last year, to 534,800 units. Although year-to-date sales are running 3 percent higher than 2013, it’s plain to see momentum has slacked off since the summer.
At the moment, it’s primarily the Chinese market driving the sales numbers upward.
At the moment, it’s primarily the Chinese market driving the sales numbers upward. Sales have climbed to 2.07 million vehicles in the first nine months, a whopping increase of more than 15 percent over last year.
“The Volkswagen Group’s core passenger car brand is benefiting, above all, from a good development of deliveries in Western Europe and the continued positive trend in China, where we delivered more than 2 million models to customers in the first three quarters for the first time,” said Christian Klingler, member of the Volkswagen board of management responsible for sales and marketing, who sees positive trends in the latest figures.
But what looks at first glance to be a positive trend reveals on closer inspection an extreme risk of clustering too much business in one market. More than 45 percent of all Volkswagens sold are being bought in China.
With so many risks in so many parts of the world on the increase, industry experts are predicting tough times ahead. “The global car industry is at a tipping point,” said Peter Fuss, an automotive analyst at Ernst & Young, although for the moment Western Europe, the United States and China remain bulwarks.
“The global car industry is at a tipping point.”
While business for Volkswagen in Germany (up 4.8 percent) and in the rest of Western Europe (up 5.2 percent) are bright spots, the critically important U.S. market remains a pressing concern. Just 270,900 new cars have been sold this year in America, 14 percent less than in the same period in 2013.
The company doesn’t have a competitive model in the popular sports utility vehicle (SUV) sector, which continues to attract many American buyers, and won’t for at least another two years. Only South America has delivered worse sales results than the U.S.
On the other hand, there seems to be no end to the high demand for the Golf model, one of the world’s best-selling cars. Volkswagen Chairman Martin Winterkorn announced at the Paris Auto Show last week that 17 additional work shifts will be added at the company’s manufacturing facility in Wolfsburg, Germany, for the remainder of the year, raising the number of special work shifts to more than 50 this year.
Meanwhile, Volkswagen subsidiaries Audi and Skoda are faring much better than the core brand. Both companies this week announced double digit-increases in sales. Business is particularly brisk at Skoda, which offers Volkswagen quality at an entry-level price. September was the best month in the company’s history, with 95,600 vehicles sold.