By Alex Taylor III
February 2, 2011

Volkswagen finds itself in a funny place these days with the Touareg SUV.

The German automaker has made clear its intentions to nearly triple its U.S. sales from this year’s 286,775 to 800,000 by 2018.

In pursuit of that goal, it has recently produced two slimmed-down models, the Jetta and the Passat, which have been redesigned and repriced for the U.S. market. Both are high volume cars and both will sell for well under $30,000.

Yet VW is also marketing the Touareg, which sells in tiny quantities at much higher prices. Last year, VW moved just 4,713 of them.

The availability of the premium-priced Touareg, VW’s de facto flagship, sends out conflicting signals about the price points for the more economical entries in the product line. It’s not likely to appeal to typical VW buyers, while better-heeled shoppers are more oriented to upscale brands.

This year, the problem is exacerbated by the arrival of the Touareg hybrid. VW’s first hybrid, it is a miraculous piece of engineering (with one exception; see below), but it carries a base sticker price of $60,565.

That’s $20,000 more even than the base Touareg with a standard V-6 engine. To be fair, VW has loaded up the hybrid with standard equipment like 19” wheels and a navigation system. All of the extra goodies, including the hybrid batteries, add an extra 424 pounds to the already overweight standard model’s 4,711 lbs.

The new vehicle is a full hybrid, making it theoretically capable of traveling one mile — at speeds of up to 30 miles per hour — on batteries alone. In practice, the gasoline engine takes over much earlier in a seamless handoff that helps the Touareg to 60 miles per hour in 6.2 seconds.

The Touareg hybrid also comes with a start-stop system that shuts the engine down when the vehicle stops, plus a coasting feature that disengages the engine from the transmission when the driver lifts off the gas pedal while traveling at high speed. German engineers call it “sailing.”

The Tungsten Silver Metallic test car arrived in the midst of the Great Blizzard of 2011 and performed with aplomb in all kinds of conditions. The 4Motion permanent all-wheel-drive system provided traction on the slipperiest surfaces, the front and rear wipers handled accumulated snow and ice, and the various heaters and defrosters responded robustly.

The big disappointment came with the mileage, which is, after all, one of the major reasons to buy a hybrid. While it took 250 miles of driving for the fuel gauge needle to drop to half a tank, the onboard computer indicated I was only getting 17.7 miles per gallon. That’s well below the 20 mpg/city, 24 mpg/highway indicated by the EPA.

VW has been criticized for imitating Toyota in its transparent ambition to become the largest auto company in the world. But it could do worse than following Toyota’s example when it comes to hybrid SUV positioning.

The Toyota Highlander hybrid is dimensionally similar to the Touareg, though it is lighter and has a smaller engine. But the Highlander gets far better mileage — 28 mpg — and its starting price of $37,490 doesn’t leave the rest of the Toyota range in its shadow.

One more thing: Toyota sold 92,191 Highlanders in 2010. Those are the kind of numbers VW is going to have to put up to reach its 2018 goal.

It is not going to get there with the Touareg.

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