Will the Passat propel VW to No. 1?

January 5, 2012, 7:11 PM UTC
Fortune


Volkswagen Passat

American car buyers and the motoring press are giving a warm welcome to Volkswagen’s new Passat midsize sedan, the German automaker’s latest salvo in a campaign to pass General Motors and Toyota to achieve No. 1 sales status worldwide.

November sales of Passat, which was named Motor Trend magazine’s Car of the Year following its introduction in September, barely topped 6,000. Though that number is less than half that of the leaders in its segment, it represents an impressive total compared to that of the previous, smaller and more expensive Passat. The increase suggests that VW buyers as well as loyalists of other brands are adding Passat to their shopping lists.

VW sales overall were up 40% for the month in the U.S. Passat was named a finalist in the North American Car of the Year competition, which will be decided at the North American International Auto Show in Detroit on January 9.

Wolfsburg, Germany-based Volkswagen’s goal is to lead the world in unit sales of vehicles by 2018, which would require the automaker to increase sales in all major automotive markets. It is currently third in the world; and the top seller in Europe.

But the final numbers may show that VW achieved No. 1 — at least temporarily — in 2011. Toyota last year was hit by quality concerns in the U.S. and the March 11 earthquake/tsunami in Japan. The German automaker’s goal is to have firm grasp on the top spot six years hence, with sales of 10 million vehicles annually, compared in 2011.

“VW’s goals are very aggressive,” says Michelle Krebs, an analyst for Edmunds.com, an automotive website. “Next year will be competitive in the midsize sedan segment. Ford has a new Fusion, Chevy a new Malibu and Honda (HMC) a new Accord.”


Auto preview: New car bonanza in 2012

One of VW’s weak spots is the U.S., where it holds a slim 3.5% of the market, including its Audi luxury franchise – behind all major Asian automakers and GM, Ford (F) and Chrysler. But the U.S. also could be the place where VW’s potential is the most unrealized.

VW floundered for years in the American market because it failed to convince enough motorists to buy models that were engineered for Europeans. The new Passat, built in a new assembly plant in Chattanooga, Tennessee, represents a fresh approach: designing cars specifically for American tastes while retaining the flavor of German engineering.

“We feel very confident about 2012,” says Scott Vazin, a VW spokesman. “Between VW and Audi we should end 2011 with slightly more than 400,000 in sales.” The VW Group’s goal in the U.S. is to sell 1 million VW and Audis in 2018.

The Chattanooga plant, with capacity to build 150,000 Passats, can be expanded if sales of the sedan grow sufficiently. VW could add another U.S.-built model, a crossover, based on the Passat architecture.


The most disliked cars of 2011

As for Audi, rumors abound that VW is considering a manufacturing site in Chattanooga or elsewhere, mimicking BMW and Mercedes, both of which build vehicles in the U.S.

Audi is the most sought-after car in the U.S., according to Edmunds.com, and its dealer inventory is at a mere 28 days. “The challenge for Audi is more production,” says Krebs.

Nearly every automaker in the world states explicitly or implies that it intends to grab a bigger share of the market – though, of course, such an outcome is impossible for all to accomplish. In fact No. 1 status has been nothing but heartache for Toyota (TM) and GM (GM). VW might want to reflect on whether its scorched-earth policy is a wise one.