Volkswagen rolls out a bigger, cheaper Jetta
Volkswagen, stuck in neutral, has unveiled a bigger and less expensive Jetta, a vehicle that is central to its efforts to regain prominence in the U.S. market.
The Jetta was introduced by pop artist Katy Perry, who danced barefoot on its hood in the middle of New York’s Times Square on Tuesday. Using Perry to introduce the car was seen as one way to broaden its appeal to a younger generation of drivers.
The Jetta is the linchpin of the automaker’s strategy to increase U.S. sales fourfold after a variety of missteps that squandered a huge advantage VW once had over other import brands.
VW’s iconic Beetle was the adorable subject of America’s first love affair with imported autos. Sales of the bug-eyed, curvy economy car grew from just two in 1949 to top more than 400,000 in 1970, a year when the company sold a total of 569,696 vehicles in the U.S.
Tripped up by quality and reliability issues as it tried to expand its lineup, VW never capitalized on its early success. Fickle Americans turned to newcomers from Japan and South Korea. Last year the brand sold just 213,000 cars in the U.S., accounting for less than 2% of the market, according to Autodata Corp.
Stefan Jacoby, chief executive of Volkswagen’s U.S. division, has ambitious plans to change that. He’s set a goal to sell 800,000 VWs annually by 2018. His first steps are a $1-billion factory that will open in Chattanooga, Tenn., early next year and the new Jetta, which will be built at a plant in Puebla, Mexico.
“Today marks the beginning of a new era for Volkswagen and for Jetta,” Jacoby said.
Despite the economic challenges faced by the auto industry in recent years, VW has made gains by streamlining its U.S. organization, improving its dealer network and broadening its product mix, he said.
Jacoby noted that VW has logged 11 consecutive months of year-over-year domestic sales growth and that sales have risen nearly 33.5% this year, almost double the industry’s average.
The Jetta is VW’s volume car. It accounted for more than half of the automaker’s U.S. sales last year, outselling all of VW’s other vehicles combined, said Rebecca Lindland, an analyst with IHS Global Insight.
“The Jetta is hugely important. It is their ticket to the market share they are seeking,” Lindland said.
VW needs to position the car as a non-luxury European-style import that offers up the tight, reactive driving characteristics consumers expect from a German nameplate, she said.
And it has to be priced much closer to other small cars.
“The Jetta has always been seen as a more expensive version of a car that is not very big. It competes in pricing against an Accord or Camry, yet it doesn’t have that size,” Lindland said.
Jacoby is addressing that perception head-on. The new Jetta will start at about $16,000 for what the automaker calls a “nicely equipped” car, almost $2,000 less than the existing model.
“Model by model, our lineup will be competitively priced so that we will be able to compete in the American market,” Jacoby said.
He pitches the Jetta as a “class-up driving experience with the kind of styling, design and power under the hood normally found in more expensive luxury cars.”
The new Jetta is almost 4 inches longer than its predecessor, making it one of the biggest compact cars on the market, said Toscan Bennett, VW’s vice president of product marketing and strategy. It is positioned against the Honda Civic, the Toyota Corolla and the Ford Focus.
“Where the size really shows a major advantage over our competitors is in the interior and rear-seat legroom,” Bennett said.
The base model comes with a 2-liter, four-cylinder engine that produces 115 horsepower. That’s considerably less than the 170 horses of the current model, and that’s on purpose, Bennett said.
VW’s challenge was to get the price of the vehicle lower to compete with other offerings in the large compact car segment of the market. It came up with the less powerful “entry level” engine in the base model to meet that goal, he said. A more expensive model will have a 2-liter turbo engine that produces 200 horsepower. The automaker also plans a direct-injection clean-diesel engine.
VW has not announced pricing for anything above the base model, which hits showrooms in October. The versions with larger engines will come later in the model year.
The automaker has a good base of young, educated and fairly affluent buyers, but it is going to have to gather a wider audience to hit its growth targets, said George Peterson, president of AutoPacific Inc., a Tustin automotive consulting firm.
It also is going to have to demonstrate that it has made progress on reliability issues, he said.
“They continue to have niggling problems. Squeaks and rattles and little electrical problems. This has been a worrisome thing for VW for years,” he said. “It seems like the cars coming out of Mexico consistently have more problems than what is imported from Germany.”
Peterson said that the problems “aren’t catastrophic” and that the brand is starting to move up in a variety of independent quality rankings that come out annually.
Bennett knows that’s a hurdle.
“Consumer perceptions tend to lag reality. The brand has made tremendous strides in improving its reliability and durability. Our task is to communicate those improvements to consumers,” he said.
One way is to offer a three-year, 36,000-mile warranty that includes free maintenance, a perk offered by some other luxury brands.
Bennett also thinks VW can reconnect to consumers who have fond memories of the Beetle, even if that just amounts to playing the Beetle-spotting “slug bug” game in the back seat.
“We are part of the cultural heritage of this country. It doesn’t matter who you talk to, almost everyone has a Volkswagen story,” he said. “Part of our job now is to reawaken that attachment with all the new vehicles that are coming.”
