Volkswagen recovering from diesel downer
Not great but, under the circumstances, encouraging.
In fact, the results are better than many predicted when the diesel/EPA cheating scandal hit, an event we dubbed VW’s Klingon Moment.
In addition to a PR crisis – which, like consumer stereotypes of diesel engines, was loud, dirty and smelly – the brand would suffer a huge financial hit.
After selling 79,422 diesel models in 2014 – 21.6% of the brand total – some analysts predicted losses up to 25% after the company dropped them.
Well, no doubt about it, Volkswagen deliveries were down in January through April 2016 versus the same period in 2015 – but only by 11.7%, or roughly half the worst case.
Good news isn’t as good for click-bait as bad news, so you might have difficulty finding positive spins. For example, an April Bloomberg headline blared Volkswagen Brand’s U.S. Sales Decline in Fifth Straight Drop.
Except for commercial vans and pickups, diesel has retreated to the tiny realm of the aficionado. In Q1 2016 only 5,380 diesel cars or crossovers/SUVs were sold.
Even before Dieselgate, Volkswagen struggled to reach sales goals
U.S. deliveries that year were 324,000, jumping by 35% in 2012 to 438,000 – the most since 1973, when VW last exceeded 400,000.
Brand planners jumped for joy; the company seemed to be on track to its ambitious 2018 goal of 800,000, way higher than the record of 569,000 back in Beetle-dominated 1970.
But, as the chart below shows, this was not to be.
Volkswagen sales had been on a roller coaster for decades and the 21st century is no exception. Even before Dieselgate, in both 2013 and 2014 sales fell by 7-10% in a market that expanded by 6% annually.
Sadly, that 800,000 sales goal has receded far into the misty future.
America’s counter-culture Boomer sweetheart
Volkswagen was the progressive young Boomer’s counter-culture sweetheart.
Of course, most couldn’t afford a new model – and half the generation wasn’t of driving age until the early seventies – but millions of Boomers rattled their way through high school and college in a funky hand-me-down Magic Bus or Love Bug.
What resonated – thanks to the classic Think Small VW ad campaign – was that the brand made a virtue of flouting convention. And what self-respecting teen could resist that kind of temptation?
But the early 1970s were a turning point. The times, they were – okay, okay, all together now – a changin‘ and over confident, East Coast centric VW had trouble adapting to new realities.
Shameless self-promotion alert:
In those days, tiny new startup J. D. Power And Associates – David Power and your humble scribe, aka the Batman and Robin of automotive research – were kept busy consulting with the top four Japanese brands in their drive to connect with American consumers.
Inevitably, in 1975, Toyota passed Volkswagen in sales, soon to be followed by Datsun/Nissan, Honda and Mazda.
Sure, their cars and their savvy managers had something to do with it. Maybe a lot. But why spoil a good story?
Volkswagen partially recovered in the late seventies/early eighties with its new Rabbit, Jetta and Scirocco lineup, but was unable to fully rekindle its Beetle-era romance with the Boomer audience.
Ever-prescient, J. David Power III, nailed it in 1984 “The people who bought Rabbits in the late 1970s are back in the market now, but they’re not looking for Volkswagens” (BusinessWeek)
Sales fell to 48,500 in 1993 and the company briefly considered leaving the U.S. market before re-inventing the brand over the next two decades.
Boomer still have a soft spot for Volkswagen
Fast forward to the 21st century. Call it a Lolita fixation or a Cougar complex, but Volkswagen now chases Millennials. Of course, they don’t buy many cars, but are cool to hang out with. Just being seen with them makes a brand feel young again.
Despite being dumped, we Boomers still have a soft spot for Vee-Dub. After all, we were imprinted in our youth and fond memories linger on.
Which in a normal world would be good news for the brand because the 18-49 demo alone cannot support a VW recovery. And the 50+ demographic– where its former best friends now live – offers huge potential ….
In August, 2015 the NADA chief economist reported the median new car buyer age as 51.7 (Automotive News).
Translation: consumers over fifty buy over half the new passenger vehicles sold in the U.S. In round numbers, we figure 52%.
Excluding 2.7 million fleet sales from the 17.4 million light duty vehicles sold in 2015, that means buyers age 50-plus accounted for 7.6 million.
That’s more than the top two European countries combined – Germany (3.2 mm) and the UK (2.6 mm). Ausgezeichnet! Good show!
Weird, then, that auto advertisers in general and Volkswagen in particular avoid targeting Boomers directly. What’s up with that?
Really, when was the last time you saw a Boomer-Plus target buyer depicted in an ad?
When pressed, brand throw out the perennial truculent teenager excuse “OMG, like, OK, everyone, like everyone, disses Boomers. Bruh, they’re like, zero, So chill. Totally”
It’s time for a disruptive, grown-up reassessment of the Boomer consumer.
Of the 111 million Americans over 50, the largest group by far is the 94 million strong Boomer-Plus Generation™. These are the Baby Boomers themselves, their slightly older sisters/brothers born 1940-1945 and Gen Xers over 50. They still buy millions and millions of new cars, and many never lost warm feelings for Vee-Dub.
So it’s easier for Boomers than younger demos to put the diesel mess into perspective. They’ve seen their old friend stumble before, and are the best prospects to help the brand repair its market share.
All it takes is a sincere invitation from Volkswagen. And some smart brand mechanics who know their way around consumer culture in the 50+ space.