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Ford, GM Win Sales As VW Brand Struggles In January

Ford, GM Win Sales As VW Brand Struggles In January.

“if you went into a VW dealership and asked for a discount they would point you to the Opel dealership across the road. Not anymore”

Ford and GM’s Opel-Vauxhall had strong European sales in January, but it was more about stealing from a dieselgate-stricken Volkswagen than a sudden consumer embrace of their new cars and SUVs.

Volkswagen is also being forced to offer much higher discounts than the competition to keep sales going, and this could spell bad financial news for the company if it continues.

In January, European Union car sales rose 6.2 per cent to 1.1 million, according to the European Car Manufacturers Association. Ford outpaced this with an 11.4 per cent increase to 75,710 compared with the same month last year, and Opel-Vauxhall did better with a 12.8 per cent rise to 70,649. Opel-Vauxhall is benefitting from sales of its new Astra sedan, which competes head-on with the VW Golf and Ford Focus. Opel sells its cars and SUVs in mainland Europe, while Vauxhall sells the identical vehicles in Britain with its badge.

Fiat Chrysler Automobiles (FCA) also had a good month with sales 14.4 per cent higher at 71,732. FCA’s Jeep had another spectacular month on a smaller scale with sales of mainly Renegades up 34.1 per cent to 7,610.

Big discounts
VW brand sales in the E.U. fell 3.8 per cent to 124,149 in January. In Germany it is being forced to pay much higher discounts to keep sales afloat.

Volkswagen is paying a penalty for the ignominy of its diesel engine scam in the U.S. VW has been rocked by the news last September that it cheated to defeat U.S. environmental rules which limited noxious emissions from diesel engines. This concerned around 500,000 diesel engines in the U.S. The scandal then moved on to the rest of the world with 11 million VW and VW subsidiary Audi engines involved in cheating not only diesel emissions, but also fuel economy claims.

According to leading German car magazine Auto motor and Sport, VW is having to offer discounts now on its medium sized family sedan, the Golf, of around 25 per cent, while on the bigger Passat discounts have risen from an average 19 per cent to 28 per cent.

Peter Schmidt, editor of the British-based Automotive Industry Data newsletter said VW brand sales fell nearly eight per cent in Germany and lost nearly three percentage points of market share. Opel increased sales more than 21 per cent, while Ford was up about 19 per cent in Germany.

“I think we could see problems for Volkswagen although it looked almost undamaged during 2015’s fourth quarter. Now we are seeing the first signs in Germany where market watchers have spotted significant changes on the incentive front for VW brand cars. We have not seen a significant change in the discount structure for Ford and Opel,” Schmidt said.

The German car market, Europe’s biggest, accounts for just over 20 per cent of the European sales.

In the past the VW Golf was considered to be the strongest mass market brand, but that is now in danger of being undermined.

“In the past, if you went into a VW dealership and asked for a discount they would have pointed you to the Opel dealership across the road. Not anymore,” Schmidt said.

A recent survey in the Auto motor and Sport magazine also pointed to a dangerous weakening in VW’s brand perception because of dieselgate fallout, with the likes of Opel and Ford benefitting.

Schmidt said brand image takes years to attain, but not much time to lose.

“In my view, the VW image has taken a big hit. You have to remember though that this is only one month and it’s difficult to make judgements in terms of solid trends. If this does turn into a trend that spells very bad news for the VW brand,” Schmidt said.

Investment researcher Evercore ISI isn’t so sure this spells doom for VW. It pointed out that VW Group sales, including brands like Audi, Porsche, and Skoda were holding up.

“Hence, in our view the impact from the diesel scandal does not seem overly concerning and we would appear to be over the worse with respect to negative news headlines on the company,” said Evercore ISI analyst Arndt Ellinghorst.

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