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Forget "Voltswagen." VW's Real Problem Is Misunderstanding the U.S. Market.

Photo credit: Sean Gallup/Getty Images
Photo credit: Sean Gallup/Getty Images

Editor's Note: This article was originally published on Tuesday, March 30, 2021, at 3:05 pm EST. Shortly after that, numerous reports cited employees at VW's German headquarters who all confirmed that the "Voltswagen" name change was simply a joke—despite VW of America publishing a press release earlier today claiming it was real.

Today, Volkswagen officially confirmed in a press release what was leaked yesterday and confirmed to Road & Track by an inside source: The company is trading 80 years of brand equity for a cheesy, half-assed pun. Its rebrand to "Voltswagen" has been rightly roasted across the board, largely attributed to the company's attempt to distance itself from post-Dieselgate troubles. Yet that reading seems too charitable. This particular move is another in a long line of weak missteps aimed at finally cracking the American public, a goal of Volkswagen's since long before the emissions cheating scandal went public in 2015.

The first thing to understand is that Volkswagen's best year on the U.S. market was around 50 years ago. In 1970, VW had roughly 5 percent of the U.S. market share, more than double its 2.21-percent slice of the pie in 2020, per sales tracking firm GoodCarBadCar. In 2012, VW's market share reached a recent high of 3.04 percent, before declining in 2013, 2014, 2015, and 2016. The post-Dieselgate sales slump was real, but it was also simply a continuation of a pattern already in motion.

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This wasn't supposed to be how it went. While some automakers—like General Motors, recently—cut unprofitable models in the hopes of boosting margins while sacrificing overall sales, Volkswagen has been quite clear in the past decade-plus that it wants more U.S. market share. Early in this century, most of that push hinged on VW's economical "Clean Diesel" offerings, which resonated during the financial crisis as fuel prices soared. Diesels grew to represent more than 20 percent of VW's U.S. sales by 2013.

But even before the emissions cheating scandal broke, the diesel-heavy plan was falling flat. As U.S. fuel prices came back down, VW was forced to confront the unique realities of this market. Diesel passenger cars have never represented a large portion of our market, in part because, unlike their European counterparts, U.S. regulators have never incentivized diesel over gas. Absent those advantages, even cheating diesels—which were more affordably priced than competing automakers' oil-burners, thanks to missing emissions controls that turned out to be necessary to meet regulations—struggled to convert U.S. buyers. After all, with diesel fuel often more expensive than gas, most buyers could only make the efficiency gains pay off over a long period of time in the real world.

So a handful of years ago, Volkswagen began to design models specifically with the U.S. market in mind, often built in North American factories. First came the 2011 Jetta, sold worldwide but enlarged to appeal to Americans. Next was the Passat, which was split into distinct U.S. and European models. Both showed strong growth here: In 2012, Passat sales grew by more than 100,000 compared to the year before. Things were looking up.

But by chasing our market with more-affordable offerings, VW abandoned most of the premium, Germanic quality that had long set it apart. More worryingly, the segments where VW was strongest—compact hatchbacks and small sedans—started shrinking. After a strong few years, Passat, Golf, and Jetta sales all declined. Then, Dieselgate hit, accelerating the freefall. Suddenly, the company had billions of dollars in fines to settle. In the middle of a far-reaching U.S. expansion effort, VW could no longer afford to burn cash.

The automaker leaned into more profitable efforts, like enlarging the once-compact Tiguan and launching the three-row Atlas, both vehicles aimed squarely at America's SUV-heavy tastes. Both have relatively strong sales, but neither vehicle is segment-defining. Unlike the Hyundai Palisade or Kia Telluride, there is no wait-list for VW's SUVs. They also don't represent the brand particularly well. VW, long known as the purveyor of practical people's economy cars, now makes most of its U.S. dollars on three-row utility vehicles, while striking German-built Arteons sit unsold and the bread-and-butter Golf departs the U.S. market for good.

That's not necessarily an indictment of VW. The company has long placed big bets on small cars. That strategy paid off during recessions and fuel crises, when the Big Three's focus on larger vehicles pushed buyers toward foreign marques. But in boom times, VW has rarely chosen to pursue the vehicle segments Americans love most. Its reputation is for small, sensible, European-influenced machines. Those may well come into vogue again, but as our buying habits have shifted back toward large vehicles, VW no longer has the luxury of waiting for the next shift in taste. Financially battered by its own misdeeds, the company has had to grasp profits where it can find them. Hence the Atlas—not a bad vehicle, just one that feels halfhearted. VW is biding time, playing to survive, not to win.

The light at the end of the tunnel, VW says, is electrification. Struggling to succeed with economical Euro-style vehicles—and to distance itself from Dieselgate—VW has chosen to push hard into electrification. As a settlement with U.S. regulators, the automaker has already committed to developing a robust EV charging system across America. And VW has introduced the ID.4, an electric crossover the company has compared to the Beetle in terms of significance. Hence, "Voltswagen."

Had you never seen the ID.4, you might find this all quite clever. Sure, abandoning decades of brand-building for an EV pun is silly, but VW must be serious about this pivot to electrification if this is, in fact, a serious rebranding. (Some still suspect it's a botched April Fools' Day joke, a theory that's not helped by messaging from VW's German headquarters that contradicts the U.S. division.)

I suspect Volkswagen—sorry, Voltswagen—is actually serious. I just don't think seriousness corresponds to competency. Because despite all of the hype, the name change, and the comparisons to the Beetle, the ID.4 seems absolutely average among all of the EVs on sale today. Its battery range is typical; it looks anonymous; it's no more affordable or compellingly equipped than the EVs that have come before it. I mean, if this is the People's EV, you can see why The People might stick with gasoline.

There's no inherent reason why we should care about the ID.4 any more than the Chevy Bolt, the Hyundai Kona EV, the Nissan Leaf, or even the Tesla Model 3. We've seen no proof of any VW tech advantage or tuning supremacy in the EV space. So when the company proclaims its own seriousness about electrification, it feels like a claim of importance through birthright. Of course, if you start with the base assumption that VW is a great and momentous brand, you would assume this move is great and momentous and worthy of a rebrand. But the focus on electrification itself doesn't matter unless it leads to amazing vehicles. And even if the Voltswagen name turns out to be an April Fool's Day joke gone wrong(as the Wall Street Journal suggests), it exposes that VW is more interested in hyping up its passable EV than genuinely disrupting the entrenched segment leaders.

That's the core problem with Volkswagen in America. The company is an underdog that perceives itself as an established winner. Great products come from teams that have something to prove. The Lexus LS, the Tesla Model S, the Kia Telluride—all were designed by automakers seeking to establish (or revamp) a reputation, outsiders breaking in. The only proven way to change minds is to build a product so compelling that it cannot be ignored. VW has been resting on its laurels long enough. If the company wants to win America, it has to be with a winning product. The sooner Volkswagen, or Voltswagen, or whoever, realizes that, the better.

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