A logo of Volkswagen is seen on a Golf car parked at a dealership in Seoul, South Korea, on Nov. 25, 2015.Kim Hong-Ji/Reuters
For the first time, Volkswagen AG U.S. sales were hit hard by the company's diesel-emissions scandal as dealers labored for most of the month with relatively few cars on their lots that they could sell.
VW's namesake brand saw deliveries decline by 25 per cent in large part because the company couldn't sell any diesel-powered cars. The company admitted in September that it used software in its cars with small diesel engines to cheat on U.S. emissions tests and stopped selling those cars. Last month, the company stopped delivering models with 6-cylinder diesel engines, including the Porsche Cayenne, after allegations that they also used so-called defeat devices. Diesel-powered autos typically made up 20 per cent to 25 per cent of VW brand sales.
This is the first month that the scandal has seriously hurt U.S. sales for the German car maker, which used rebates and cheap lease deals to generate a 0.2 per cent sales increase in October. The company is trying to boost production of the gasoline– powered cars that it is allowed to sell, but it didn't increase shipments to dealers until the middle of the month.
"I had more cars that I can't sell parked in the back lot than I had in the front lot for sale," said Alan Brown, who co-owns two VW dealerships in the Dallas area and is chairman of the brand's U.S. dealer council. "The factory is still trying to reset production to gasoline cars and that can take three or four months to get inventory in."
Brown said he started the month at one of his stores with just 38 salable new cars on the lot, about a third of what he would like. VW got more cars to dealers about Nov. 18, but it takes at least a week to prepare the cars for sale and advertise them, he said. He now has 135 vehicles and thinks sales will return to normal levels this month.
Loyalty Tested
VW has loyal customers, said Karl Brauer, senior analyst with Kelley Blue Book Co., an automotive research firm in Irvine, California. But buyers may be staying away because they can't purchase the diesel cars that are core to its brand.
"Volkswagen was able to hold off a big decline in sales for a month or two by using discounts but it caught up to them," Brauer said. "Their sales fell 25 per cent and diesel was usually that much of their sales."
It was the wrong month to run low on inventory. Some people may see the emissions crisis as the time to get a deal, but couldn't find what they wanted, said Jessica Caldwell, an analyst with automotive pricing website Edmunds.com. Others may be avoiding the brand until they see how the company responds to the problem.
Volkswagen submitted its recall plan for the 4-cylinder diesel models to the California Air Resources Board and federal regulators on Nov. 20. The company will have to come up with fixes that enable the diesel engines to meet clean-air rules before a nationwide recall is rolled out to affected consumers.
"What they can sell is very limited," Caldwell said. "There were also a lot of sales events from other carmakers going on."