Volkswagen takes Passat upscale to escape mid-market blues

Jul 03 2014, 08:14 IST
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SummaryVolkswagen is steering the Passat upscale, aiming to lift its second-most selling model clear of a struggling market for mid-priced cars without alienating its core family customers.

Volkswagen is steering the Passat upscale, aiming to lift its second-most selling model clear of a struggling market for mid-priced cars without alienating its core family customers.

With low-cost brands adding frills to appeal to affluent drivers and premium carmakers pushing their models into more affordable categories, the middle market has borne the brunt of a six-year slump in European car sales.

From 2009-2013, when European car sales tumbled 15%, the major mid-market carmakers’ share of that shrinking market fell from 48%to 44%, shows industry data. The main premium brands’ combined share, meanwhile, rose from 13%

to 17% . Though Volkswagen (VW), Europe’s biggest carmaker, makes most of its money from upmarket Audis and has prospered from the surge in popularity of sport-utility vehicles (SUV), the German group cannot afford to ignore the mass market if it is to reach its goal of overtaking General Motors and Toyota to become world No 1 by 2018.

Analysts said it made sense for VW to move upscale with the Passat, which has made 22 million sales since its 1973 launch, when it unveils the latest model in Berlin on Thursday. “The mid-market is a fiercely fought segment and competition is anything but letting up. Stretching into the luxury territory is sensible,” said Stefan Bratzel, head of the Center of Automotive Management.

But there are risks.

VW will have to deliver improved safety and so-called infotainment features for the Passat without pushing the price or further squeezing margins at its passenger car division. Gazing at sketches of the new Passat in a Berlin showroom,

Wolfgang Mertens, a 58-year-old accountant who has driven VW-badged cars for three decades, remained to be convinced.

“The Passat is a common-sense car,” he said, referring to a vehicle whose popularity has historically rested on fuel-efficiency, spacious interiors and strong resale value. “They (VW) have enough luxury on offer, why push it upmarket?”

Sales of the Passat have been declining, especially in VW’s German home market where deliveries of the model slumped 24% to 72,048 vehicles last year from 94,523 in 2008, according to the Federal Motor Transport Authority. Adding upscale tweaks could help the Passat compete against luxury marques BMW and Mercedes-Benz, while staying ahead of rivals Peugeot, Renault and Ford which have pledged to step up the pressure on VW with plusher trim, better gadgets and near-premium model versions.

Among its extras, the new Passat offers a novel system to assist reverse driving with

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