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A Golf VII of German car manufacturer Volkswagen is shown during Volkswagen's presentation of the new car model on Sept. 4, in Berlin. (John MacDougall/AFP/GettyImages)
German car giant Volkswagen (VW) unveiled the new model of its best-selling Golf series in Berlin’s New National Gallery Tuesday. The completely redesigned seventh generation will include many new features and hit European dealerships this fall.
The car was unveiled with much fanfare and Volkswagen Chief Executive Martin Winterkorn commented proudly, “By far, the Golf remains Volkswagen’s most important car.” Further elaborating on the German company’s ambition to rise from being Europe’s biggest to become the world’s biggest by 2018 he said: “I’m deeply convinced the seventh generation is a further milestone on our way to the top.”
The car was first introduced in 1974 and many believe that the model saved the company, as original Beetle sales were faltering. In the 38 years since, VW has sold more than 29 million units, 900,000 in 2011 alone. It takes third place for best selling car in history after Toyota’s Corolla and Ford’s F-series and will retail for $21,400 in Europe.
U.S. Growth Needed to Win Big
Most of the Golf’s sales took place in Europe, however, and now increasingly in China, where VW sells around 2 million cars of all models per year and has a production site in Changchun were the Golf is manufactured.
In order to really replace Toyota, however, VW also needs to expand in the United States where it does not do as well in the mid-tier segments as its Japanese and U.S. rivals or its German brethren in the luxury segment. The Golf was first launched in the United Stated in 1975 under the rather peculiar name “Rabbit.”
It never became a hit like the VW Jetta and production in Westermoreland, Pa., was shut down in 1988. The new models for the North American market will be produced in Puebla Mexico and probably hit U.S. dealerships in late 2013 or early 2014, according to VW North America spokesman Mark Gillies. He says the relatively late introduction to the United States has to do with the fact that “the U.S. is a relatively small market” for Golfs—having sold only 4,000 models in August—and that total U.S. sales for all models in 2011 were only 324,000.
“We are a big market for the U.S. Passat, we are the biggest market for Jetta in the world, and we are the biggest market for Beetle in the world. But when it comes to the Golf, because Golf is a hatchback, which is sort of a niche product in the U.S., whereas in Europe the hatchback is a mainstream vehicle.”
Don Sherman the technical director of CAR and Driver Magazine who has been covering automobiles for 40 years agrees: “There is a long-standing tradition that American consumers don’t pursue hatchbacks. Even though they offer a lot of virtue and utility it hasn’t been a favorite. … If you are a hatchback, it’s a reason not to buy.” According to him this is the reason why the Jetta has been quite popular in the United States compared to the Golf.
Sherman thinks other factors that have made it difficult for the Golf were “intense competition” mainly from Asian producers and the fact that the current model from 2009 is relatively old.
VW Plans To Expand In America
VW wants to make the Golf and other models work in the United States: “We have ambitious plans to become a mainstream volume player in the U.S. market,” says Mark Gillies who is very happy with recent sales figures for August, up 62.5 percent year over year, the most successful August since 1973. To support this growth, VW opened a factory in Chattanooga, Tenn., last year, which will produce the Passat, a model specifically designed for the American market.
“Localization is very important to be able to build cars profitably for the U.S. market. It is likely that we are going to localize more production [in the United States] in the future,” says Gillies, while Don Sherman thinks that the current production of the Jetta and the Beetle in Puebla, Mexico, offers advantages from a cost point of view and few disadvantages when it comes to consumer preference: “Consumers basically don’t know, they assume it’s a German car, made in Germany. I don’t think they really care exactly whether a car is made in Korea, Japan, Germany, the United States, or Mexico.”
Both, however, see the possibility that VW can meet its goals in the next couple of years by profiting from shifting consumer preferences and addressing some gaps in its product line. With respect to the famous hatchback adversity of the American consumer, Sherman is sure that things are changing and the new Golf might benefit, “There are more hatchbacks on the market, preferences are gradually shifting.”
Sherman thinks that the new model can surpass the competition and remarks, “We do like VW products, they are typically more fun to drive than many of their competitors, so they are in good alignment with CAR and Driver taste” but also cautions that consumers have their own preferences. He also includes the possibility of launching a smaller model than the Golf with a lower price and higher fuel efficiency to increase sales volume.
Both Sherman and Gillies indicated that VW needs to address one major gap in its product line, namely the vastly popular sports utility vehicle range: “There are certain areas in the market where we are lacking at this moment… . We would like to get the price [of our Tiguan SUV] more in line with the competition. We don’t have a full line of SUVs, unlike our competitors,” says Gillies. Sherman sums up a winning strategy for VW: “They can [reach their goals] by offering the most tantalizing product in each segment and expand in new segments such as SUVs.”
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