VW Australia axes Up and possibly Scirocco
BY MIKE COSTELLO | 9th Apr 2014
The German car-maker’s local arm is looking at ways to trim back its range to focus on core volume models and certain niche premium or performance offerings.
Models that sit at the periphery will be phased-out, according to VGA managing director John White.
Speaking with GoAuto at this week’s launch of the Golf R flagship, Mr White said the company’s current range of vehicles was too complicated for customers, as well as dealers that have to juggle the resulting complex stock list, and that a more streamlined approach was being undertaken.
“The product line-up is very broad and very deep, and highly proliferated,” Mr White said.
“The strategy is to de-proliferate the line-up in terms of models, then in terms of combinations. This way it’s easier for customers to get what they want.
“From our perspective, we need to focus on the cars that are either going to drive the best volumes or performance for the brand.” VGA currently offers 19 passenger and commercial model lines, and attained 54,892 sales here in 2013 to finish as the eight top-selling brand. Sales are up 5.8 per cent this year, bucking an overall industry trend that sees sales down on last year.
Mr White said the decision to axe the Up had been made and that stock would expire by September, two years after it was launched with the aim of luring younger buyers to the VW brand. There will be no more shipments of the vehicle, which retails for just $13,990, from Slovakia.
In the end, said Mr White, the cost of promoting the car in a competitive and low-margin segment could not be justified when the money could be better spent elsewhere. Up sales have fluctuated wildly, spiking when under promotions such as drive-away deals.
The lack of an automatic transmission also hurt sales, especially amongst the youth market Volkswagen was aiming for.
Just 53 units have been sold this year, and the baby VW has struggled against rivals such as the cut-price Mitsubishi Mirage, which has 55 per cent share of the newly-formed Micro segment in 2014 thanks to razor-sharp dealer offers.
“We’ve made a decision to have an orderly exit of the market with Up, so we’re going to phase it out,” said Mr White.
“I think the car was brought in for the right reasons, to play a role in the light-sized segment, but the segment is shrinking, the segment is highly competitive, gotten more so, and if you follow the volume of the car the sales have been up and down.
“We put money behind it, the car spiked, we back off and the sales slow down significantly. So when you take a look two years in, what the realistic volume is, and how much the dealers and we make, you’ve got to question why you’ve got it.
“I'd rather use our resources on more volume (product).” Expect to see extra promotional resources put behind the Jetta (down 48.4 per cent in 2014 and the recipient of a recent price cut), Passat (down 21.8 per cent, and due to be replaced by a new version next year), and the six-year old Tiguan (down 28.1 per cent).
On the subject of the Tiguan, Mr White said: “I think the compact SUV segment it's in has a lot of fresh product and from our perspective we haven't been aggressive enough in promoting it”.
Meantime, the Golf-based Scirocco sports coupe also faces a murky future in Australia, with the recently-revealed model update shown last month in Geneva looking unlikely to come here.
This could potentially open the door to a return for the axed Golf GTI three-door, though the addition of that car, plus the new GTI Performance edition launched this week, would hardly reduce range complexity in the way VGA desires.
Scirocco sales plunged last year to 445 units, down from 712 units in 2012. Volkswagen only placed the car on sale in January of that year, by which time it had been available in Europe for almost four years. Former VGA management long-debated whether to introduce the car at all.
Mr White said the model update was no lock to come here, and that the current version was now being phased out over the next 3-4 months.
“The other (car) we’re considering is the Scirocco,” he said. “Scirocco we’re really trying to determine the role that it plays… the facelift, it’s a modest facelift, so we’re in the throes of deciding what we’re going to do.
“If we do keep it, it will be pretty simple in terms of package and configuration. It’s still under consideration with Germany.” Another car certain to face the axe is the folding hard-top Eos, which sold 765 units in 2012 before falling to 404 units last year, and is down a further 5.7 per cent this year.
But the decision to drop that model is an easy one: Volkswagen globally will stop production soon, and focus on the next Golf cabriolet instead. The decision was reported last month.
“It was announced in Geneva there was not going to be a successor, so we will have an orderly run-out of Eos, it just depends on how many cars we’ll take, that hasn’t been formally confirmed,” said Mr White.
