VW Discounts Almost Double U.S. Average After Cheating Scandalby
Discounts are twice the industry average, TrueCar says
Dealer says incentives provide `a story to tell customers'
Volkswagen AG, trying to woo U.S. consumers amid its diesel emissions cheating scandal, is offering new-vehicle discounts that by one measure are almost twice the industry average.
Current owners of VW-brand vehicles can get interest-free loans along with rebates of up to $2,000, as well as low-cost leases. During the first week of this month, the brand’s average discount to the sticker price was 11.1 percent, compared with the industry’s 6.2 percent, according to TrueCar, a website that tracks car pricing.
Volkswagen is trying to minimize the damage to its reputation and deliveries from the scandal, which probably will result in large fines and already forced Chief Executive Officer Martin Winterkorn to step down. The Wolfsburg, Germany-based company is also trying to get U.S. buyers to consider its gasoline-powered vehicles after it had to stop selling some diesel models because of the emissions cheating. Diesels were more than 20 percent of its U.S. sales.
“They need something to get traffic to their showrooms because the diesel lovers are not coming in,” said Joe Phillippi, principal of Auto Trends Inc., a consulting firm in Short Hills, New Jersey. “They weren’t exactly knocking the cover off the ball before the crisis, either.”
VW is offering three-year leases on the brand’s top seller, the Jetta compact, for $139 a month with a $2,199 down payment, according to the company’s U.S. website. That’s cheaper than Honda Motor Co. and Toyota Motor Corp. are showing on their Web pages for their competing compacts, the Civic and Corolla. Volkswagen also is offering interest-free financing and as much as $2,000 in discounts on its No. 2 seller, the Passat sedan.
“This gives the dealers a story to tell customers,” said Alan Brown, general manager and partner at Hendrick Volkswagen outside of Dallas and chairman of VW’s U.S. dealer council. “This situation has made us focus on selling gasoline engines.”
Volkswagen spokeswoman Jeannine Ginivan said the deals are aggressive and are an effort to bring in customers and help dealers boost sales.
The deals have helped sales roughly keep pace with October 2014, said Randy Hiley, who owns Volkswagen dealerships in Texas and Alabama. Still, he said he’s worried that publicity about the emissions scandal and a lack of diesels will continue to hurt sales.
Hiley said Volkswagen has given dealers cash to help them take care of customers, including more than $80,000 to his Texas dealership. They can provide loaner cars, use the money to give buyers a better deal without sacrificing dealer profit or just keep the cash if they have to take diesel cars on trade-in and can’t sell them until the automaker comes up with a plan for fixing the vehicles.
Ginivan said the cash is given to dealers with no specific mandate.
Even before the emissions scandal, Volkswagen was one of the bigger spenders on rebates and deals, according to Autodata Corp., a research firm in Woodcliff Lake, New Jersey.
The VW brand spent an estimated $4,261 a vehicle in incentives last month, up more than 50 percent from $2,781 a year earlier and higher than the industry average of $2,507, according to Edmunds.com data compiled by Bloomberg Intelligence. The brand’s spending has exceeded $3,000 a vehicle since April.
“They’re obviously throwing money at it,” Hiley said in a telephone interview. “We had a slow weekend and I don’t think we’ve seen the worst of this yet.”