Volkswagen’s American Comeback is the Biggest Sales Story of 2017
From the sooty ashes of Dieselgate, VW’s rise proves that Americans have short memories for scandals.
A New Year offers endless opportunities to slice-and-dice annual sales numbers, forecast the year ahead or second-guess bad decisions. (Buick’s comatose Cascada convertible limped through 2017 with barely 5,500 buyers, but what I want to know is how many traded in a Nissan CrossCabriolet.) Yet a few performances stood out, and a few industry axioms firmed up. One, whatever ails an automaker, a spoonful of SUV is the cure. And two, Americans don’t give a damn about auto scandals, if they were even aware of them in the first place.
Volkswagen's unexpected comeback proved both points. And for that, I declare the German automaker the year’s biggest winner. VW sales jumped 5.2 percent in 2017, even as overall industry sales fell by 1.8 percent, with nearly every major automaker sustaining modest declines.
When VW’s Dieselgate scandal broke in 2015, the media’s Sky-is-Falling types declared that the company had destroyed pretty much everything: The trust of consumers, its sales for years to come, perhaps its very future. Nonsense, I replied. Companies from Ford to GM to Toyota had survived worse scandals—ones that had actually killed people, rather than squirting a nominal amount of extra pollutants into the atmosphere.
Now, Dieselgate may have cost VW $30 billion (so far) and sent a few low-ranking fall-guy executives to prison. But give Americans a car they like, and they’ll always be in a forgiving mood. Nothing says “I’m sorry” like a big-ass SUV, and the three-row, Tennessee-built Atlas contributed 27,000 sales to VW’s 2017 total of nearly 340,000. The enlarged, Mexico-built 2018 Tiguan contributed more than 21,000 sales of its own. Remember too that the Atlas didn’t reach showrooms until May, and the Tiguan in summer. So while those two SUVs represented just 23 percent of the brand’s full-year sales tally, by December nearly half of all VW buyers were driving home in either an Atlas or Tiguan. Even a perilous overall slide of 18.6 percent in December (versus December 2016) couldn’t spoil VW’s big year.
Sure, those 340,000 sales are still a long way from Volkswagen’s post-recession peak of 438,000 back in 2012, let alone the record 583,000 new cars it moved in Beetle-crazy 1970. But you've got to start somewhere. It’s worth noting that two-thirds of that slide from 2012 took place before the diesel scandal broke, and that had everything to do with VW’s shortage of SUVs tailored to American tastes. Now that VW has the message, perhaps it can mount a challenge to brands that have left in in the dust—including Subaru, whose 5.3-percent gain in 2017 (to nearly 648,000 units) sneaked past VW to top all major automakers in percentage terms. (Alfa Romeo sales rose 2,200 percent, but to a total of just 12,000 cars, while Jaguar's F-Pace SUV led a nearly 27 percent rise to nearly 40,000 sales, so that's not in the same league as a Subie or VW).
The industry at large snapped its seven-year streak of rising sales, including two all-time highs in 2015 and 2016: The tally shows 17.2 million Americans buying cars in 2017, down from 17.6 million the previous year. But don’t weep for automakers. The relentless rise of SUVs helped boost average transaction prices to another record high of $36,113 in December, according to Kelley Blue Book. Because SUVs (and pickups) bank more profit than the typical car, they’re helping automakers prop up their bottom lines even as the overall market cools. Americans are paying $583 more on average for a new car (up 1.6 percent) than they did just 12 months ago. Multiply that by millions of cars, and you’ll see that even a 1.8-percent slide in yearly sales won’t inflict much pain in executive suites or on factory floors.
The bigger question is when the real pain will return, as it always does in this boom-and-bust industry. On the upside, job growth looks strong, a tax cut is looming, and Americans can afford to spray gasoline like locker-room champagne. Potential energy crisis? Middle East or Korean conflagration? Percolating financial bubbles? Yo, buddy, easy on the gloom-and-doom, especially while I'm shopping for a new pickup. The coming year will find every automaker sticking fingers in dikes to plug leaking sales however and wherever they can: Sweetened lease deals, longer loans, easy credit – including the subprime variety that’s bringing a familiar, distressing jump in loan defaults—and as many new SUVs and crossovers as they can bake and serve for hungry consumers.
Even in this declining market, virtually every stinking segment of SUV and pickup posted a healthy sales increase, from a 15-percent jump in luxury compact crossovers to a 5.6-percent rise for full-size pickups. Nearly category of what we once knew as “cars” suffered major losses. Remember when we all assumed that Americans had finally acquired a taste for Euro-style amuse bouches like Minis and Ford Fiestas? Well, subcompact cars took a depressing 20.4-percent plunge in 2017, with midsize cars falling nearly as far at 16.2 percent. Sports cars were off by 9.5 percent, entry-level luxury cars by 10.7 percent. Even minivans dropped by 12.4 percent, despite the ample lures of a new Honda Odyssey and Chrysler Pacifica. Only electric cars and hybrid/alternative energy cars rose, the former by 30.2 percent (albeit to just 65,000 units) and the latter by 2.3 percent, to roughly 173,000 units.
The big players largely held the fort in 2017: GM led ‘em all with a hair over 3 million sales (3,001,602 specifically), down 1.4 percent. Ford was next with 2.56 million (off 0.9 percent), and Toyota moved 2.43 million, a 0.6-percent decline. But it was a very bad year for Fiat Chrysler: Its sales nosedived by 8.2 percent, to 2.06 million. Chrysler, Dodge and Fiat brands all suffered double-digit losses. Even bread-and-butter Jeep got sliced by 10.6 percent to about 829,000 units—an ominous sign in a market that’s completely ga-ga over SUVs. A bit surprisingly—or not, considering their car-centric lineups—Hyundai and Kia sales tanked by a respective 13.4 and 8.9 percent; though that’s after several consecutive years of sales records, and still left those brands selling 1.25 million units combined. In contrast, Honda and Nissan rode their vast lineups of affordable SUVs to defy the downward trend. Honda eked out a 0.2 percent gain to move a record 1.64 million cars in America. Nissan was just behind, setting its own American record with 1.59 million sales—up 1.9 percent.
In the closely watched luxury-sales race, Mercedes-Benz continued to widen its lead, despite a 0.6-percent overall decline. An SUV blitzkrieg helped Mercedes to 372,325 sales, followed by BMW at 305,685 (off 2.3 percent) and Lexus just behind at 305,129 (down a notable 7.9 percent). But Audi continued to plug away, up 7.6 percent to 226,511 sales. That's the eighth straight year of record Audi sales, from a brand that didn't even top 100,000 sales in America until 2010.
And if you’re looking for an early contender for success in 2018, despite a tepid market, look no further than Chevrolet. For once, Chevy’s timing looks good: Aside from impressively designed, mass-market SUVs including the compact Equinox and three-row Traverse, they’ve got an all-new, super-profitable Silverado pickup—the best-selling model by far in the entire GM portfolio—coming to showrooms in 2018. (Can you say cha-ching)? Ford, in contrast, is looking at too many bare cupboards, putting pressure on both its stock price and new CEO Jim Hackett.
As reported by the Detroit Free Press, Ford's lineup is replete with aging, in-decline models like the Fusion and Taurus sedans, with few compelling replacements in sight. Worse, it’s been late or entirely AWOL in some of the nation’s hottest segments, including subcompact SUVs and midsize pickups. After grievous delays, we’ll finally see that midsize Ranger pickup at Detroit’s auto show in January, and a niche-model Bronco for 2020. Hackett and Ford have talked a big game on electrification and mobility services, yet the company doesn't have a legit competitor to the Chevy Bolt or other mainstream EVs. Ford needs a New Year's resolution: It must pick up the pace of vehicle introductions if it wants to stay in front of Toyota as America’s second-largest automaker—and fight for its slice of a shrinking market pie in 2018.