Can the New Jetta Boost U.S. Sales for Volkswagen?

Volkswagen ties hopes on Jetta 2015 to help the company reposition itself in the U.S. Does the newer version have what it takes to stir this market?

ICRA Online
ICRA Online
Apr 28, 2014 at 11:00AM

Jetta has been Volkswagen's (NASDAQOTH:VWAGY) most successful compact sedans with more than 14 million units sold since its launch in 1979. In 2013, the company delivered 925,000 units worldwide, making Jetta the top-selling car for the entire Volkswagen Group. The sedan is reasonably popular in the U.S. and is one of the top-selling Volkswagen cars. It could also play a big role in repositioning the VW brand in the trailing U.S. market.

The European carmaker recently presented the redesigned 2015 Jetta sedan at the 2014 New York International Auto Show. Let's check out how the company stands to gain in the U.S. markets through the launch of the 2015 Jetta.

Volkswagen Jetta 2015. Source: Volkswagen

Ambitious goals
Volkswagen Group is gunning for 1 million in sales in the U.S. by 2018, up from 610,960 sales the company saw in 2013. The auto major has decided on the namesake VW brand to be the main vehicle of this growth. The brand had a quiet 2013 as sales slipped 6.9% on the back of aging models and no big launches. This could change soon, however. The company has announced a super aggressive 100 new model launches worldwide through 2015,  and the U.S. will obviously get its share. The refreshed 2015 Jetta is the beginning.

The U.S. market dynamics
The U.S. compact segment sees annual sales of over 2 million cars, and the market expanded by 5% in 2013 as segment leaders like Honda Civic, Toyota Corolla/Matrix, Chevrolet Cruze, and Hyundai Elantra saw their sales rise. We expect competition to heat up further as automakers launch new models. At the New York Auto Show, Ford (NYSE:F) and General Motors (NYSE:GM) launched the refreshed 2015 Focus sedan and 2015 Chevy Cruze, both of which will be tough contenders against the Jetta.

According to the data by IHS Automotive, Focus has been the world's best-selling nameplate in both 2012 and 2013. The latest facelift that includes a sleeker body, better interiors, improved infotainment system, and more fuel efficiency should stimulate higher demand for the car. The Cruze will also sport new styling and color schemes, though its biggest attraction will be the new OnStar 4G LTE. This is a brand new technology that will redefine car infotainment and comes with a bandwidth that will provide simultaneous Internet connectivity for up to seven devices. 

Top 10 compact cars in 2013


The Jetta strategy
There's no denying the challenges, but Jetta (and its sibling the Passat sedan) represents the company's best chances at making a go in the U.S. market. These two cars are designed with American buyers in mind, and represented 27% and 18%, respectively, of the Volkswagen Group's total U.S. sales in 2013.

For the Jetta, the company targets the working middle class in the U.S. who look for stylish and fuel efficient cars with good safety features that are available at a good price. The pointers below show that the new 2015 Jetta takes care of these demands nicely.

Better looking: Volkswagen has restyled the car's front and rear, added new radiator shutters, a new bumper, and redesigned the front grille. In the car's review, Matt Degen from Kelly Blue Book writes that "the changes are not night-and-day compared to the outgoing model, but meaningful enough to add more flair."

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Safety features: Jetta 2015 is well-equipped with blind spot detection to aid while changing of lanes -- the first Jetta model to do so. Other attractions in the safety department include radar sensors that sense vehicles on roads at a range approximately 65 feet to reduce the chance of collision, the rear cross-traffic assistance system, the frontal collision warning system, and modified brake ventilation channels. These advancements are likely to be crowd pleasers as according to a recent survey by Intel Corp, nearly 44% of the people in the U.S. prefer living in a city with automated cars.

Fuel efficient: Volkswagen claims that the 2015 model would be 8% more fuel efficient than its predecessor. The diesel variant with the improved 2.0 liter turbodiesel engine that uses the new modular diesel system is touted to achieve 45 miles per gallon on the highway up from 42 mpg in the current model. The new model conforms to the upcoming LEV3 emission norms in the U.S. applicable from 2015 in terms of improved fuel efficiency.

Price: Though Jetta 2015's price has not been revealed yet, it will hopefully be in line with the expectations of the working class. Even with the previous models Volkswagen kept a tight rein on prices by outsourcing some of its engineering and parts production to low-cost markets like Mexico, which contributed around 40% of the cars parts. The current price of 2014 Jetta SEL sedan hovers around $27,345, much below many other auto giants offering a similarly well-equipped car.

Foolish last word
Volkswagen is doing all that's required to get an increased share of the total sales in the U.S. The refreshed Jetta, with a focus on improved style and overall efficiency, could help the company gain firmer ground in this market.