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Volkswagen's U.S. Sales Are Hammered Again as the Diesel Scandal Lingers

By John Rosevear – Feb 2, 2016 at 6:20PM

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With their brand tarnished by a global emissions cheating scandal -- and with no diesel VWs to sell for now -- Volkswagen's U.S. dealers had a tough month in January.

VW said that sales of its compact Tiguan crossover boomed in January. But sales of nearly all of VW's other models were dismal. Image source: Volkswagen.

Volkswagen (VWAGY -4.69%) said on Tuesday that its U.S. sales fell 14.6% in January as its dealers continue to struggle to overcome the loss of VW's once-popular diesel-powered models.

One bright light for VW in an otherwise dismal month
 "January sales numbers were down due to the seasonal nature of the fleet business," VW of America number operating officer Mark McNabb said in a statement. "Despite that and the weather conditions in the Northeast portion of the country, Volkswagen dealers improved in terms of retail business."

VW was especially happy with the performance of its compact Tiguan crossover SUV, which posted a year-over-year sales gain of just under 72%. VW has struggled to take advantage of a worldwide shift by consumers away from traditional sedan models and toward the latest generation of car-based "crossover" SUVs. 

But the Tiguan was far and away the brightest spot in what was overall a dismal month for VW-brand sales in the U.S. Nearly all of VW's other models posted year-over-year sales declines, despite a big boost in incentives. TrueCar estimates that incentives for the three brands that VW sells in the U.S. (Volkswagen, Audi, and Porsche) were up a 48% last month from January of 2015, to an average of over $3,400 per vehicle. 

Of course, VW's U.S. dealers are also struggling with the consequences of the company's massive global diesel-cheating scandal -- in more ways than one.

The diesel mess is hurting VW's dealers in more ways than one
It's hard to measure how badly VW's brand has been damaged here in the U.S. by its admission last fall that it rigged millions of diesel-powered vehicles with software that cheated emissions tests. The software switched on emissions controls when it detected that a government test was underway, but allowed VW's ostensibly "clean" diesel engines to emit toxic pollutants well in excess of legal limits in normal driving.

Image source: Volkswagen.

It seems likely that the scandal is keeping some buyers away from VW dealers and hurting the brand's sales. But there's another factor hurting its year-over-year sales totals in the U.S.: VW's dealers don't have any new diesels to sell right now. 

Before the company's global diesel-emissions cheating scandal erupted last fall, diesel-powered vehicles would often make up 20% or more of the VW brand's total U.S. sales in any given month. For the moment, those sales are gone. 

It's not because buyers are shunning the cars (although they well might, given the chance), it's because right now, VW's dealers aren't allowed to sell them. The U.S. Environmental Protection Agency has withdrawn the certifications that would allow VW to sell the cars here until the latter establishes to the agency's satisfaction that the cars don't contain illegal "defeat devices" designed to cheat emissions testing.

Until VW and U.S. regulators come to an agreement that will allow VW to resume selling those diesels (if they ever do), VW's dealers will have to work around the big gap in their lineups. 

The upshot: VW's dealers and customers are still waiting for good news
VW has boosted its discounts in an effort to help its dealers, but -- Tiguan excepted -- U.S. sales of Volkswagens are still dismal. That's unlikely to change until VW makes peace with the EPA and until it has some success in moving past the scandal. 

Almost five months after the EPA first announced its charges against Volkswagen, neither of those things looks likely to happen soon. For investors who have been thinking about scooping up some beaten-down VW shares, there's probably no need to rush.

John Rosevear has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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