Images

A revamped Volkswagen Tiguan SUV will arrive at dealers in Europe soon, but the brand lost ground to rivals in January. Image source: Volkswagen.

What's happening: Volkswagen (NASDAQOTH:VLKAY) lost market share to key rivals in its home region of Europe in January, according to figures released this morning by the European Automobile Manufacturers Association (known as the "ACEA," its initials in French).  

The key details: The ACEA tracks registrations of new passenger vehicles in European Union countries and reports them monthly. For January, it said new-car registrations in the EU rose 6.2% in January, but registrations of VW-brand vehicles fell 3.8%. The VW brand's market share in the EU fell 1.2 points year over year, to 11.7%. 

The ACEA noted that Italy (up 17.4%) and Spain (up 12.1%) both posted particularly strong year-over-year increases in new-car registrations. Both were harder-hit than some Western European neighbors by recessionary conditions int he past few years. 

Both Italy and Spain are also, importantly, sales strongholds for VW's European arch-rival, Fiat Chrysler Automobiles (NYSE:FCAU). FCA's registrations rose 14.4% in January, with big increases for its Fiat, Alfa Romeo, and Jeep brands. 

Jeep's contribution to FCA's European sales totals is still small. Just 5,673 Jeeps were registered in the European Union in January, according to the ACEA, versus 47,057 Fiat-brand vehicles. But the brand's fast growth (registrations were up 34.1% year over year) suggest it's on its way to becoming a significant contender in time. Jeep's popular subcompact Renegade is made in Italy. 

FCA's Detroit-area rivals also had good months. Ford's registrations in the EU rose 11.4% in January on big sales of small SUVs, while registrations at General Motors' (NYSE:GM) Opel subsidiary rose 12.2% year over year, driven by strong sales of the new Opel Astra compact sedan. 

Both Ford and FCA targeted VW with aggressive incentives in Germany last month, according to a Bloomberg report

What it means for Volkswagen: Taken together, VW's family of brands still has a commanding lead in the European Union, with 24.2% of the market in January. And its Audi premium brand is doing well despite the diesel-emissions scandal: Audi's registrations in the EU were up 13.7% in January.

But as we saw in some other parts of the world last month, Volkswagen is feeling the heat from its ongoing diesel-emissions scandal. The brand has clearly been damaged with some consumers, causing sales to slip. 

That won't help VW's bottom line. The company is already facing the cost of recalling and fixing millions of vehicles around the world, along with what will almost certainly be several billion dollars' worth (at least) of fines and regulatory penalties in the U.S., Europe, and other markets.

What's next for VW: The company has indefinitely postponed its fourth-quarter and full-year 2015 earnings reports as it scrambles to come to terms with the spiraling costs of the scandal. It's facing a civil suit by the U.S. Justice Department that could potentially expose it to tens of billions of dollars in damages, as well as other legal actions in the U.S., Europe, and elsewhere.

It's possible CEO Matthias Mueller is working behind the scenes to get to a settlement with the U.S. government that VW can charge against its 2015 earnings. That could help get the company past the scandal more quickly -- and help speed its efforts to recover its reputation with consumers around the world. 

If so, we're likely to know more about it soon.

John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Ford. The Motley Fool recommends General Motors. 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.