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Volkswagen's Sales are Crushed Again as the Diesel Scandal Lingers

By John Rosevear – Mar 1, 2016 at 7:04PM

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VW's Audi brand is holding its own, but the core Volkswagen brand is losing a lot of sales as company leaders work to settle with the U.S. government.

VW's Tiguan SUV sold well last month. But nearly all of the brand's other models didn't, as buyers appear to be deserting the brand. Image source: Volkswagen

What's happening: Volkswagen (VWAGY -0.40%) said that its U.S. sales of VW-brand vehicles fell 14% in February versus a year ago, as the company's inability to sell diesel-powered models in the U.S. continues to hurt its year-over-year sales comparisons.

But the VW Group's high-volume premium brand fared somewhat better: Audi's U.S. sales rose 2.3% last month.

What Volkswagen said: Sales of the compact Tiguan crossover SUV were up 78% from a year ago, to 3,245 vehicles delivered. And the company delivered 198 examples of the battery-electric e-Golf, up 52% from February of last year.

Every other VW-brand vehicle was down year over year.

"We were pleased to see increased retail sales at our dealerships in February, supported by vehicles like the Tiguan," said Mark McNabb, chief operating officer of VW's U.S. operation, in a statement. "Even though overall sales were down due to seasonal fleet business, we are encouraged by showroom activity this month."

Audi sales were more of a mixed bag. The compact A4 sedan and big Q7 SUV posted good year-over-year sales gains, but sales of some other mainstream Audis, like the midsize A6 sedan and popular Q5 SUV, were down.

Audi's U.S. chief noted that there are new models arriving shortly. "There is robust demand for models at the top end of our lineup, such as the A7 and Q7," said Mark Del Rosso, chief operating officer of Audi's U.S. operation, in a statement. "This gives us confidence that our sales momentum will continue with the upcoming launches of the all-new A4 and R8 this spring."

What it means: There's not much in the way of good news hiding in the numbers at the Volkswagen brand. Simply put, U.S. sales of every single VW-brand model except the Tiguan crossover SUV and the e-Golf were down in February, some by huge percentages.

A year ago, VW had a lot to brag about. Its then-new compact Golf hatchback had just won Motor Trend's prestigious Car of the Year award, and U.S. sales of the model hit the highest mark in 15 years. But Golf sales last month were down over 46% from those highs.

It didn't get better with VW's other models. The Jetta sedan? Down 13%. Midsize Passat? Down 30%. Beetle? Down 52%. There was no good news, anywhere.

There are probably two factors at work here. Of course, the negative publicity that lingers from VW's still-unresolved emissions cheating scandal has probably led lots of former VW fans to shop elsewhere this time around.

But the scandal is having a more direct effect on VW's sales. Until last fall, between 20% and 25% of VW's U.S. sales in any given month were made up of vehicles powered by its so-called "clean diesel" engines. The U.S. Environmental Protection Agency has revoked VW's right to sell those models in the U.S. for the moment.

Given that, a mere 14% year over year drop doesn't seem all that bad.

For Audi, the story is probably simpler: Luxury brands often show sluggish sales early in the year. BMW (BAMXF -1.09%) said that its U.S. sales fell 10.7% in February, and Cadillac and Lexus were each up just 1%. The outlier was Mercedes-Benz, which posted a 35.5% year-over-year gain on strong sales of some new models.

What's next for Volkswagen: VW has postponed its fourth-quarter and full-year 2015 earnings reports while it tries to get to a settlement with the U.S. government. It's still not clear how that settlement and the other costs of the emissions scandal will affect VW's earnings as the year goes on.

It's also still not clear how VW will go about fixing -- or buying back -- the roughly 600,000 affected vehicles in the U.S. Until we know more about those things, it's hard to draw any conclusions from its latest sales results.

John Rosevear has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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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