Volkswagen Reinvents VW Beetle in Push for U.S. Dominance

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InvestorPlace
With more than 21 million cars manufactured under the Beetle nameplate in the past 60-plus years, it’s a bit shocking to consider the iconic Volkswagen car has seen only two major design schemes. Such big numbers on so few changes are proof of the compact car’s resonance with motorists worldwide. But with only 300,000 vehicles sold in the U.S. last year — a mere 2.5% of the 11.6 million automobiles Americans purchased in 2010 — Volkswagen has a long way to go before it is a serious player in the domestic auto market. That’s why Volkswagen has tweaked the styling of its flagship Beetle for just the third time in history, with a sleek extended roof line, a trendy interior and a longer body to appeal to the next generation of American drivers. But will this hip new Bug be enough to meet VW’s ambitious sales goal amid weak consumer spending and high gas prices? For starters, it’s worth noting that auto sales are still off considerably from high-water marks set before the financial crisis, and it’s an uphill climb for everyone. Annual sales in 2007 topped 16 million, and 2008 sales topped 13 million. With 11.5 million cars sold in America last year, there is just a smaller pie to divvy up among major automakers. However, fiscal restraint may give the Beetle a leg up in the era of high gas prices. With a fuel efficiency of about 22 mpg highway and 31 mpg city, the car is an economical drive for many commuters. Then again, the fuel-efficiency angle swings both ways. While 20% of VW consumers are into diesel-powered cars, the false perception of the fuel as dirtier than unleaded gas continues to turn off many Americans from diesel Jettas, Passats and Beetles. If Volkswagen expects its European success with diesel to cross the Atlantic into U.S. showrooms, it’s got another think coming. But on the whole, the stylish reinvention of the iconic compact car could prove an important move for Volkswagen in its quest to triple its current U.S. auto sales footprint to 1 million by 2018. But it’s not the only one. A redesign of the Passat sedan is also in the works, and Volkswagen is building goodwill with American consumers with a Chattanooga, Tenn., auto plant that will be up and running sometime this summer. The timing of the U.S. push also comes as Japanese automakers Honda (NYSE: HMC ) and Toyota (NYSE: TM ) continue to be hamstrung by supply-chain woes in the wake of the recent tsunami and nuclear crisis in Japan. If those leaders can’t keep up with demand — Honda sold 1.2 million vehicles in the U.S. last year, while Toyota sold 1.7 million — that will create opportunities for Volkswagen. But it could be an uphill climb. General Motors (NYSE: GM ) and Ford (NYSE: F ) have both taken a page out of the European compact car book with plans for the Cruze and the Fiesta, respectively, to appeal to shoppers looking for chic but fuel-efficient cars of modest size. And with both the Chevrolet Cruze and Ford Fiesta starting at a few thousand bucks less for their basic models, Volkswagen hopes style will give its compact Beetle the edge. Judging by VW’s powerful history with the brand, that could be the case. As for whether it’s enough to catapult Volkswagen to one of the front-running U.S. auto stocks, that remains to be seen. Jeff Reeves is editor of InvestorPlace.com. Write him at editor@investorplace​​.com , follow him on Twitter via @JeffReevesIP and become a fan of InvestorPlace on Facebook.