Volkswagen AG is dumping its premium pricing strategy in the United States and will instead compete head-on with Japanese competitors in the compact and mid-sized sedan segments.
The new approach begins with the redesigned 2011 Jetta sedan, which goes on sale in the U.S. in October. The new, slightly larger Jetta will start at about $16,000, down from $18,435 for the current Jetta. The base model includes stability control and air conditioning.
The base 2010 Toyota Corolla starts at $16,200 and the base 2010 Honda Civic at $16,405.
The Jetta, VW's top-selling model in the United States, will replace the smaller Golf as the brand's least expensive car in the U.S. The Golf starts at $18,370.
In the past, VW maintained as much as a 10 percent pricing premium over competitive vehicles. In recent years, the difference has been lowered to 5 percent and less.
VW lowered the Jetta's price "because it is our bread-and-butter car and the potential in sales is sizable," said Mark Barnes, COO of VW of America.
He said VW aims to increase U.S. Jetta sales to 150,000 in a full year. Last year VW sold 108,427 Jettas, down from a peak of 145,604 in 2002.
Breaking price barrier
The new pricing strategy surprised dealers.
"This will really help draw buyers," said Jack Daniels, owner of Jack Daniels Volkswagen in Fair Lawn, New Jersey
VW's Chattanooga, Tennessee-built mid-sized sedan goes on sale in September 2011. Barnes said VW will price the sedan to compete with the Honda Accord and Toyota Camry, which means a base price of about $22,000. The Accord starts at $21,805 with shipping.
VW plans to sell about 150,000 of the new mid-sized sedans annually.
By repositioning its sedans, Barnes said, VW finally will "break the price barrier and the belief that VW is an expensive car."
VW division has ambitious plans to increase U.S. sales to 400,000 vehicles in 2012 and 800,000 in 2018, up from 213,454 last year.
Although sales were up 35 percent through May to 104,961 vehicles, Barnes said VW division likely will increase 2010 sales by only about 10 percent. Last year, sales got a big boost in July and August from the federal government's cash-for-clunkers program.