Volkswagen's (VOWG_p.DE) latest push to become more than a niche player in the United States builds on a truism the German carmaker has long ignored: if you want to crack the U.S. market, tune in to American customers.
VW is aiming for leadership in global auto markets, backed by timely expansion in China and Latin America as well as its dominance in Europe. Yet it continues to struggle in North America.
It swapped U.S. chiefs a year ago, disappointed by the results of a push into midsize sedans assembled at a $1 billion factory in Tennessee. U.S. sales of VW-branded cars have dropped 16 percent since 2012.
To fight back, the company plans to triple its product range in the fast-growing crossover segment and refresh models more quickly, company sources said.
The campaign will include a five-seat variant of the forthcoming midsize sport-utility vehicle (SUV), a concept version of which will be unveiled on Monday at the Detroit auto show, the sources said.
VW is also stepping up cooperation with dealers and assembling a team of 200 experts in R&D and design at its U.S. plant to ensure vehicles better cater to American tastes.
"It took us long to realise that the U.S. market requires more special attention," a senior manager at VW's German headquarters said on condition of anonymity.
"You have to have an ear on the ground to capitalise on trends and customer desires."
Michael Horn, VW's new U.S. chief, has reduced the product lifecycle from seven to five years for sedans and is planning similar changes for SUVs, one source said.
"It's the game you have to play in the hype-heavy U.S. market," the source said.
VW's past failings mean it will miss an 800,000 U.S. sales target for 2018, according to researcher IHS Automotive. It sees 547,000 sales of VW-brand cars by then, from last year's 367,000, missing the goal by about a third.
Chief Executive Martin Winterkorn, at a reception in Detroit on Sunday night, admitted it could be tough to more than double U.S. sales to 800,000 by 2018. "This will not be a walk in the park," he said. "We are facing challenges in this great market."
IHS forecasts include VW's plans to overhaul the Tiguan compact SUV this year, plus a coupe-style version and long-wheelbase model that may offer a petrol-electric hybrid option.
A source at VW said the new long-wheelbase Tiguan seven-seat SUV is most likely to be built in Mexico in 2017. The five-seat Cross Coupé concept SUV to be unveiled at the Detroit show is likely to be assigned to the Chattanooga plant, the source said.
U.S. compact SUV sales rose to about 1.49 million last year from 964,000 in 2009, while midsize SUVs grew to 1.69 million from 946,000, according to auto website Edmunds.com.
But VW won't benefit from the boom until new products arrive in 2016-17, Evercore ISI analyst Arndt Ellinghorst said, noting that existing Tiguan and Touareg models cost more than rivals.
Also, Toyota and Mazda, buoyed by the weak yen, will keep pushing into passenger cars, VW's traditional area of strength, he said.