It was an appearance with reverberations that Bernd Osterloh made in January 2014 in a Wolfsburg café near the Volkswagen Group headquarters. The diesel scandal had not yet been uncovered by the US authorities when the then head of the VW Works Council took the company's management to task for the problems in the world's second-largest car market. The car manufacturer lacked suitable models in the sought-after segments of large SUVs and pick-up trucks. The dealer network was still not tight enough, and the model change cycle had been miscalculated. According to Osterloh, the USA was „a catastrophic event“ for VW.

A decade later, the Wolfsburg-based company's image has changed. SUVs now make up the majority of vehicles delivered by the Volkswagen Group of America in the USA. In 2023, their share of the Volkswagen brand's statistics was 74%, while the share of passenger cars was 16%. In 2021, the brand made it out of the red in the USA after a long period. However market share is still struggling.

When Wolfsburg announced the construction of VW subsidiary Powerco's first battery factory outside of Europe in St. Thomas, Canada, in March 2023, Group CFO Arno Antlitz explained that the company now had „a unique opportunity to grow profitably in North America and significantly advance the transformation towards electromobility“. Pablo Di Si, President and CEO of Volkswagen Group of America, added that electric mobility was „our growth opportunity in the North American region – and we are driving an ambitious strategy to play a major role“.

Less than two years later, the Argentinian, who joined the VW Group in 2014, brought the business in the Latin American market back into the profit zone after many years, and became Head of North America on 1 September 2022, has left Volkswagen „at his own request“. The Wolfsburg-based company did not provide any information on the reasons for his departure. However, overly optimistic planning was the 55-year-old's undoing.

The sales figures for the ID.4 electric SUV, which was launched in the USA two years ago, have been particularly disappointing so far. According to statistics from the VW North America subsidiary, 16,375 vehicles were delivered in the first three quarters of this year – around 40% fewer than in the same period last year. In the third quarter, the drop was even more at 58%. In 2019, VW began expanding the plant in Chattanooga, Tennessee for e-car production, with related investment of 800 million dollars. Production of the ID.4 started in mid-2022 with an initial 7,000 vehicles per month, and the intention to ramp up that number in 2023.

The ID.4 is currently the Group's only all-electric vehicle to be built and sold in the USA. Other electric models that Europe's largest vehicle manufacturer sells in the market, but does not produce there, are the ID.Buzz electric van, Audi models such as the Q4 e-tron, Q6 e-tron, Q8 e-tron and e-tron GT and Porsche models such as the Macan, Taycan, Taycan Sport Turismo and Taycan Cross Turismo.

VW attributes the sluggish sales of the ID.4 electric model to several factors. Deliveries in North America slowed down in the second half of the year, mainly due to a sales stop and a voluntary withdrawal in connection with a quality problem at a supplier that manufactures the door handle of the ID.4. In addition, car manufacturers aggressively introduced incentives for their electric models to gain market share. Finally, high interest rates continue to push consumers towards cheaper models and configurations, usually involving combustion-engine vehicles.

To adjust consumer preference and the overall market, the number of e-vehicles available for sale would be lowered. „We have this flexibility because our plant in Chattanooga produces combustion engines and electric cars on the same production line, so we can easily adjust the product mix to meet the needs of the market," the company said. VW has not affirmed the figures mentioned when Pablo Di Si was appointed in July 2022. At that time, the car manufacturer held out the prospect of establishing the most comprehensive electric portfolio on the North American market, and offering more than 25 electric models from the Group by the end of the decade.

VW is also not commenting on the development of earnings in the market region, and any discrepancy compared to internal expectations. The company is still profitable in the US business, both at the Group and brand level, it simply states. The target set during the era of CEO Herbert Diess, who left the company in the summer of 2022, of achieving a 10% market share in North America by 2030 with an ambitious growth plan has been cancelled by VW. At least it is no longer being repeated publicly.

Including brands such as Porsche, Scout and Cupra – which are not under the umbrella of the Volkswagen Group of America – the aim is to „significantly increase“ the market share in the USA by 2030, VW stated in response to an inquiry.

Probably 7% to 8% would be considered a success. According to the information provided, the North American company currently has a market share of just over 4%.

Kjell Gruner is now to drive the US business forward, VW announced in November. The 57-year-old, who was born in Stockholm, worked for many years for the sports car manufacturer Porsche, which has been managed by VW Group CEO Oliver Blume since 2015, before moving to VW's new joint venture partner, the Californian Tesla challenger Rivian.

VW has a promising future in the USA, the car manufacturer insists. It refers to an „extremely competitive“ product range, which has been completely renewed since summer 2023. The new ID.Buzz and Tiguan were highly praised by reviewers. Sales have risen by 17% in a market that has only grown by 1.8% since the beginning of the year. „We have seen strong demand for entry-level models and equipment and have endeavoured to provide our dealers with the range to meet this increased demand,“ VW said. The Jetta, for example, which, like the Volkswagen Taos and Tiguan models, rolls off the production line at the Puebla plant in Mexico, is on the rise with growth of over 60% year-on-year in entry-level models.

The company justifies the appointment of Kjell Gruner as head of Volkswagen Group of America from 12 December by pointing out that Gruner is a successful manager and has extensive experience in the US market. However, the markets doubt that Gruner will make the VW brand much more visible in the USA. The US investment bank Stifel, which recommends the VW preference share as a buy with a target price of 135 euros, noted on the occasion of the management change that VW should rethink its regional strategy.

Premium brands such as Audi and Porsche are international products and similar in all markets. In the case of models from volume manufacturers, however, customer preferences differ from region to region, which limits economies of scale. Profit margins are too low, given the regional differences. If the USA also introduced import tariffs on vehicles produced in Mexico, 65% of the cars sold by the VW brand in the USA would no longer be competitive. For Porsche and Audi, on the other hand, the US market is extremely important, but the brands have no production there. According to Stifel, the Audi SUV models Q7 and Q8, as well as the Porsche Cayenne, should roll off the production line at VW's Chattanooga plant.

The investment bank is also sceptical that VW will need two-volume brands in the USA after the introduction of the revived Scout brand, which would have nothing in common in terms of parts and platforms. The Wolfsburg-based company now expects pick-up truck production to start at the separate plant in Blythewood in the state of South Carolina in 2027, a year later than initially announced.

New import tariffs after the Trump administration takes office in the USA at the beginning of next year could be the trigger for the VW brand to turn its back on the US market, Stifel surmises.

However, there is nothing to suggest that the brand will turn its back on the US market, especially as its dependence on the world's largest market, China, would increase. The earnings contributions of VW's joint ventures there have fallen sharply, and as the long-standing market leader in vehicles with combustion engines, the Wolfsburg-based company is struggling for relevance in the rapidly growing electric segment.

VW is keeping a close eye on the current debate on possible punitive tariffs, including on imports from Mexico and Canada. The VW brand is well positioned in the USA, as more than 90% of vehicles sold there are produced in North America, and the company fulfils the criteria for duty-free treatment under the USMCA, the successor agreement to NAFTA. In 2023, the VW Group delivered around 713,000 vehicles in the USA. Around a third of these were produced in the USA, another third in Mexico. The remaining third was imported from Europe.