Is it really pain at the pump?

With nightly news continually telling us how painful every fill-up is, one would think that consumers would be quickly scared of vehicles with big fuel tanks and appetites. So far however higher gas prices have not slowed down light truck sales in the US with every full size pickup model in March outperforming its February results by a good margin even with gas up over half a dollar a gallon on average nationwide in that time period.

February in blue and March in Red

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New Volkswagen Passat Analysis

There has been a lot of online chatter about the new "Americanized" Volkswagen Passat over the past few days. Built in Chattanooga, Tennessee, the designed for America (also sold in China) Passat is larger in all dimensions than the latest European Passat which itself is just a facelifted version of the 2006-2010 Passat. As with the latest Jetta that also underwent an "Americanization" process, Volkswagen and car fans in general are disappointed with VW abandoning the standard Passat and creating a new version for America. Feeling betrayed Volkswagen owners and fans in particular are the most vocal and feel that the new Passat lacks the features (styling, interior, engine, etc) that make Volkswagens German. While the omission of the 2.0T engine could be described as a step back the media consensus is that the Passat still has a nice interior and sharp handling for a family sedan. While the American Passat doesn't have the greatest styling the same could be said about the refreshed European Passat as well. Overall the new Passat appears to be a solid competitor in the midsize category while playing a different role than the previous Passats. With that in mind let's take a look at why Volkswagen has created a new Passat for America.

While the previous Passat was a near premium sedan (in Germany it's main competitor is the Opel Insignia which is sold in the US as the Buick Regal) with near midsize dimensions it struggled to gain solid sales traction. Stuck trying to compete with mainstream competition (Camry, Accord, Altima, Malibu, Fusion) the Passat's higher price tag had it doomed from the start. Unable to follow the success of the previous generation, the 06-10 Passat saw its sales nosedive over the years as Volkswagen decided to wind down the model and replace it with something more appropriate for the market. In order for VW to meet its ambitious goal of 800,000 yearly sales in the US by 2018 a major presence is required in the midsize segment that is the best selling car category in America. The latest Passat addresses the biggest shortcomings of the last Passat (smaller size and higher price than the competition) in order to increase yearly Passat sales to over 100,000 a year. While the new Passat is a departure from the previous ones, it is a necessary one for VW to become consistently profitable in the United States.

The last generation Passat (introduced in 2005) never broke 50,000 yearly sales as it was too expensive and small against its mainstream competition. Essentially the Passat's problems boiled down to the fact that Volkswagen was unable to convince consumers to pay the extra 5-8,000 for a more premium yet smaller product.

Volkswagen saw its sales drop after 2001 because of an aging lineup and a poor quality reputation.While Volkswagen hopes for 800,000 sales by 2018 a more reasonable goal of 500,000 is possible in that frame with its new American centered lineup. A crossover vehicle would be the next step for Volkswagen to achieve the half-million mark in America.

Pickup Sales Fall in April

About a month ago pickup sales were at their highest point in recent memory even with gas passing four dollars a gallon in some places. As expected the trend did not last long and every brand save Toyota saw sales of their full size pickups fall compared to last month. Spurred by high demand for its V6 engines Ford's F-150 led all with 45,435 sales in April, while this was an improvement over a year ago it could not match the previous month's sales. In second place the Chevy Silverado posted its second worst month of the year and was fractionally worse compared to a year ago. Much like the Sierra the Dodge Ram struggled when compared to March but was able to improve upon 2010 sales by around four thousand units. The biggest surprise of the month was certainly the Toyota Tundra that continued to improve its sales for the fourth month this year as it closed its gap to the GMC Sierra. Click the chart below to see pickup sales over the course of this year.

Pickup Sales Undeterred By Rising Gas Prices

Even with gas prices rising across America pickup sales appear to be immune for the time being. Since the first of the year gas prices have increased over 20% amid rising crude oil prices due to instability in the Middle East. Nevertheless, over the past three months pickup sales have been gradually increasing. Take a look below to see the first quarter sales trend for the sixth full size pickups available on the market today. Aside from the GMC Sierra all of the pickups have increased their sales successively every month in the quarter. Ford and Dodge have done particularly well increasing their sales by 49 and 79 percent respectively. At this point in time it appears that pent up demand and improving credit availability are more powerful motivators in the market than higher prices at the pump. Only time will tell if pickup sales take a dive with gas already over four dollars in some parts of the country and rising elsewhere.

Chart Source