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Volkswagen Posts Weak September US Car Sales, Bets Big on EVs

Zacks Equity Research

Volkswagen AG VWAGY recently reported weaker U.S. vehicle sales for September, ending the six-month streak of year-over-year monthly gains. Meanwhile, the German automobile giant’s truck unit is likely to pour $2.2 billion into electric vehicles (EVs) and software developments in a bid to keep pace with the changing dynamics of the auto industry.

September Sales Slid Despite Strength in SUVs

Volkswagen’s U.S. auto sales in September came in at 26,947 units, marking a decline of 12% year over year. The sales were weighed down by a decline in car sales, partially offset by SUV sales. Car sales slumped 30% year over year, with declines across major brands including Jetta and Golf. Jetta and Golf sales tumbled 24% and 13% year over year in September, with 8,090 and 2,917 deliveries.

Nonetheless, SUV sales increased 15% from the prior-year period to 14,111 units (accounting for 52.3% of total sales). Volkswagen’s Atlas sales in September soared 41% year over year to 6,024 units. Furthermore, sales of 59,705 units for the model during the January-September period recorded a year-over-year rise of 39%.

On a year-to-date basis, Volkswagen’s total unit sales in the United States have increased 4.5% to 278,155 units. During the said time frame, SUV sales jumped 16% and car sales dipped 6.1%.

Ready to Ride the EV Wave

Per Bloomberg, Volkswagen’s Traton truck division intends to invest more than $2.2 billion over the next five years on EVs and digital offerings. While most passenger automakers are shifting their focus to capitalize on EV revolution, heavy-duty trucks and pickups have not seen the same pace of transition to battery-powered vehicles. Although global automakers like Daimler AG DDAIF, General Motors GM and Tesla TSLA, among a few others, have embarked on some electric truck projects, there hasn’t been even one project launch yet.

Volkswagen is making massive bets in the EV space and targets to invest around $33 billion by 2023 to make its electric cars successful. The firm expects EVs to account for 40% of total sales by 2030. It has injected $1.3 billion into a factory in Germany to develop the ID.3, one of its most ambitious EV projects.

The company expects volume production for the ID.3 electric car to kick off this November, with the first set of deliveries expected in 2020. In fact, 30,000 reservations have already been received for the car’s special first edition. For the first time, ID.3 features Volkswagen’s Modular Electric Toolkit, also known as MEB platform. The Volkswagen Group is ready to produce 33 more vehicles on the MEB platform in the next three years. 

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