Testing brand equity to destruction.
For almost half a century, Volkswagen has occupied a sweet spot in the global automotive market. It might be described as semi-premium, but that prosaic term hardly does justice to its achievement in developing and sustaining an image amongst the car buying public that places the marque consistently half a step higher than its mainstream competitors.
The brand equity, as marketing types would say, is of enormous value to the company. It has allowed Volkswagen to get away with producing some distinctly sub-standard products(1), ignore often middling scores in reliability and customer satisfaction surveys, and even recover relatively unscathed, in reputational if not financial terms, from the Dieselgate scandal that might have been an existential threat to other, less well regarded marques.
Occasionally, however, Volkswagen has pushed its luck too far and the market has pushed back hard. One such event was its attempt to enter the US minivan market, which had experienced exponential growth since the 1984 launch of the Plymouth Voyager and Dodge Caravan. The brainchild of Lee Iacocca, CEO of Chrysler Corporation, these mundane vehicles saved the company from threatened bankruptcy and hugely enhanced Iacocca’s reputation.
The minivan was, in concept, extremely simple. It was a tall monobox vehicle with a space-saving transverse-engined, front-wheel-drive(2) mechanical layout that left a large and versatile space for passengers and their luggage. Previously, the staple mode of transportation for American families was the station wagon, but the minivan offered as much space in a much more flexible format and was far less cumbersome to drive.
Other US manufacturers scrambled to catch up with Chrysler as minivan sales took off. They reached a peak in 2000, when around 1.37 million minivans were sold. However, by that time a new category of family holdall, the Sports Utility Vehicle or SUV, was gaining in popularity. It offered similar versatility to the minivan but its more rugged styling held greater appeal, particularly for male drivers. SUVs conjured up images of exploring the great outdoors, while minivans were invariably associated with trips to the shopping mall.
Volkswagen’s competitor in the US Minivan market was a marginal one. It was called the Eurovan and was the passenger version of the T4 Transporter van, known elsewhere as the Caravelle or Multivan. Declining sales led to its withdrawal from the market in 2003. As minivan sales continued to contract, Ford exited the market by ending production of its Freestar(3) in late 2006. General Motors did likewise in late 2008 by ending production of the Chevrolet Uplander(4).
Chrysler discontinued production of the short-wheelbase versions of its minivans in 2007 but continued its long-wheelbase versions and introduced a completely new model in 2008, based on the company’s RT platform. These were sold, in ascending order of price and equipment, as the Dodge Grand Caravan, Chrysler Grand Voyager and Chrysler Town & Country. There was even a luxury Lancia version, badged Voyager, which was sold in Europe from 2011 to 2016.
There was still solid if reduced demand for these large minivans in the US, so Volkswagen decided it wanted a slice of the action. It contracted with Chrysler to build a VW-badged version of the Grand Voyager, to be sold only in the US, Canada and Mexico. This was Volkswagen’s first tentative step to supply models that were more suited to the North American market than its traditional Euro-centric offerings.
Volkswagen might have considered offering its Sharan large MPV in North America but was prevented from doing so by an agreement with Ford, with which it had co-developed the first Sharan. Ford did not want the Sharan being sold in competition with its US-made MPVs. In any event, the Sharan was simply too small to compete. It was 243mm (9½”) shorter in wheelbase and 524mm (20½”) shorter overall than the Grand Voyager.
The Volkswagen version of the Grand Voyager was called the Routan(5). It was given new front and rear end designs that incorporated contemporary VW styling cues such as the large swept-back headlamps and a ‘bib’ style front grille that closely resembled the 2006 VW Eos. The smoothly linear centre section of the vehicle was already perfectly plausible as a Volkswagen design. The Routan was mechanically identical to its Chrysler siblings and was powered by a V6 engine in 3.6, 3.8 and 4.0-litre capacities, mated to a six-speed automatic transmission.
The Routan was the brainchild of Volkswagen CEO Wolfgang Bernhard, who was formerly Chief Operating Officer of Chrysler. When the deal was announced, Bernhard promised that the Routan would be much more than just a Chrysler with a VW badge on it. It actually turned out to be rather less. Bernhard did not remain with Volkswagen long enough to see the Routan in production: he was ousted by Ferdinand Piëch, Chairman of the VW Group Supervisory Board, in January 2007 after less than two years at the helm.
The Routan was built alongside its siblings at Chrysler’s Windsor, Ontario plant. While it was similarly equipped to the Grand Voyager, it did not feature Chrysler’s innovative Stow ‘n Go or Swivel ‘n Go seating options. With the former, the second and third-row seats folded completely flat into the floor. With the latter, the second-row seats rotated through 180° to face those in the third row. These options were an attractive feature of the Grand Voyager and the Routan was significantly handicapped without them. Moreover, Volkswagen was demanding a considerable premium for its badge: the Routan’s entry price was US $27,840 compared with the Grand Caravan’s US $20,990.
The Routan bombed in the US market. Volkswagen had forecast annual sales of 35,000, representing a 5% market share. Actual US sales(6) were as follows:
By way of comparison, total US sales of the Chrysler and Dodge versions over the same period were 1,610,027 units. So poorly did the Routan sell that production was paused in 2009 and terminated permanently in July 2012, despite there still being two years to run on the contract between Chrysler and Volkswagen. Subsequent sales of the Routan came from the stockpile of unsold inventory and almost all went to fleet buyers, including car rental companies and even Chrysler Corporation itself.
The Routan was, in short, a huge embarrassment to Volkswagen and a salutary lesson in not pushing your brand equity too far. Volkswagen’s subsequent efforts to produce models more attuned to the US market have been rather more thoroughly researched and competently executed, although they have still enjoyed mixed results. The 2011 Passat NMS(7) started strongly with sales in 2012 of 117,023 but declined thereafter and were just 24,396 in 2021. The Atlas large SUV, introduced in 2017, achieved sales of 72,384 in 2021. Volkswagen’s US market share in 2021 was 2.45%(8), pretty much where it was a decade ago(9).
(1) The Golf Mk3 comes immediately to mind in this context.
(2) Ford and General Motor’s first minivan competitors were rear-wheel-drive, but would later switch to FWD.
(3) And its Mercury Monterey sibling.
(4) The Uplander was a 2005 update of the Chevrolet Venture minivan, given a new, taller nose and flatter bonnet. The facelift fooled almost nobody into thinking it was a proper SUV.
(5) Which, strangely, is an anagram of Touran, Volkswagen’s European mid-sized MPV, not sold in the US.
(6) All sales data from www.carsalesbase.com.
(7) New Midsize Sedan, Volkswagen’s name for its US-market offering in this class.
(8) US market share data from www.goodcarbadcar.net.
(9) Volkswagen’s US market share in 2012 jumped 3.04%, thanks to the initial success of the Passat NMS, before falling back to 2.63% the following year.