It’s something I’ve heard from a variety of Volkswagen executives the entire time I’ve covered the auto industry, usually accompanied by a remorseful head-shake: “We just haven’t figured out the American market yet.”
Unfortunately for the German automotive giant, that’s been a problem for a lot longer than the dozen or so years I’ve been writing about this business. Volkswagen was essentially the original “import brand” in the U.S. in modern times, but its command of the American market share peaked with the original air-cooled Beetle. It has long struggled to determine what American car buyers want and how to build them. Now, VW’s “America problem” rears its ugly head yet again as the ID. Buzz fails to capture hearts, minds and dollars on our shores.
On today’s edition of Critical Materials, our morning roundup of industry and technology news, we’ll dive into what happened with this once-promising electric vehicle in America.
Also on deck: VW is also closing a long-running plant in China, and while Nissan and Honda may not be merging, they are still teaming up in other ways. Let’s dig in.
30%: How The Volkswagen ID. Buzz Missed The Mark
Photo by: Kevin Williams/InsideEVs
Let me get this out of the way first: I actually really like the ID. Buzz. I find it incredibly charming, and every time I’ve been in one, it gets the kind of attention that would make a Lamborghini jealous.
But I also get the many concerns around its value proposition in America. When crowds gather around one and you tell them that it costs about $70,000 and offers just 234 miles of range, they lose enthusiasm fast. Sales have not been great as a result. Only 1,900 were delivered in the first quarter of this year, and it’s been under a stop-sale order since May. (Read more about why that is at The Autopian.)
Last week, the Wall Street Journal had an excellent deep dive into what went wrong with the ID. Buzz, and it’s worth a read in full. A few highlights. Keep in mind that the concept wowed everyone when it debuted in 2017, but the ID. Buzz only went on sale in the U.S. in 2024—a delay that makes a Tesla product seem prompt. (The ID. Buzz went on sale in Europe in 2022.)
Now that it’s finally here, it also faces an EV slowdown in America, an end to the leasing tax credits, and tariffs. How did all of this happen? The WSJ explains, starting with VW’s diesel-cheating scandal in the 2010s.
[Former VW CEO Herbert Diess] saw the Volkswagen people carrier as a way to recapture what made the company popular in 1960s America: fun, affordable vehicles. Making them electric would help dispel the stench of its emissions scandal.
Diess had considered making the vehicle in the U.S., where Volkswagen opened a factory in Chattanooga, Tenn., in 2011. As a compromise to get the ID.Buzz over the line, Diess gave the vehicle to the commercial-vehicle business, which had produced the original bus and made its successor vehicles for sale across Europe. Chattanooga got to produce the more mainstream ID.4 SUV instead, while the commercial business gave up a project to electrify an existing van.
But the commercial-vehicle engineers had less expertise on electric-vehicle technology and building automobiles for sale in the U.S.
“Commercial-vehicle engineers had to learn a lot of things, and the other engineers said, ‘We’re too busy, you figure it out yourself,’” the former Volkswagen North America executive said. “That’s why it took so damn long.”
But making the ID. Buzz at VW’s commercial vehicle plant in Hanover—which has some of the highest labor costs in the conglomerate—helped make it much more expensive. The delays, inexperience by the factory team, high price, lack of colorful paint options on the cheaper base model, limited range and other factors helped make the car a tough sell over here, the WSJ reports. And it’s emblematic of a bigger problem:
The snafus are emblematic of Volkswagen’s struggles to bring products designed for European tastes or regulatory standards to the U.S.
Used to catering to sedan-loving Europeans, the company was slow to introduce SUVs as Americans started to embrace them in the 2000s. The emissions scandal itself was rooted in an effort to adapt a European technology for tighter U.S. nitrogen-oxide emissions standards, at minimal cost.
“The problem with all of the Volkswagen brands has always been that they’ve just been a bit too Europe-centric,” said Citigroup analyst Harald Hendrikse.
And that’s scathing, but unfortunately true. I love the GTI and Golf R as much as the next person (yes, even as the editor of an EV site—I’m not a monster) but the hatchback that’s ubiquitous everywhere else in the world is a tough sell for Americans.
Unlike Toyota, Nissan and even Honda and Hyundai now, VW sells no trucks. It has an unclear brand identity here, and its more mainstream SUVs like the Atlas and Tiguan are never class leaders over the RAV4 and the rest.
Then there’s the ID.4, which is a good EV and one that’s gotten better over time. But with the ID.7 no longer coming to America and all these issues with the ID. Buzz, the original “pivot to EVs” automaker doesn’t offer much to pivot to.
The WSJ story closes with the Volkswagen Group’s present CEO, Oliver Blume, saying he remains optimistic about delivering what Americans want—but he’s talking about Scout Motors, not anything from the core VW brand. Ouch.
60%: VW To Close Longtime Joint Venture Plant In China
SAIC Volkswagen ID.3 In China
Meanwhile, VW has other problems in China, another market where it established an early beachhead. German news outlet Handelsblatt reports that the automaker is due to close a plant in the city of Nanjing, which it has co-run with Chinese joint-venture partner SAIC for 17 years. Here’s Reuters with more:
“We can confirm that SVW Nanjing Plant has ended production,” a Volkswagen spokesperson said in a statement, adding “many SAIC VOLKSWAGEN sites are currently being converted or have already been converted for electric vehicle production”.
The carmaker would gradually shift production of its Passat family cars from the Nanjing plant to a nearby factory in the same eastern province of Jiangsu, the person said at the time.
Like other Western automakers, VW has been losing ground in the world’s biggest new-car market to newer, homegrown Chinese companies that can better cater to local tastes. Its next generation of Chinese-market EVs will be more directly developed with some of those companies, including SAIC.
90%: Nissan, Honda Will Keep Teaming Up On Future Software
Longtime Critical Materials customers may recall that the aborted Nissan-Honda merger began as a tie-up for future EV software—another area where Japan’s automakers have fallen behind those from China. Today, the Nikkei Asia reports that this deal is still on:
The two Japanese companies plan to introduce vehicles equipped with a new operating system by the late 2020s. In December 2024, the two carmakers entered talks to form the world’s third-largest automotive alliance. Although the negotiations collapsed due to differences over terms, discussions on collaboration continued. With a shared goal on software integration, the partnership is moving forward.
Collaborating on operating software could allow the carmakers to charge customers for updates, transforming the traditional business model of relying on one-off car sales.
I can’t say I’ve been dazzled by the modern software systems in cars from either brand, so they definitely have some work to do.
100%: How Would You Fix Volkswagen’s ‘America Problem’?
Photo by: DW Burnett / Motor1
As I mentioned earlier, VW’s more than a bit remiss in “figuring out” what American buyers want. Yet that seems to be a unique challenge for this brand. Toyota, Honda, Hyundai and Kia all arrived in America after VW and they’ve done just fine; heck, even other VW Group brands like Porsche and Audi have products that appeal to U.S. buyers, although that may be apples-to-oranges since they’re in the luxury space.
And it’s hard to fathom a world where VW’s slim market share could withstand the entry of some Chinese brands into the U.S., however far-off that may be. If you were in charge of the Volkswagen brand’s American strategy, what would you do differently?
Sound off in the comments.
Contact the author: patrick.george@insideevs.com
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