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VW Aus supply issues to worsen next year

Supply and demand: Supply issues of the Tiguan and the Polo (left) have impacted VW sales in Australia this year and will continue to hurt the company’s sales in 2019.

WLTP homologation, Polo and Tiguan supply issues hurt Volkswagen Aus

Volkswagen logo21 Jun 2018

VOLKSWAGEN Group Australia (VGA) will miss out on between 2000 and 3000 sales this year due to ongoing supply issues that are only tipped to worsen in 2019, according to the company’s managing director Michael Bartsch.
 
Speaking with GoAuto at an event in Sydney this week, Mr Bartsch revealed that when he was appointed to the position in 2015, he believed that Volkswagen could steadily increase its volume from 60,225 sales that year to 80,000-plus, however a lack of SUV products and supply issues have affected that forecast.
 
“I think the best way to put it is we will be stable relative to last year,” he said.
 
“I think 2018 and 2019 in terms of predicting the final volume have been, well, this year will be the most difficult and next year will be another difficult year (to predict) because there have been so many variables that are beyond just looking at what the market is … and then trying to make it work on a supply side.
 
“In 2015 before the emissions crisis hit, what I saw was a brand which in reality should be able to move … towards 70,000 to 80,000 cars per year. (But) our market coverage at the moment is about 62 per cent. I need to get market coverage of about 85 per cent to be able to get those volumes.
 
“So we are operating significantly below our potential. My guess is that by the time I get to the end of this year we’d probably have missed conservatively 2000 to 3000 cars. And when I look at my planning parameters next year … my guess is we could be short about 5000 cars.”
 
Volkswagen has averaged 4627 vehicles per month to May 2018, leaving it on track for a 55,524 annual haul. However, if it remains 2.0 per cent up on last year it could make a surge in the second half of the year to 59,000 sales – continuing a flatline of 58,004 in 2017 and 56,571 in 2016, from a high of 60,255 in 2015.
 
Mr Bartsch nominated stock shortfalls of Polo and Tiguan – 162TSI Tiguans had a seven-month wait last year – plus the delayed arrival until next month of the Tiguan Allspace as affecting volume this year. 
 
However, he said poor fuel quality hampering engine availability, and European compliance issues around a new emissions testing program, have had a knock-on effect in Australia.
 
Mr Bartsch explained that Volkswagen must homologate every engine and transmission variant of its European model line-up to a new World-harmonised Light-vehicle Testing Procedure (WLTP) by September 1, and this had caused production pauses and delays as engineers work to cover the backlog of a vast model range.
 
“For us it (WLTP homologation) might be hurting a little bit more because we have the double issue of the testing procedures that might be required to absorb capacity that come with both the EA189 (diesel emissions-affected) updates and the WLTP, and we have a finite number of engineers,” Mr Bartsch said.
 
“So I would suggest it’s probably impacting Volkswagen a little bit more, but what I can assure you is it’s a problem with anybody on the European side of manufacture that is homologating vehicles to that protocol.”
 
An example of this has already been seen with a global pause on manual transmission production of the Golf GTI, Golf R and Skoda’s Octavia RS. Vehicles such as those with that particular transmission would return to Europe, but not Australia where a manual makes up about 10 per cent of those model’s sales.
 
As previously reported, WLTP this year replaces the 20-year-old New European Driving Cycle (NEDC) still used in Australia. It aims to become a more real-world assessment of a vehicle’s fuel usage, despite still being laboratory-tested.
 
Mr Bartsch added that Australia should adopt the standard, insisting that when Volkswagen engineers catch up to the backlog of homologation it would be a greater outcome for consumers. 
 
However, other challenges still remained for the foreseeable future.
 
“The supply line that we thought we were going to be getting, we haven’t quite got it as soon as we would have liked to,” Mr Bartsch explained.
 
“For example, the long-wheelbase Tiguan (Allspace), and we haven’t got the Polo that we thought we would in the ramp-up, we were supply restricted or starved for the first three months of the car.
 
“The biggest challenge I have here is not with competition, the biggest challenge I have here to do what I need to do with the brand is our pipeline and our product portfolio bandwidth.
 
“I need SUVs and I need supply.”
 
The second-generation Tiguan has increased volume by only 2.9 per cent to 4484 units to the end of May this year.
 
In May last year the previous-generation Polo found 538 homes versus 286 for the new-generation model in May this year, adding to a 16.4 per cent loss year-to-date totaling 2260 sales.
 
Indeed, the heavy hitters of Golf (up 21.0% to 8162) and Golf Alltrack (up 55.4% to 421) have just managed to cover other losses; including Amarok 4x2 (down 53.7% to 130), Passat (down 33.2% to 697), and Touareg (down 24.3% to 544).
 
Meanwhile the Arteon (delivering a new 312 sales this year) and Amarok 4x4 (up 1.5% to 3284) have also almost covered the discontinued Jetta (which had accrued 494 sales this time last year but managed 72 this year) and Scirocco (trickling from 97 last year to nil now).
 
Mr Bartsch said he was hopeful that the T-Cross and now also T-Roc – which was previously ruled out entirely – can feed into a small SUV-sized hole in its range in 2019, but it also needs the Atlas/Teramont large SUV which is less likely until a mid-cycle update that could finally add right-hand drive production for the first time. But none of those are yet confirmed.
 
“The missing volume is the A0 SUV (T-Cross/T-Roc), the B SUV (Atlas/Teramont), adequate supply in the A SUV (Tiguan), and adequate supply in the A0 hatch, the Polo,” he said.
 
“The brand is strong, the price position is right, the brand position is right, everything is right. We have the right number of dealers, everything is in place. My challenge is supply. We just need the product.”

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