Volkswagen up! to be axed

Volkswagen’s smallest model, the up!, will be the first victim of a new strategy to simplify the German car-maker’s model range in Australia.

The ground-breaking four-seat micro-car was introduced with great fanfare in October 2012 but, despite setting a new entry price of just $13,990 for Volkswagen, found just 1440 buyers and a tiny 1.1 per cent of the mainstream light-car segment in its first full year on sale.

In the first quarter of this year, the up! has attracted just 53 customers (down more than 92 per cent year-on-year ), accounting for just one per cent of the much smaller new micro-car segment.

As such, Volkswagen has made the decision to remove the car from its line-up this year.

Within Australia’s smallest vehicle class, the German-built  up! was outsold by cheaper Asian-made city-cars like the Mitsubishi Mirage, Nissan Micra, Suzuki Alto and Holden Barina Spark, as well as the more expensive Fiat 500 and Fiat Panda. Only the smart fortwo and Chery J1 have proved less popular so far in 2014.

Volkswagen Group Australia chief John White says that level of sales is not sustainable. 

The car's departure from the local market is part of a wider strategy to rationalise the entire VW model range.

Speaking at this week’s launch of the new Golf R and Golf GTI Performance models, White said up! sales slumped after the company ended its expensive advertising campaign for a model that was widely attributed with setting new standards in Australia’s fledgling A-segment.

“We’ve stopped putting a lot of money behind it,” he said. “What we’ve seen is it’s a very price-sensitive segment. Our numbers were wildly fluctuating – it was feast or famine.

“We’re seeing a more natural level of sales. Sales aren’t at the same level they were.”

Asked if the current sales rate – less than 18 per month – was sustainable, White said: “No.”

The car will be axed this year.

White indicated the up! could not continue to be an ambassador for the Volkswagen brand without being profitable.

“The
up! was brought in [to Australia] for all the right reasons, as a brand
statement. [But] I don’t think we can do enough volume to make it
profitable enough for us or our dealers, given the competitive
environment. That lower end of the market is very competitive, so we
have to look closely at it.

“I’ve been here a year now and part of my evaluation was to look at our product line. Part of the strategy is to streamline and deproliferate the range... the packaging, offerings and in some cases models.

“We want to focus on cars that do good volume or are good for the brand, and we’ll confirm which ones they are soon. You can expect to see rationalisation.”

Another model that may also disappear from local showrooms is the Scirocco, a facelifted version of which was revealed at last month’s Geneva motor show but is yet to be confirmed for Australia.

Available in a single top-shelf R performance specification here, the Scirocco coupe found just 445 homes last year (down 37.5 per cent). Sales have slumped a further 50 per cent so far in 2014, with just 59 sold.

However, while Volkswagen is likely to reduce the complexity of its range by deleting a number of model variants and options, other under-performing models are not expected to be culled.

For example, Volkswagen has just applied a new retail focus on the Jetta, sales of which are down almost 50 per cent this year, while Passat sales are down 22 per cent in the lead-up to an all-new model making its world debut at the Paris motor show in October.

Model cycle issues also plague the Tiguan, sales of which are down more than 28 per cent in a booming and highly competitive small SUV segment. First launched here in May 2008, VW's smallest SUV received a mild facelift in October 2011.

"I think the compact SUV segment it's in has a lot of fresh product and from our perspective we haven't been aggressive enough in promoting it," said White.