VW to focus on the lucrative SUV segment in the U.S.

In a tactical move aimed at garnering more market share, VW has decided to not just be a niche player but a “family-oriented SUV company.”

On Tuesday, in a strategic decision, Volkswagen disclosed that diesel vehicles will not form part of its product offerings in the United States any more. In a rebooting of strategy, EU’s largest automaker will instead focus on sport utility and electric vehicles.

This decision was conveyed by none other than Herbert Diess, VW’s chief brand strategist, who was eager to distance the brand from the memory of the diesel emission scandal.

The decision to drop the sale of diesel vehicles in the United States is just one element of its strategic overhaul, which Diess conceded could nearly a decade to accomplish and close gaps with its U.S. rivals.

“For years we have been lacking a blueprint for success in the United States, while we are losing ground to rivals in markets like Brazil or India,” said Diess.

While admitting that VW may have missed “the SUV boom,” to catch up, Volkswagen now plans to launch 19 SUV models by 2020, up from just 2. This includes electric models.

It has stated an aim to sell 1 million electric vehicles by 2025.

“At the moment we assume that we will offer no new diesel vehicles in the U.S,” said Diess to European business daily Handelsblatt.

However, last week, at the Los Angeles Auto Show, VW had showcased its Atlas SUV, which was purposefully built for the U.S. market.

Stating that success in the Americas was critical to the company’s revival and to the brand’s success, Diess said, “We not only want to be profitable in Europe and China but are determined to generate positive results in all major markets by 2020.”

As of 2015, while sales in the Americas accounted for only 59% of the group’s auto sales it however contributed to only 16% in operating profit.

Last week at the LA Auto Show, the CEO of Volkswagen Group of America, Hinrich Woebcken, mentioned to reporters that Volkswagen wants to shift from being a “niche” player to a more “family-oriented SUV company.”

He went on to add, the entry into the lucrative SUV segment could enable VW to capture 60% – 70% of the U.S. market, up from 40%.

Reacting to these changes, Volkswagen’s shares rose by 0.42% to ~120.45 euros.

The stock is still reeling from the aftershocks of the diesel emission scandal and is down by nearly a quarter of its value.

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