Here's why Volkswagen's scandal is so annoying

The Volkswagen Tiguan. Photo: Miguel Villagran/ Getty.

Volkswagen is the world’s largest automaker, but its US business has been struggling mightily for the better part of the last decade.
The company was finally showing that it had landed on a solution to this – with two new crossovers and a SUV that would target some of the fastest growing segments of the US auto-market.

Then came the emissions scandal. Revelations that the company cheated federal emissions standards on half a million cars have done serious damage to the company’s finances and reputation.

But they have also overshadowed Volkswagen’s new product plans. Last week, when the company’s US CEO Michael Horn reaffirmed the plans for the new cars, he opened the event with a blunt apology that grabbed the headlines.”We have totally screwed up,” Horn said.

Maybe it’s good news for Volkswagen, then, that the new cars won’t be out until next year at the soonest, giving the company a chance to put some distance between the product launch and the recent news.

In 2016, Volkswagen will launch its Golf SportWagen Alltrack. It’s a compact crossover wagon with raised ride height in the same flavour as Subaru’s well-liked Outback or Audi’s larger and more more posh Allroad wagons. That will be followed by two vehicles the company plans to launch in 2017 — the second generation Tiguan compact crossover and an as-yet-unnamed Mid-Size SUV.

With these, VW is targeting a big market in the US. Currently, compact and midsize SUVs and crossovers represent roughly one out of every four vehicles sold in America, with the segments growing at an annual rate of 14% and 10% respectively.

VW SUVBenjamin Zhang/Business InsiderMichael Horn in New York.

Without these cars in the showroom Volkswagen is being obliterated by its competitors in the market.

So far in 2015, Honda has sold almost 230,000 CR-V compact crossover while Ford moved nearly 205,000 Escapes. On the other hand, VW has managed to sell just 19,000 of its Tiguan crossovers which translates to 1.2% of the segment.

Things are even worse for the Touareg. Of the more than 1.3 million midsize SUV and crossovers sold in the US this year, just 4,700 have carried a VW badge or 0.3% of the segment.

The upcoming Tiguan — which we’ve only seen in European trim at the 2015 Frankfurt Motor Show — is larger, more luxurious, and packed with more technology than the current iteration.

With these improvements and a competitive pricing policy, Volkswagen could have the winner it’s looking for.

Volkswagen Golf Sportswagon AlltrackVolkswagenVolkswagen Golf SportWagen Alltrack.

Worldwide, VW will offer the new Tiguan is two different sizes — a long and a short wheelbase. According to Car and Driver, the US market will only get the larger of the two.

Sources also the tell the magazine that US spec cars will be built in VW’s plants in Mexico and could be offered with three-row seating.

Although the current generation Tiguan proved to be a rather popular in Europe and abroad, the stylish compact crossover never really caught on in the US. The VW is too expensive and gas guzzling to compete against segment leaders, such as the Honda CR-V, Toyota RAV-4 and Ford Escape.

The 2017 Midsize SUV is a bit more mysterious. It looks to be based on the CrossBlue Concept VW debuted a couple of years ago. Volkswagen has not confirmed whether the SUV will serve as a complement or a replacement for the Touareg, although a company spokesperson did tell Business Insider that it will be bigger and cheaper than the current Touareg which the the spokesperson characterised as a performance SUV.

Volkswagen TouaregVolkswagenVW Touareg.

If this is the case, then VW has addressed two the Touareg’s greatest shortcomings — price and size. With a starting price of just under $US50,000, the Touareg is verging close to luxury territory for a mass-market brand.

If the new SUV can offer more size at a lower price, it would shoulder the sales burden and allow the Touareg to be recast as a more niche performance model. After all, lurking underneath the Touareg’s VW body is a Porsche developed SUV.

NOW WATCH: Volkswagen faces a possible $US18 billion EPA fine for cheating on emissions tests

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