The Touareg Ultimatum
When Volkswagen launched its first sport-utility vehicle four years ago, it may as well have paraphrased President Kennedy's famous inaugural line: "Ask not what your company can do for Touareg, ask what Touareg can do for your company." 
The Volkswagen Touareg gets revised for 2008.
It's an important juncture for a vehicle, and for a manufacturer, lauded for great design and rewarding driving, but suspect for dependability and dealer service.
What Touareg can do for its company is to give buyers a good feeling about VW. People who can afford to spend an average of $40,500 on a car have lots of choice in vehicles. They're not likely to choose another Volkswagen if their Touareg experience is a sour one.
Touareg was introduced during 2003 as a 2004 model. VW said at the time it knew quality would be vital. But early models in particular suffered reliability woes so severe VW bought some back from disgruntled owners and came up with a crisis-management Touareg service program. Placating Touareg owners is of special interest to Volkswagen.
As its most-expensive model, with an average transaction price of $40,500 (and a sticker than can top out over $76,000), Volkswagen relies on Touareg to attract buyers far more affluent than the average VW customer. This is what the SUV is doing for its company.
Touareg buyers make more money and have more education than buyers of other VW products. And compared to buyers of other premium-class SUVs, Touareg owners are younger, richer, and are more likely to be male.
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These are indispensable demographics to a brand that counts a youthful, educated, upwardly mobile buyer profile among its most enviable assets. "Most of the other [auto] manufacturers would kill to have our demographics," said Emily Wilson, manager of new vehicle launches for Volkswagen of America.
Moreover, VW says Touareg is its strongest "conquest" vehicle, with 70 percent of buyers defecting from a competitor's SUV, primarily Jeep Grand Cherokee and Ford Explorer.
VW acknowledges that it's difficult to gauge how well Touareg has delivered on other hoped-for collateral benefits.
Showroom traffic did spike shortly after the SUV's launch, VW spokesman Clark Campbell said. Those were shoppers new to the brand, he said, if for no other reason than SUV intenders previously had no reason to visit a VW showroom.
According to Volkswagen, Touareg is its strongest "conquest" vehicle,
taking sales from its competitors.
VW says 30 percent of those who did buy a Touareg were moving up from a less-expensive Volkswagen car. But how many of them were pleased enough with their Touareg experience to buy another VW is difficult to measure, Campbell said. "This is not something that we can substantiate in terms of data."
What VW's Doing for Touareg
Touareg sales started well enough, helped, Wilson said, by Motor Trend magazine's 2004 SUV of the Year award. "That drew a lot of attention, so we just didn't launch with a whimper."
But after a model-year high of 27,206 in 2004, U.S. sales declined steadily, falling to 11,500 in 2006 and, hampered by the model-year changeover, to just 4,030 in the first six months of 2007.
In all, VW sold 79,091 Touaregs in the U.S though June 2007. That pales compared to sales over the same period for SUVs VW identifies as Touareg's primary competitors: 474,741 for the Lexus RX, 264,723 for the Acura MDX, and 167,377 for the Volvo XC90.
Touareg 2
VW sees
the 2008 update as an opportunity to reinvigorate Touareg sales, to
build upon the SUV's halo power, and to sustain the momentum it claims
to have gained in quality.
Dimensions are unaltered from the 2004-2007 version, and Touareg remains a five-passenger midsize SUV. It retains a three-model lineup built around its V6, V8, and diesel V10 engine choices. And although headlamps, grille, and taillamps are new, only by parking one next to its predecessor can the 2008 model be easily identified.
 Outside, Touareg got new headlamps, grille, and taillamps for 2008. |
For example, VW dealers found themselves selling Touaregs at a loss to seal deals on vehicles festooned with options buyers didn't want, said Steve Neder, head of launch and product management for Volkswagen of America. So the 1,536 possible combinations of options available on the original Touareg have been reduced to just 208.
At the same time, Touareg 2's standard equipment list has been beefed up. Premium-SUV shoppers expect lots of amenities included in the base price, so now standard on all models are such items as front- and rear-obstacle detection, a power tailgate, and power driver's seat. That last feature is an example of a surprise deal-breaker. "People would walk away from this vehicle because it didn't have a power driver's seat standard," Neder said.
Touareg's engines hadn't come under serious criticism, but the V6 and V8 are upgraded with the addition of direct fuel injection. The technology improves engine efficiency though exacting control of the fuel-air mixture.
Both engines gain 40 horsepower for 2008, the V6 to 280, the V8 to 350. VW says they're faster with little or no change to EPA fuel-economy estimates. It says the V6 model does 0-60 mph in 8.3 seconds, down from 9.4; EPA ratings stay around 16 mpg city and 20 highway. The V8 does 0-60 in a claimed 7.1 seconds, down from 7.6; EPA ratings remain around 14/19. (VW says the unchanged V10 diesel does 0-60 in 7.5 seconds and rates 15/20.)
The V6 model, which starts at $39,320 and tops out at $54,120 fully equipped, is expected to continue to account for about 70 percent of Touareg sales. The V8 has a price spread of $48,320-$59,020. Its share of Touareg sales slumped to 16 percent in 2007 from 29 percent in 2006. Meanwhile, the V10, with a spread of $68,320-$76,270, increased its share from 3 percent to 14 percent.
Expanding the diesel's penetration is part of VW's plan for Touareg, though huge gains will have to wait until calendar 2009 and the arrival of a new diesel engine with emissions low enough to be sold in all 50 states; the current V10 Touareg can't be sold in California and parts of New England.
Off-Road Prowess
If the diesel's prodigious 553 pound-feet of torque and ability to go more than 500 miles on a tank of fuel are among this SUV's hidden assets, so too is the off-road capability built into every Touareg.
 Volkswagen created the Touareg Adventure program, in which $2,000 buys two days of instruction, lavish meals, resort lodging, and driving in the off-road mecca of Moab, Utah. |
Factory-sponsored Touaregs compete in the world's toughest off-road races. And the company has created the Touareg Adventure program, in which $2,000 buys two days of instruction, lavish meals, resort lodging, and driving in the off-road mecca of Moab, Utah. VW is encouraging its salespeople to attend, hoping the kick of coaxing Touareg over Moab's otherworldly terrain translates into enthusiasm for the product.
"A customer feels that vibe when they come in," said VW spokesman Steve Keys. "Unfortunately, with a lot of salespeople who haven't had this experience, the deal is all about the price."
Star Power
What's the price of landing Touareg a role as the bad guys' ride in this summer's big-screen blockbuster? About $40 million, says VW. Touareg's placement in The Bourne Ultimatum is part of a global, three-year, cross-promotional accord between VW and Universal Studios.
Exposure for the Touareg in the movie and its theatrical trailers is just part of the deal. The automaker gets rights to VW-branded DVDs of the first two Bourne films and Web site tie-ins that include ticket giveaways, a Bourne-related contest, and shared Internet links.
That Internet connection is crucial to VW's overall marketing plan, said Price, the PR manager. VW has benefited from Web-savvy shoppers more than most car companies, he said. Volkswagen ranks behind only BMW's Mini brand in the number of visits to its official site that result in actual vehicle sales, Price said. "The Web site is really the hub" for reaching VW intenders, he said, and the Bourne deal is crafted to direct prospects to VW.com.
The Quality Challenge
It's clear that to reinvigorate sales, and to build upon Touareg's halo power, VW must not repeat the quality gaffes that threatened to alienate early owners. And it must sustain the momentum it claims to have gained by improving the SUV's reliability.In 2004, Touareg owners reported three problems per 100 vehicles, nearly triple the industry average. Price characterized the problems mostly as glitches in engine management systems, instrument panel displays, and climate control systems. "It was niggling little stuff," he said.
Touaregs tested by Consumer Guide over the years experienced squeaks, rattles, and flashing antilock-brake and airbag warning lights for systems found to be operating normally by a dealer technician.
 Previous-generation Touaregs were plagued with problems like glitches in engine management systems, instrument panel displays, and climate control systems. |
The goal of trouble-free motoring is an elusive one for VW. It finished 35th among 39 brands in the J.D. Power and Associates Vehicle Dependability Study released in August, 2007. The study evaluates vehicle quality after three years of ownership. And in the latest J.D. Power measurement of customer satisfaction with the dealer service experience, VW ranked ahead of only Land Rover and Jeep.
This not a good recipe for
success when VW says Touareg's chief rivals are the Lexus RX350 and
Acura MDX. Leon Ostrander, head of VW sales training, said some VW
salespeople feared Touareg could jeopardize relationships with loyal
customers. "We had sales people say, 'We don't maybe want to hand over
the keys to a Touareg because we didn't want to see them again in a
couple months.'"
VW responded by providing dealers a detailed
roster of repairs and preventative service measures. It showered
Touareg owners with loyalty coupons good for credit toward another VW,
and it bought back some Touaregs with persistent problems. It tried to
make certain Touareg owners in for service got Touaregs to drive. "No
Touareg owner wants to come in and have a Jetta as a loaner," Wilson
said.
By 2006, Touareg's reported problems per 100 vehicles had
dropped to 1.5, Ostrander said, adding that in 2007, it was at the
industry average of just over one per 100 vehicles. VW also says
Touareg's warranty claims decreased 70 percent between model years 2004
and 2006.
Though it all, Touareg's supporters still find reason to believe the SUV is doing something special for its owners.
Ostrander
says on-line Touareg owner sites are rife with suggested fixes for
common problems. "People say, 'If you have this, this, and this done to
it, it's a great vehicle.'"
Adds Wilson: "Seriously. People say that when it runs, man, it's a great vehicle."