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Resilient Supply Chain Helps VW Finish 2020 Strong

The Volkswagen brand finishes 2020 on an upbeat note, with the best fourth-quarter sales since 2014 and the best December sales since 2012, says Scott Keogh, CEO and president of Volkswagen Group of America.

“I’m quite impressed with how 2020 turned out,” Keogh says in a conference call. “The expectation was, it was going to be far more severe.”

Largely due to coronavirus business shutdowns, for the full year the VW brand’s U.S. sales of 325,784 vehicles in 2020 were 10% lower than the previous year. That’s slightly better than an estimated sales decline for the whole U.S. industry of about 15% for 2020, to about 14.5 million, Keogh says.

For the fourth quarter, VW-brand sales were up 11%, to 94,330. December sales of 38,432 vehicles were a hefty 38% higher than year-ago.

Audi of America, also part of Volkswagen Group of America, reports 2020 sales of 186,620 units, down 17% vs. 2019. Fourth-quarter sales for VW’s luxury division were down 4.8% to 62,517. Volkswagen Group of America is based in Herndon, Va.

Duncan Movassaghi, chief sales and marketing officer, says part of the VW brand’s sales increase in late 2020 was because deliveries were unusually low in late 2019 for the VW Passat during model-year changeover.

“We weren’t getting that in the prior-year period. We ran out, and we hadn’t launched the new model,” he says.

Meanwhile, in spring 2020, Keogh says VW lost about 11 weeks of production at its plant in Mexico and eight weeks at its plant in Chattanooga, TN. Keogh says his takeaway is, “how resilient these supply chains are,” and how quickly production bounced back.

“Yes, it was ragged. Yes, chaotic. Yes, we had to do things like put parts on airplanes” to keep assembly lines running, which raises costs, Keogh says. But taking everything into account, he says the outcome for VW and for the industry is much better than anyone expected back in March or April.

Still, VW’s forecast for 2021 U.S. light-vehicle sales is on the conservative side, at 15.6 million, in line with projections from Wards Intelligence/LMC Automotive. Toyota Motor North America forecasts 16 million sales in 2021.

Keogh says VW’s forecast still represents a sales increase of more than 1 million units over 2020, which isn’t bad. Keogh says he’s “not naïve” about the coronavirus or high unemployment.

On the positive side for 2021, Keogh says interest rates remain low and consumer savings are on the increase. “I think the disposable income is there” to support higher 2021 auto sales, he says.

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