Volkswagen Offers 6-Year Warranty to Win Back U.S. Customers
In an effort to win back American customers angered over the company's emissions scandal, automaker Volkswagen AG (VLKAY) is offering a six-year, 72,000-mile warranty on two of its 2018 sport utility vehicles (SUVs). The new warranty coverage provided by VW surpasses the industry-leading 60,000 mile or five years warranty coverage offered by competing car manufacturers Hyundai Motor Co. and Kia Motors Corp. Most sport utility vehicles come with a standard three-year/36,000-mile warranty. Volkswagen announced the enhanced warranty coverage for its 2018 Atlas and Tiguan SUVs ahead of the New York Auto Show.
"This warranty further addresses the needs of American buyers head-on," said Volkswagen Group of America Chief Executive Officer Hinrich Woebcken in a statement. "We believe this warranty will lead to reduced cost of ownership for Volkswagen owners."
Attempt to Win Back American Consumers
Volkswagen's olive branch to American customers comes as the German automaker continues to struggle to recover from the global scandal that engulfed the company in 2015 after executives at the carmaker admitted the company had installed secret software that allowed a number of Volkswagen vehicles to cheat emissions tests for six years and skirt the environmental protection laws of countries around the world – including the United States.
The backlash against Volkswagen in the wake of its admission was swift. U.S. sales of VW vehicles fell 8% in 2016 to 323,000 units sold, after having fallen 5% in 2015. On the other hand, sales of VW cars and SUVs rose 10% in the first quarter of 2017. All U.S. sales of diesel vehicles manufactured by Volkswagen were stopped in 2015 once the emissions scandal became public.
In March of this year, Volkswagen pled guilty as part of a settlement over the automaker's emissions scandal, which largely involved its fleet of diesel cars and trucks. In total, VW executives agreed to spend up to $25 billion in the United States to address legal claims brought by Volkswagen owners, environmental regulators, state governments and car dealers, and offered to buy back about 500,000 vehicles that are known to be polluting the United States.
The 2018 Atlas, with three-row seating and built in the United States, arrives in car dealerships this spring. The redesigned 2018 Tiguan SUV, with two-row seating, will arrive later this year. The rest of VW's U.S. lineup will retain the standard three-year/36,000-mile bumper-to-bumper warranty that is the car industry standard.
The Bottom Line
How successful the enhanced warranty protection will be in luring American consumers back to the Volkswagen brand remains to be seen. But some analysts suggest that U.S. car buyers are in a mood to forgive and forget. "The American people are full of forgiveness. All you have to do is say you are sorry and give them a deal," AutoNation Inc. Chief Executive Officer Mike Jackson told CNBC News in an interview.