Volkswagen of America Inc. is on track to shatter its full-year 2005 sales total because it is playing to its strength – small cars that are rich in technology.

But how will the auto maker maintain this momentum going forward without betraying its brand identity? That is the critical question as VW broadens its product lineup.

“The crossover is a good evolutionary-type product,” IRN analyst Erich Merkle says, referring to the Golf-based Tiguan cross/utility vehicle scheduled for production in 2008. “That’s kind of a good fit for Volkswagen.”

But not the pending minivan that will be built by Chrysler Group, Merkle warns.

VW and the Detroit-based arm of DaimlerChrysler AG signed an agreement in January to share Chrysler’s next-generation minivan platform, codenamed RT. Nevertheless, Wolfgang Bernhard, VW brand group chairman and former product development guru at Chrysler, vows his company’s minivan will be distinct from its platform-mate.

“Perception is everything,” Merkle says. “It doesn’t matter what Bernhard says. It gets back to the consumers. Do they buy the argument? The Saab buyer did not buy that argument with the 9-7X and I don’t think the Volkswagen buyer’s going to buy the argument in the case of a Chrysler-made minivan.”

Sales of the Saab 9-7X SUV, which shares a platform with the Chevrolet TrailBlazer, have been weak. Critics say it lacks the attributes of sporty Sweden-based Saab, even though it features some distinctly different components, such as suspension design, from its platform-mate.

“I’m not saying that a minivan would be a total failure, but I think it has to be executed properly,” Merkle tells Ward’s. “Consumers are pretty savvy.”

Merkle’s remarks come on the heels of VW’s ninth-consecutive monthly sales improvement, year-over-year. Led by a whopping 93.9% hike in deliveries of the redesigned Passat sedan, VW’s sales were up 5.0% over July 2005.

Factor in sales of the redesigned Jetta and GTI, along with strong early response to the newly returned Rabbit, and VW’s year-to-date total is 17.3% ahead of last year – well on its way to beating 2005’s lackluster full-year sales of 224,195.

And VW dealers are still missing one significant product from their showrooms. The Eos convertible coupe is set to arrive in the U.S. next month.

Each dealer has been promised one unit to inspire would-be buyers. The auto maker expects to sell 3,000 to 3,500 units this year en route to full-year sales of 12,000-13,500.

Already available in Europe, the Eos, which features a 5-piece retractable hardtop from Webasto AG, was that market’s top-selling drop-top in June.

It arrives here just in time, Merkle suggests.

“Where they’re making their turnaround is back to the basics,” he says. “It’s what Volkswagen does best. And that is the small car.”

For this reason, the Rabbit’s re-emergence bodes well. VW revived the storied nameplate for its compact hatchback to replace the Golf badge in North America.

“They’ll be fine with that (name) because, quite honestly, the Golf name – what does that mean here in the United States? It’s pretty non-descript,” Merkle says.

The current product offensive is timely because VW was “in desperate need of some new product,” Merkle adds.

“The Golf was at the tail end of its lifecycle, along with the Jetta. They came out with the Phaeton, which was just a terrible mistake to think that you could take Volkswagen that far up-market. They were trying to do too much with the Volkswagen brand.”

The Phaeton luxury sedan is being phased out of VW’s U.S. showrooms with the ’06 model year.

What the auto maker needs to do is find its ceiling, Merkle suggests.

How high can it go? The Tiguan might represent the upper reaches.

“The Touareg starts to stretch the limit a little bit,” Merkle says, adding he has higher expectations for the CUV’s Audi platform-mate, the Q7, which arrived here in June.

emayne@wardsauto.com