VW Jammed Up Again in U.S. Over Unrealistic Expectations

After several weeks of speculation and reports out of Germany that Volkswagen would replace its North American CEO Pablo Di Si, the company does so and replaces him with Kjell Gruner, a former Porsche and Rivian executive.

The choice of Gruner is perhaps not surprising given his experience in the Volkswagen Group at Porsche, and at Rivian, which is going to be a significant partner for VW going forward providing software expertise and systems development. The exit of Di Si, according to two VW executives not authorized to speak for the company, was tied to unmet expectations, though the departing executive had just 26 months to achieve some success.

Chiefly, Di Si, say the sources, had committed to selling upward of 100,000 ID.4 battery-electrics annually. Instead, the rollout of the ID.4 has been a disaster. Through October, VW sold just 11,857 units, built at the Chattanooga, TN, plant. Despite qualifying for a $7,500 federal tax credit, the I.D.4 has run into several obstacles, including the softening of demand for BEVs, a recall and a temporary halt in manufacturing due to issues with the electronic door mechanisms.

“He over-promised and under-delivered, and that does not turn out well at VW no matter the underlying reasons for the performance,” says one VW executive with knowledge of what happened. Though the ID.4 was completely baked in terms of design and execution before Di Si took over, there is also a feeling within the ranks at VW that the BEV falls short.

In addition to the buying public having to get used to a new name, the vehicle has been criticized for use of cheap plastics in the cabin and a balky telematics interface. None of that is on Di Si, but he was the one charged with selling them.

Gruner inherits the same problem with an underutilized Chattanooga plant just as the company is negotiating with workers who voted last April to join the UAW, thus complicating costs at the plant going forward.

 VW Group CFO Arno Antlitz says in a statement: “In Kjell Gruner, we have brought on board an experienced expert who knows the market and customers very well and will continue to consistently pursue the growth path we have embarked on.”

VW put more than $4,000 on the hood of each vehicle to move excess inventory, creating a 19% year-over-year sales gain through September, but the German automaker still dramatically underperforms rivals in dealer throughput. Through September, VW’s throughput per dealer was just 438, compared with 985 for Honda, 769 for Subaru and 570 for Mazda, according to sales and dealer counts provided by the automakers.

Sales at luxury brand Audi in the U.S., also under the direction of Di Si, have struggled in 2024, with sales dropping 17% to 139,665 through the third quarter. That compares poorly with increases for Mercedes-Benz and Lexus and flat sales at BMW.

The long-awaited ID. Buzz homage to the iconic Microbus is a small-volume shot in the arm.

VW is under tremendous pressure globally. For the first time in its history, the company is trying to close some of its German production lines as it negotiates job losses with the German union and German government. Bedeviled by the need to move faster on software solutions in its product development, it is also investing $5.8 billion into Rivian as part of a joint venture to develop EV architecture and software. The dividends of that deal are meant to benefit vehicles across the VW Group including Porsche and start-up Scout Motors.

Industry analysts see VW’s prospects in the U.S. as problematic at best. Dan Ives, managing director at Wedbush Securities, states: “The evolving U.S. regulatory landscape, especially concerning EV incentives and tariffs, adds layers of complexity to Volkswagen’s strategy.”

VW labored through the 2010s boxing with an oft-repeated sales goal of 1 million vehicles per year in North America from VW, Audi and Porsche. That plan was based more on aspiration than the reality of VW’s brand equity and product lineup. More recently Di Si was touting a target of a 10% market share by 2030, which would put the automaker at between a completely unrealistic 1.5 million to 1.6 million sales a year.

Setting such sales targets has proved time and time again to be foolish. It remains to be seen if Gruner will own those forecasts.