Volkswagen of America is spending more per vehicle on incentives for its VW brand models in a bid to attract more shoppers and boost sales.
The tactic appears to be paying off. Not only are sales up, but so is VW's average transaction price -- a sign that customers aren't pocketing the savings but using them to buy more car.
The move comes as Volkswagen seeks to become a bigger player in the United States, aiming to sell 800,000 VW brand vehicles annually by 2018. To hit this target, the VW brand must more than double U.S. sales in the next six years from 324,402 in 2011, which would require attracting more first-time VW buyers and taking market share from rivals.
In April, VW brand spent $2,020 per vehicle on incentives, a 31 percent increase over the same month a year ago, but still below the industry average of $2,428, according to research firm Autodata Corp. Also last month, the brand's average transaction price rose to $27,115, a nearly $1,000 increase over April 2011, according to TrueCar.com.
Sales for the brand also have climbed. Since the arrival of the U.S.-built Passat in September, VW has reported a sales increase of 32 percent or more each month. Through April, the VW brand sold 131,898 vehicles, up 38 percent from the corresponding period last year.
"There is no question that our growth is going in the right direction," said Frank Trivieri, VW of America's vice president of sales. "But you have to keep your eye on what the market is doing."
The incentives include a combination of leasing specials and low-interest financing.
For instance, on the Passat and Beetle -- both redesigned for the 2012 model year -- VW is offering 1.9 percent financing on gasoline-engine models. Dealers, too, are eligible for cash back, including $500 on the Beetle, according to TrueCar.com.
Meanwhile, customers are paying more for VW vehicles. They're opting for pricier trim levels and more expensive equipment, such as the TDI engine, industry analysts say.
Larry Gordon, owner of Colonial Automotive Group in Massachusetts, which has three VW stores, said the brand's efforts appear to be working, especially in attracting newcomers to VW. He said that unlike earlier, "we're seeing a lot of crossover from import brands."