VW offers $2,000 loyalty bonus to avert defections

WASHINGTON -- Volkswagen of America is offering a $2,000 customer loyalty incentive this month to prevent a possible wave of owner defections in the wake of its admission of diesel emissions violations.

Existing VW owners will receive $2,000 toward the purchase or lease of any new VW gasoline or hybrid model, according to the brand’s website. The offer can be combined with any other VW offer, except for dealer employee participation or fleet programs, a VW spokeswoman said.

The offer comes as VW tries to manage the fallout from last month’s disclosure that the company sold some 482,000 diesel-powered vehicles in the U.S. market with engine software designed to cheat on U.S. emissions tests.

“The heart and soul of this brand relies upon the devoted customers and dealers that drive our products on a daily basis,” VW of America COO Mark McNabb said in an Oct. 2 memo to dealers announcing VW’s monthly incentive programs.

VW will also continue its September incentive programs, McNabb said. Those include hefty dealer-cash bonuses of $2,000 to $2,750 for gasoline Passat midsize sedans, $2,250 for gasoline Jetta compacts and $4,000 for the Touareg crossover, CC coupe-styled sedan and Eos convertible.

VW has turned to big spending as it works to keep its dealers engaged and prevent existing owners from defecting to other brands. Last month, VW launched a series of steps to stabilize dealer profits, including floorplan reimbursements for grounded diesel models and guaranteed payouts of $300 per unit under its sales-based bonus program for dealers.

After ordering a halt to sales of all new VWs with 2.0-liter diesel engines on Sept. 19, VW posted a 0.6 percent sales gain last month while industry sales overall soared 16 percent to an annual pace not seen since July 2005. Golf hatchback sales fell 37 percent while Jetta sedan deliveries dipped 14 percent, at least partially reflecting the diesel stop-sale order.

The impact to VW’s sales in October could be magnified if the company can’t quickly release the repair plans needed to resume sales of its diesels. As of today, VW hadn’t formally submitted proposed repair plans for EPA approval, the agency said in a statement to Automotive News. A VW spokeswoman said the company had no updates on when a repair plan would be ready, or what the repairs might include.

Consumer mistrust of the brand could also have a negative effect in the near term.

A survey released today by Kelley Blue Book found that 53 percent of around 1,000 respondents polled last month after the scandal surfaced said they had a “general” or “complete mistrust” of VW in light of the emissions violations, while 64 percent of those surveyed were aware of the issue.

But VW’s aggressive incentive programs appear to be helping to soften the blow, dealers say.

One east coast VW dealer who asked not to be named said he got four VW vehicles traded in this weekend for new ones.

“But how long can the factory afford to do that?” the dealer said.

Michael Morais, president of the 16-franchise Open Road Auto Group, says his two VW stores saw a “significant” increase in sales over the weekend since the programs took effect on Oct. 2. His flagship VW store in New York City sold 11 new VWs to existing owners and his other VW dealership in Bridgewater, N.J., had its best Saturday since news of VW’s violations broke.

“We have felt an immediate impact,” Morais said. “The support has been greatly appreciated.”