Will This New SUV Bring American Buyers Back to Volkswagen?

By Markets Fool.com

The all-new 2018 Volkswagen Atlas is a seven-passenger SUV designed for the U.S. market. It will go into production at VW's Chattanooga, Tennessee, factory next spring. Image source: Volkswagen.

Continue Reading Below

Volkswagen (NASDAQOTH: VLKAY) took the wraps off of its all-new 2018 Atlas late last week. The Atlas is a big SUV that VW hopes will revive its fortunes after several years of declining sales in the U.S. market and a costly diesel-emissions cheating scandal.

What it is: A family-friendly SUV aimed at the U.S. market

"This is the biggest and boldest Volkswagen we have ever built in the United States, delivering the distinctive design and craftsmanship we're known for, now with room for seven," Hinrich Woebcken, CEO of Volkswagen's North America unit, said in a statement. "The Atlas marks a brand-new journey for Volkswagen to enter into the heart of the American market."

At almost 199 inches in length, the Atlas is big for a VW -- in fact, it'll be the biggest VW Group vehicle yet built on the scalable MQB architecture that underpins the Golf and other models. It has seating for seven passengers in three rows, making it a direct competitor to big-selling models like the Ford (NYSE: F) Explorer, Honda (NYSE: HMC) Pilot, and Toyota (NYSE: TM) Highlander.

The Atlas'sinterior seats seven passengers in three rows. Image source: Volkswagen.

Continue Reading Below

VW hasn't yet released pricing, but it said that the Atlas will be available in five trim levels that will be "priced for the heart of the competitive SUV market." Two engines will be offered, neither of which are diesels: A 2.0 liter TSI turbo four cylinder making 238 horsepower, and the 3.6 liter VR6 V6 with 280 horsepower. Front wheel drive will be standard; all-wheel drive will be optional on V6-powered models.

The Atlas will be built at VW's sole U.S. factory, in Chattanooga, Tennessee.

Two charts show why the Atlas is key to VW's U.S. hopes

Here are two charts that show why VW is building the Atlas -- and why it needs the new SUV to be a success if the brand is to return to growth in the United States.

The first shows the VW brand's total U.S. sales by year from 2012 through 2015.

Data source: Automotive News.

As you can see, VW's U.S. sales in 2015 were down over 20% from 2012 levels. (And that's mostly before the effects of VW's diesel-emissions scandal. Through September, VW's U.S. sales are down another 12.5% this year.)

As we see in the second chart, the explanation for that drop is pretty simple: VW has so far mostly missed the SUV boom. VW has two SUVs, but they're not competitive with mass-market rivals and they've sold poorly here.

The chart compares the VW brand's total U.S. sales of "light trucks" with those of the Explorer, Highlander, and Pilot. These totals include the VW Touareg and Tiguan SUVs as well as the Routan minivan.

Data source: Automotive News.

VW's total SUV (and minivan) sales in the U.S. haven't been anywhere close to the sales of any of the three competitors it has targeted as rivals for the Atlas.

Long story short: If VW wants to turn around its flagging fortunes in the U.S., a family-size crossover SUV will be essential. That makes the new Atlas a critical product.

VW hasn't said whatthe new Atlas will cost

Pricing (and fuel economy ratings) will be announced closer to the Atlas's launch next spring, the company said. Until we see the pricing, it's hard to gauge the Atlas's chances.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

John Rosevear owns shares of Ford. The Motley Fool owns shares of and recommends Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.