Volkswagen Sales Are Crushed as the Diesel Scandal Hits Hard

U.S. sales of Volkswagen's Passat sedan fell 60% in November. Image source: Volkswagen.

Volkswagen said that U.S. sales of VW-brand vehicles fell almost 25% in November, as the company's emissions-cheating scandal may have kept buyers away from its showrooms. The company's luxury brands, Audi and Porsche, fared somewhat better.

The key numbersThe U.S. isn't a big market for Volkswagen-brand vehicles. Just under 24,000 were sold here last month. (For comparison, market leader General Motors sold 229,296 vehicles in the U.S. last month.) But that small total is still a big decline from the nearly 32,000 VWs sold in the U.S. in November of last year.

Part of the problem is simply that VW can't sell any diesels in the U.S right now. Federal regulators have held up approval of VW's diesel-powered models while it sorts out the company's response to charges that VW used secret software embedded in its cars to cheat on emissions tests for years.

That alone is probably responsible for much of the drop: Diesels accounted for 17.2% of VW's U.S. sales in November of last year. But VW may be having trouble drawing buyers to showrooms -- despite significant discounts. TrueCar estimates that VW's per-vehicle incentive payments (across the VW, Audi, and Porsche brands) rose 27% in November versus a year ago.

Sales at Audi and Porsche have fared somewhat better, but neither set records in November. Audi's U.S. sales were up just 0.4%, while Porsche's fell 5.3%.

What it means for VWThe drop in VW-brand sales is a headache for VW's leaders, but it isn't a crisis for the company. VW sells far more vehicles in Europe and China than it does in the U.S. But it will add to the pressure on VW to resolve the emissions-cheating scandal as quickly as possible: VW's American dealers are already incensed with the company, and falling sales won't help.

So far, it doesn't look like the scandal has done much to dent Audi and Porsche sales in the U.S. But if that changes, VW CEO Matthias Mueller and his team will have more than headaches to worry about. Audi and Porsche contribute an outsized portion of Volkswagen's overall profits, and the U.S. is proportionally more important to both than it is to the VW brand.

Porsche and Audi, together with the Bentley super-luxury brand, accounted for just 16% of the VW group's total vehicle sales last year -- but they brought in over 60% of the group's operating profits.

The upshot: VW, like the rest of us, is waiting on the EPA VW has a plan for fixing the roughly 567,000 vehicles in the U.S. that contain the emissions-cheating software, and has submitted it to the U.S. Environmental Protection Agency (EPA) and California Air Resource Board (CARB) for review. Those agencies have until Dec. 21 to review the plan, and they're expected to issue a public response on that date.

VW (and its dealers, and owners of the affected cars, and possibly some potential buyers) will have to wait until then for more clues as to the consequences of the scandal. I continue to think that anyone considering an investment in VW's beaten-up shares should wait (at least) until then as well.

The article Volkswagen Sales Are Crushed as the Diesel Scandal Hits Hard originally appeared on Fool.com.

John Rosevear owns shares of General Motors, which The Motley Fool recommends. The Motley Fool also recommends TrueCar. 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.

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