Volkswagen AG will upgrade the Passat, its best-selling sedan, with safety technology inspired by fighter jets to lure buyers away from upscale nameplates.
When it goes on sale in the fourth quarter, the mainstream model will be VW’s first car available with a head-up display. The system projects data such as speed and navigation instructions onto a retractable screen over the steering wheel to keep the driver’s focus on the road. Other high-tech safety options include functions that can bring the car to a halt if the driver falls asleep.
“Competitors struggle to keep pace with VW,” said Juergen Pieper, an analyst with Bankhaus Metzler in Frankfurt. The Passat, which was presented in Potsdam, Germany and is one of Volkswagen’s top four profit earners, “looks set to maintain VW’s dominance in the segment.”
Volkswagen is seeking to reclaim its lead in the European sedan market after sales of the Passat fell behind BMW AG’s 3-Series last year. That means luring buyers with technology reserved for luxury models. VW can afford the features because the car shares key components with models including the Golf and Audi A3 compacts, which in turn lowers costs.
Defending its traditional stronghold is critical to the manufacturer as it targets tripling profitability at its namesake brand.
The Passat “introduces technologies and features in the mid-market that are otherwise only available in higher segments,” CEO Martin Winterkorn said at the unveiling. “The new Passat is going to the Volkswagen brand a powerful push.”
Sales of the Passat in Europe, its main market, are forecast to surge 65 percent to 228,000 vehicles next year, beating out the 3-Series and Daimler AG’s Mercedes C-Class for the segment lead, according to IHS. Deliveries of the Ford Mondeo, the closest mass-market competitor, are due to be less than half the Passat’s level.
Higher sales and lower development and production costs from VW’s parts-sharing strategy could help double the Passat’s profit margin to as much as 8 percent of sales.