Volkswagen line fueling sales, revenue for Penkhus

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The throes of a recession might not seem like the most opportune time to expand a business, but Bob Penkhus had an inkling that adding Volkswagen to his dealership would be good for business.

And he was right.

Penkhus bought the Volkswagen franchise two years ago from Hueberger Subaru across the street from his Volvo and Mazda dealership in Motor City, a cluster of auto dealerships between South Tejon and 8th streets near Interstate 25.

Penkhus made a hefty financial commitment to the German auto manufacturer at a time when manufacturers across the country were scaling back production. GM and Chrysler were even pulling franchises and shuttering dealerships.

Market dynamics have been changing as those new-car dealers have been forced into the used-car auto auction business to bid against existing used-car dealers, Penkhus said.

Nationally, new car sales have been stagnant and the car business, like most business, has been rocky.

But the road has been smooth for Penkhus, he said, thanks in large part to Volkswagen sales.

When it launched two years ago, Penkhus sold about 10 cars a month, not bad for a brand new product, he said. But it quickly climbed to about 65 cars a month and has since leveled off at about 35 Volkswagens per month — about even with the number of Volvos and Mazdas he sells.

He’s been selling Volvo and Mazda in Motor City since the 1970s when he moved the dealership his father built in 1954 to the automotive cluster.

Volkswagen is the first new addition to the Penkhus inventory since the 1970s.

Penkhus said he saw growth potential in Volkswagen. The auto manufacturer has been around a long time and keeps reinventing itself. It recently released a new Passat, designed specifically for the North American market. It’s bigger and sturdier than the European version of the little car, Penkhus said. And it’s likely to be a big seller here.

The company also has its third iteration of the classic Beatle, this time with the engine under the hood instead of in the trunk, Penkhus said.

“They’re in the new wave of cars,” he said.

Volkswagen is also producing more of its TDI line, which includes hyper-fuel-efficient diesel-powered cars that appeal to buyers at times like these when gas prices are high.

“When you see a company that has its eye on the future, you want to do business with them and sell their product,” Penkhus said.

That’s why it seemed logical to invest in a major new venture at a time when business looked like it would continue to slow.

Volkswagen is poised for major growth. Both J.D. Power & Associates and I.H.S Automotive predict that Volkswagen will overtake both GM and Toyota this year to become the largest auto manufacturer in the world. The company is expected to sell 8.1 million cars in 2011 worldwide, a 13 percent increase over 2010.

Volkswagen is also predicted to top 1 million car sales in the United States in 2012.

Penkhus said he expects the company to announce new United States manufacturing plants soon as well, which will eliminate import tax and bring down the cost of the cars unless Volkswagen teams up with the American Auto Workers Union.

When Penkhus bought the Volkswagen franchise, he did it because he was sure it would be a good investment.

“I’d never even driven most of these cars until I started bringing them over from across the street,” he said.

The business they have brought has made a big difference to the bottom line at Penkhus.

“When you add an extra 35 to 65 cars a month, it definitely helps,” Penkhus said.

He also said that adding Volkswagen has brought new business to the shop on the mechanics side and it’s brought in new trade-in inventory that has contributed to Penkhus’ thriving used-car business

Volkswagen was a good addition, he said.