VW sees opening in Detroit-dominated pickup market

The U.S. pickup truck market has big profits, big segments — and a big hurdle for foreign makes to clear, given Detroit Three loyalty and steep import tariffs.

But Volkswagen thinks there might be an opening.

The German manufacturer has introduced two pickup concepts to the U.S. market in the last year, and it is particularly bullish on its most recent entry, the Tarok mini-pickup concept shown at this year's New York Auto Show.

“As (midsize) pickups get bigger – to the stage where they are as big as full-size pickups were not so long ago – and more expensive and less fuel-efficient, we are trying to see if there is space for a vehicle with a smaller footprint that potentially is more affordable and gets better gas mileage,” says VW Senior Vice President for Product Marketing Hein Schafer.

With a 193 ½-inch wheelbase, the Tarok is much smaller than, say, the midsize Ford Ranger at nearly 211 inches. But VW innovates a neat party trick by expanding its 4-foot bed into a 6-foot bed by dropping the panel behind the rear bench seats and flattening the seat backs like an SUV. Like the Rabbit-based, simply named Volkswagen Pickup from the 1980s, the Tarok would sit on a compact-car chassis and be sold as a lifestyle, outdoor truck – in contrast to the ladder-frame bruisers that dominate larger segments.

VW's transverse-engine MQB platform also has the advantage of being made in Mexico. Vehicles built in North America are not subject to the so-called "chicken tax," a protectionist 25% tariff applied to pickups imported from abroad. VW currently imports the Jetta sedan and Tiguan SUV from Mexico.

Import tariffs are a concern for VW even as it enters into a global truck alliance with Ford. VW plans to make a truck-based midsize pickup called the Amarok. The problem? It's made in Argentina for international markets and would be subject to the 25% tax, which is a dealbreaker.

“If we were to go into the pickup market, we would produce the vehicle in the USMCA area,” says Schafer, referencing the United States-Mexico-Canada Agreement — the proposed replacement for the North American Free Trade Agreement that governs the North American trade sphere and is exempt from the chicken tax.

VW wants in to the U.S. pickup market because it is a cash machine.

“The pickup market is huge, but we have seen that even the biggest of car companies have yet to make much of a dent in the domestic stranglehold on full-size trucks,” says Schafer. “So we wanted to show something a bit different — something that’s a bit more in line with what a potential VW customer might expect.”

Stung by the high costs of Dieselgate and electric car mandates in Europe, the German manufacturer is determined to grow in the profitable, less-regulated, SUV-crazed U.S. market.

With its three-row Atlas SUV and compact Tiguan ute, VW has shaken off its old, Beetle-car identity to become a full-line SUV and sedan maker with offerings in four of the five biggest vehicle segments.

The 2018 Tanoak midsize pickup concept shown in the Big Apple was based on the Atlas (which is currently made in Tennessee). But while VW says media and public reaction was positive, the truck would be an expensive proposition to make in a crowded midsize market including established nameplates like the Chevy Colorado and Toyota Tacoma.

VW is also wary of Honda’s experience with the midsize, SUV-based Ridgeline pickup. Despite glowing media reviews and a menu of unique features, the Ridgeline has failed to catch fire in a segment where trucks are defined by ladder-frame chassis and big tow numbers.

The wee Tarok not only enters pickup white space, it also plays on VW’s traditional brand strength of selling well-engineered compacts. Its interior is typically upscale and VW says it has multiple engine options in its toolbox.

Autotrader senior auto analyst Michelle Krebs says that the smaller the pickup, the easier it is for foreign brands to gain market traction against the Detroit Three.

"Our research shows there is little brand loyalty in smaller trucks," she says. "Full-size buyers are the most loyal in the industry; smaller-truck buyers are the least. So the newest player likely has a good chance of conquesting buyers."

VW is not the first to look at a compact pickup. Fiat Chrysler sells the cute car-based Fiat Toro pickup in South America and has reportedly looked at bringing it to the U.S. to shore up the struggling Italian brand here.

"Obviously there is a market here for small pickups for young people who don't want to spend $40,000 and want a lifestyle vehicle to haul their bikes or kayak," says veteran auto analyst Joe Phillippi of AutoTrends Consulting. "But it's a finite number of sales and manufacturers need to make sense of the numbers."

While VW won't talk price yet, Phillippi estimates a small pickup would start in the low-$20,000s — which is $5,000 under midsize pickups — and top out under $30,000 when fully loaded. Targeted at youth buyers on the U.S. coasts, it could also bring new customers to VW's lineup.

Autotrader's Krebs agrees that there is an opportunity with young folks -- "VW has always done well with youth buyers" -- as long as the price is right.

"That's why avoiding the tariffs and building it in North America is key," she concludes.

On its website, Volkswagen takes a stroll down memory lane, recalling the Pennsylvania-manufactured VW Pickup that sold over 77,000 copies between 1979-84.

"Is America ready for a smaller pickup again?" the company asks. "Based on the reaction to the Tarok Concept in New York, Volkswagen has the potential to make one a reality — and bring another distinctive vehicle back to American roads."

Henry Payne is auto critic for The Detroit News. Find him at hpayne@detroitnews.com or Twitter @HenryEPayne. Catch “Car Radio with Henry Payne” from noon-2 p.m. Saturdays on 910 AM Superstation.