Volkswagen is charting a new course in the North American market, aiming to blend efficiency with a premium experience that harkens back to its glory days in the 2000s and early 2010s. The German automaker, known for its engineering prowess and accessible yet aspirational vehicles, is making strategic moves to cater to evolving consumer preferences. Central to this shift is a focus on conventional hybrid electric vehicles (HEVS) rather than plug-in hybrids (PHEVS) and a renewed emphasis on premium touches in its lineup. This article explores how Volkswagen wants to be more premium, delving into its hybrid strategy, design philosophy, and market positioning.
The Hybrid Pivot: Why Volkswagen Wants To Be More Premium with HEVS
Volkswagen’s decision to prioritise conventional hybrids over plug-in hybrids in the U.S. market reflects a pragmatic response to consumer behaviour and market dynamics. At the 2025 New York International Auto Show, Kjell Gruner, CEO of Volkswagen Group of America, shared insights into this strategy. “Consumers don’t want to change their behaviour,” Gruner noted, highlighting the challenges of PHEVs, which require charging infrastructure that not all buyers have access to. With PHEVs accounting for just 1.9% of U.S. vehicle sales compared to 10.7% for hybrids and 9.4% for EVs, Volkswagen wants to be more premium by targeting the larger hybrid market.
The decision also considers cost and weight. PHEVs add significant material costs and complexity, which can deter buyers seeking value. By focusing on HEVs, Volkswagen aims to offer electrified options that feel seamless and familiar. Gruner emphasised local production, stating, “We want to manufacture them in North America.” This approach requires time to establish local tooling, battery production, and supply chains, ruling out quick imports from Europe, where Volkswagen already sells both HEVs and PHEVs.
Two key models will lead this hybrid charge: the Volkswagen Tiguan and the next-generation Atlas. The Tiguan, VW’s bestselling model, will gain a hybrid variant in the coming years, addressing the absence of electrified options in its 2025 third-generation lineup. The Atlas, a three-row SUV, is slated for a hybrid version around 2027. These volume models are critical to Volkswagen’s goal of capturing market share while reinforcing its premium aspirations.
Premium Design: Elevating the Volkswagen Experience
Volkswagen wants to be more premium, not just through powertrains but also through design and materials. The new Tiguan exemplifies this shift, featuring American walnut wood trim and massaging seats on its top trim. These touches evoke a sense of luxury, aligning with Volkswagen’s “German roots” of engineering excellence and high-quality haptics. Gruner described this as “a little bit of extra fun, the nice things in the vehicle,” aimed at buyers “climbing the social ladder.”
This premium focus recalls Volkswagen’s positioning in the 2000s, when models like the Passat and Touareg offered upscale features at accessible price points. Today, Volkswagen wants to be more premium by balancing affordability with aspirational design. The goal is to create vehicles that feel like a reward, offering material quality and refinement that stand out in the competitive compact and midsize SUV segments.
Why Not Plug-In Hybrids?
Volkswagen’s pivot away from PHEVs in the U.S. is driven by practical and strategic considerations. Gruner outlined several challenges: “It adds a lot of weight and also a lot of material cost.” Additionally, the regulatory environment remains uncertain, with potential changes to federal tax credits for electrified vehicles under discussion. The Trump Administration’s proposed elimination of EV credits could further diminish the appeal of PHEVs, which rely on such incentives to offset costs.
Localization is another hurdle. While Volkswagen could import PHEVs from Europe, Gruner emphasised the need for North American production to avoid tariffs and ensure long-term viability. This requires significant investment in local manufacturing, which Volkswagen is undertaking for its hybrid models. By contrast, PHEVs would demand additional resources for battery and charging infrastructure, making them less feasible in the short term.
The Market Context: Missteps and Opportunities
Volkswagen’s hybrid strategy comes in response to a miscalculation about the U.S. market’s appetite for full battery electric vehicles (EVs). Like many automakers, Volkswagen overestimated the speed of EV adoption, betting heavily on models like the ID.4. However, hybrids have outpaced EVs in popularity, catching Volkswagen flat-footed. The absence of a hybrid option in the 2025 Tiguan launch underscores this oversight, but the company is moving swiftly to correct it.
Volkswagen wants to be more premium by aligning with consumer preferences for hybrids, which offer fuel efficiency without the need for charging infrastructure. This approach also mitigates risks associated with global political factors, such as tariffs on foreign-built vehicles. By producing hybrids locally, Volkswagen aims to future-proof its lineup while delivering vehicles that resonate with American buyers.
Performance and Innovation: A Glimpse of Volkswagen’s Ambition
Beyond hybrids, Volkswagen is exploring bold ideas to reinforce its premium credentials. At the Nürburgring, a modified VW Golf R was spotted testing, hinting at an off-road-capable variant inspired by rally or safari concepts. This prototype suggests Volkswagen wants to be more premium by pushing boundaries, blending performance with versatility. While not directly tied to the hybrid strategy, such projects showcase the brand’s commitment to innovation and excitement.
The upcoming Tiguan performance variant, set for the 2026 model year, further illustrates this ambition. Unveiled at the New York Auto Show, it aims to bridge the gap until the hybrid arrives. Volkswagen wants to be more premium by offering diverse options that cater to enthusiasts and mainstream buyers alike, ensuring its lineup feels dynamic and forward-thinking.
The Road Ahead: Challenges and Expectations
Volkswagen’s hybrid timeline presents challenges. The Tiguan hybrid is still a couple of years away, and the Atlas hybrid won’t arrive until around 2027. This delay risks ceding ground to competitors like Toyota and Honda, which dominate the hybrid SUV market. However, Volkswagen’s focus on localization and premium design could differentiate its offerings, provided execution is flawless.
The potential for a mild hybrid Jetta adds another dimension to Volkswagen’s strategy. A Jetta hybrid, discontinued after 2016, could return to capture budget-conscious buyers seeking efficiency and refinement. Volkswagen wants to be more premium across its lineup, from compact sedans to three-row SUVs, ensuring broad appeal.
Volkswagen’s Premium Identity in a Competitive Landscape
Volkswagen wants to be more premium by blending German engineering with accessible luxury, a formula that has defined its best moments. The shift to hybrids reflects a pragmatic response to market realities, while the emphasis on premium materials and design signals ambition. As Gruner put it, Volkswagen’s vehicles should feel like “a product that has those premium touches that feels better as a reward.”
In a crowded market, Volkswagen faces stiff competition from brands like Mazda, which also prioritize upscale design, and Hyundai, which offers compelling hybrids. Yet Volkswagen’s heritage and engineering pedigree give it an edge. By focusing on hybrids and premium touches, Volkswagen wants to be more premium in a way that resonates with aspirational buyers, offering vehicles that are both practical and indulgent.
Conclusion: A Premium Future for Volkswagen
Volkswagen’s pivot to hybrids and premium design marks a pivotal moment for the brand in North America. By prioritizing conventional hybrids for models like the Tiguan and Atlas, Volkswagen wants to be more premium while meeting consumer demand for efficiency and familiarity. The addition of upscale features like walnut trim and massaging seats reinforces this vision, positioning Volkswagen as a brand that rewards its drivers with quality and refinement.
As Volkswagen navigates regulatory uncertainties and invests in local production, its commitment to premium engineering remains clear. Volkswagen wants to be more premium not just in its vehicles but in its approach to the market, balancing innovation with accessibility. With hybrids on the horizon and a renewed focus on aspirational design, Volkswagen is poised to reclaim its status as a premium yet approachable automaker, delivering vehicles that inspire and endure.