There's been some question about why Volkswagen would opt from offering both satellite radio providers to offering only one. It would seem the best thing for VW would be to provide the choice to the consumer.

An article in Reuters today shines a bit more light on the background of deal now. XM spokesman Chance Patterson told Reuters the expense of pursuing deals with these automakers was not worth the return.

"XM has long-term agreements with Toyota, General Motors, Honda, Nissan and Hyundai Corp. We evaluated the VW-Audi deal and determined the significant cost didn't justify the limited volume of vehicles produced," he said.

Interesting fact: Germany's Volkswagen is Europe's biggest automaker, but in 2005 it produced only 1.8 percent of the automobiles sold in the United States.

But even more importantly I think Sanford Bernstein analyst Craig Moffett has a great point. The number of cars being produced with satellite radio will now signficantly be increased. Craig Moffett said that while the total number of cars involved in this new deal is relatively small, the pact may ultimately be positive for both XM and Sirius, because of the high percentage of units that will install the radios.

"This signals that Volkswagen believes that there is enough demand for satellite radio...for it to put satellite radio in a very high proportion of its cars," he said in a note to clients. "It is yet another data point that indicates that ultimately the percentage of new cars that will have satellite radio installed is higher than consensus expects.."

So overall it's a good move for the awareness of the satellite radio industry in general.

[Reuters] 

SIRIUS Satellite Radio has inked a deal with Volkswagen of America to offer SIRIUS as VW's sole satellite radio provider for vehicles sold in this country through 2012. Volkswagen will exclusively offer SIRIUS beginning with the introduction of its 2007 model year vehicles, and expects to equip approximately 80% with SIRIUS satellite radio receivers. Additionally, Volkswagen will offer three months of complimentary service.

Volkswagen is a key auto manufacturer with several brands under it's umbrella. As part of this deal, Audi of America will offer SIRIUS as its exclusive satellite radio provider for Audi's model year 2007 - 2012 vehicles. Today, the installation rate of satellite radio in Audi models is approximately 50%.

Volkswagen owns Audi, Bentley, Bugati, Lamborghini, and several others (SEAT, Skoda, etc - but they're not so common in the States). Previously they had a joint deal with both XM Satellite Radio and SIRIUS Satellite Radio.

[Press Release (Volkswagen)]
[Press Release (Audi)]