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Volkswagen to turn down cheaper road: report

Next step: Volkswagen’s Lavida, built with joint-venture partner SAIC, is the brand’s best-selling car in China.

Budget brand reportedly signed off by VW to tackle emerging markets in 2017

21 Mar 2014

VOLKSWAGEN’S boardroom is reportedly weeks away from signing off on a new budget car brand to help it boost sales in some of the world’s poorest markets.

The German automotive giant has considered an entry-level brand for some time, but has struggled to make a viable business case as the company battles to stay within budget because of high internal manufacturing standards.

However, German publication Manager Magazine is reporting that Volkswagen Group chief executive Martin Winterkorn is keen to test the brand in China first, with it likely to be built at one of VW’s joint-venture production facilities shared with Chinese manufacturers SAIC and FAW.

Dr Winterkorn is said to have ruled out using existing cut-price Volkswagen brands such a Skoda and Seat in favour of establishing an entirely new brand.

If the brand is successful in China, it is believed that VW will turn its attention to other emerging markets where it is yet to gain a significant presence, notably in India and some south-east Asian countries.

Volkswagen also could look to launch the brand in other emerging markets such as Africa, Eastern Europe and Latin America, the report said.

The budget make would be the group’s 13th brand and would likely include a small family of models with an annual sales target of about 500,000 units.

It is expected that the first model from the new brand would make its debut by late 2016 or early 2017, and should cost no more than €7500 ($A11,436).

Volkswagen already has a strong presence with budget models in South and Central America as well as Mexico, where it sells rebranded versions of previous-generation Volkswagens.

The top-selling vehicles in this region are typically stripped-back models with minimal comfort and safety features, with car-makers taking advantage of loose crash safety regulations to keep prices down.

The VW Clasico, which is a fourth-generation (1999-2005) Jetta/Bora was the second top-selling car in Mexico last year behind the Chevrolet Aveo (a previous-generation Daewoo Kalos), while the number one choice for Brazilian motorists is the Volkswagen Gol, which holds the record as the best-selling car in the South American country.

In China, Volkswagen commands a healthy sales lead over its competitors, with 2.4 million units sold there last year, ahead of rivals Hyundai, Toyota, Nissan and General Motors.

VW’s Lavida sedan – a joint venture vehicle designed and built with partner SAIC – was the most popular passenger car in China last year, outselling both the Ford Focus and the GM Cruze-based Buick Excelle.

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