VW to introduce budget brand?

There are reports from the North American International Auto Show, (Detroit, Jan 14 – 27) that Volkswagen will decide this year whether to introduce a new budget brand aimed at developing markets.

If the company decides to go ahead, it would almost certainly start in China, where VW recorded a near-25 per cent increase in sales to a total of 2.15 million in 2012. But India and other new markets such as Mexico could also be targets for a low-cost VW brand.

The aim would be to bring a car in about £1,200 below VW’s current cheapest offering, the up!, says Dr Ulrich Hackenberg, who heads the company’s product planning and engineering divisions.

“It will be tough but, with our experience, not impossible,” says Hackenberg. “Such a car can only be built in a country with low production costs.

“The suppliers and the materials would have to be localised – deeply localised. By sourcing the second and even third-tier parts in those countries we could save a lot of money.”

One of the issues, he adds, is the different requirements of the various new markets. China would want a fairly large car while India would want something small, so the fundamentals would have to be “flexible and capable of derivatives”.

Hackenberg added: “We would be thinking to sell it under a new brand name because you cannot enlarge the offer of any brand (VW) too far.”

It would also have to be more than just a basic budget car, Hackenberg says. “It has to fulfil not only mobility – the customer wants to love his car. It needs to have good styling and the offers of additional equipment which the customer can maybe buy later.”

Hackenberg says any such car from VW would meet more than basic safety requirements. “We would make our decision based on the competition in that market,” he went on. “If the competitors had a three-star car then maybe we would aim to go for four stars.”