VW moves ahead with plans for new budget brand

CHINA-ONLY BRAND TO JOIN SKODA AND SEAT AS VW GROUP'S BUDGET OFFERINGS

Volkswagen is moving closer to the debut of a new budget brand for China, according to a report from Bloomberg and Automotive News. Plans to introduce a new marque positioned below Volkswagen in the Chinese market, where the company has had a presence since 1982, were first announced three years ago by VW CEO Martin Winterkorn.

A target price of 6,000 euros to 7,000 euros ($6,500 to $7,600) for the new brand's first vehicle has been announced, and the design was reportedly finalized in 2014. Volkswagen executives previously disclosed that more work had to be done at the engineering level to trim costs for the car's target price range.

Volkswagen has not revealed the name of the new brand, or whether it will eventually be offered outside of China. Winterkorn promised an update on the project "in the foreseeable future."

The introduction of a new budget brand in China, where Volkswagen manufactures a number of European Volkswagens as well as models made exclusively for the Chinese market with partners FAW and SAIC, follows the brand's creep upward in price and offerings. Volkswagen also builds Skoda models in China, a brand that was once at the bottom of the price ladder. In recent years Skoda has followed Volkswagen offerings upmarket with the debut of larger and more luxurious vehicles such as the Yeti and the Superb, leaving a gap at the entry-level niche of the market that domestic Chinese manufacturers have exploited. Recent reports of a new Volkswagen Phaeton sedan for the 2018 model year have reconfirmed the brand's push upmarket.

Volkswagen's creation of a new budget brand will follow Nissan's return of the Datsun brand to certain world markets, a venture that has experienced limited success in markets where it was introduced, which have not included China.