By on December 14, 2012

Volkswagen is making most of its profits with pricey Audis, but it is looking towards making volume with low cost cars. Plans for a budget-brand, reported at TTAC in October, are “entscheidungsreif”,  ready for a decision as they say in Wolfsburg. In January, Volkswagen’s board could give its go-ahead.

A team under former Opel CEO Hans Demand will present plans for a family of low-cost cars, based on China’s new Jetta/Santana, says Der Spiegel. The plan starts with a sedan. A hatchback, a wagon, and a SUVlet will follow. If the plans are approved, Volkswagen will pretty much copy Renault’s Dacia strategy.

Volkswagen will have to sell a lot of cars to make money. According to the report, the break-even point is at half a million units per year. The worldwide market for budget cars is seen at 8 million units per year, rising to over 10 million by 2018.

The cars will be sold under a separate brand. It will be interesting to find out which one Volkswagen takes. Will it follow Nissan’s Datsun example and resurrect DKW? Will it  throw logic to the side, add value and call them Wanderer? Or will a lot of money be poured in to creating a new brand of cheapo cars?

The cars won’t be super-low cost anyway. According to the report, they will cost “less than 8,000 EUR” or around $10,000.  Renault is rumored to work on something that costs about half.

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14 Comments on “Volkswagen Ready To Add Low-Cost Car Brand...”

  • avatar

    Would this be a non-US market strategy, or might the budget lineup come here, too? Since the next version of the Tata Nano is supposedly going to be able to meet US standards, I’m wondering if the industry now thinks that the US market contains a big chunk of that projected 8 – 10 million.

  • avatar

    And the march towards world domination continues.

    Just a thought — the march would be more sustainable if the VW board authorized a half-billion Euros into basic research as to why electrons quite often refuse to obey VW engineering orders, and get lost or escape.

    My pal’s new A4 shows that electrons are still not willing to follow wires in VW products. Just when you think they’re tamed, the herd finds a hole in the fence and can then be found aimlessly wandering around the local roads, holding up traffic during the rush hour.

    I owned five Audis over a twenty year period, and the DNA hasn’t really changed, has it. The chromosomes stand next to each other, giggling nervously, standing to attention as the Regimental Sergeant Major barks orders at them. All the while, though, they’re looking for a bit of fun. And more often than not, they’re at it again.

    • 0 avatar

      I own three audis ranging in model year from 2006 to 2011. They have all been dead stone reliable. My wife’s 2006 A3 with 89k miles has been more reliable than her previous car, a 1994 Honda Civic, which, in and of itself, was a very reliable car. I do however admit that the brand is hit-or-miss, and I probably have just not been hit yet ;)

    • 0 avatar

      Unreliable electronics are actually a security feature, preventing drivers from falling asleep due to random and unpredictable electrical phenomena that they are forced to anticipate and pay attention to. This feature appears to be available in a plethora of Volkswagen Group cars, and is indeed part of its cars’ DNA and rich heritage.

  • avatar

    Funny how a company that started out as a low cost brand, ‘Peoples Car’, now needs to develop a low cost brand. How’d that happen VDub?

    • 0 avatar

      The hippies grew up and became yuppies??? Lol

    • 0 avatar

      Low cost is relative to the market; A low cost car in India is $3k, a low cost car in Bergen County, NJ is $35k.

      The market overall has been growing at the very bottom and at the very top. VW is just following the money. In engineering terms, it sure makes a lot of sense. If you can sell the last generation mid market model as a first generation low market model 5 years later, it sure helps spread the R&D costs out, and VW spends a metric schitload on R&D.

  • avatar

    It is quite nonsensical of Volkswagen to launch a new low-cost brand, when it has *two* existing low-cost brands already in Skoda and Seat, and it hasn’t even figured out a good way to handle the latter…

    But I suppose this is good news in a way for those who wish to become Audi drivers, as it means that they can buy a low-cost VW brand car and get pretty much the same thing as an Audi, and, if necessary for vanity reasons, they can just buy a pair of Audi badges on eBay to replace the existing badges. This should already work quite well with the Seat Exeo.

  • avatar

    Well, they’ve got plenty of options:

    Bauerwagen (peasants’ car)
    Trampelwagen (“bumpkins’ car”)
    Pöbelwagen (mob’s car)
    Gesindelwagen (riffraffs’ car)
    Geizkragenwagen (tightwads’ car)

  • avatar
    el scotto

    Sounds like VW is trying to imitate GM’s old marketing strategy. Chevy, Pontiac, Olds, Buick, Cadillac. A car for every budget and the ability to climb “the ladder of prestige”. I’m not that familiar with all of VW group’s products. If anyone wants to make an analogy to the five GM brands I listed please feel free to do so. FWIW an old boss of mine has an Audi wagon with a V8. It is lust-worthy on many levels.

  • avatar

    Isn’t the VAG value brand in the rest of the world the SEAT brand? That would be perfect for the US lower cost option.

    • 0 avatar

      SEAT should be mediterranean and sporty, at least in theory. Of the current brands, Skoda qualifies as a value brand, but not a low-cost one.

      • 0 avatar

        I think SEATs generally do tend to undercut their equivalent Volkswagens by around 10% or so, not huge differences, but still something of a value brand. I know they’re talking about using this brand for developing markets, but I could see SEAT working well as a low-cost brand in America, more so than Skoda. It’s already sold in Mexico and has real Spanish heritage, and might do well by targeting specifically the Latino community. I believe that’s a demographic that generally favors the domestic Big Three, so SEAT sales in the US would likely be conquests for VW rather than at the expense of their other brands.

  • avatar

    This is a fantastic idea. They could take older but still decent Volkswagen platforms, build them in a former Eastern bloc country where labor costs are lower, and sell them at value prices under a different brand so as not to tarnish VW.

    Well, I guess there’s Skoda, but this plan is different somehow.

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