Volkswagen has been working to introduce a budget brand and the company may finally give the green light to the new brand in the coming weeks at the next Supervisory board meet. The upcoming low cost or budget car will be sold under a new brand name, making it the 13th brand to be part of the Volkswagen Group. The proposed budget car is targeted for emerging markets like China and India and could see a launch by the end of 2016 or early 2017.
The all-new budget brands would be first tested in China and will be developed and produced together with Volkswagen’s Chinese partners FAW and SAIC. Volkswagen is contemplating a whole family of budget models for the emerging markets. If the low cost car meets the expectations of the company, the Group will expand the same to other markets like the ASEAN countries and India. Volkswagen is aiming to achieve a sales target of 5 lakh units per annum from its low cost brand.
Low costs brands are not new to emerging markets like China and India. General Motors in association with SAIC has a low cost brand called Baujun for China, while Toyota operates with the brand name Avanza. Suzuki too has the Maruti brand for our market, while Nissan launched the Datsun brand to provide low cost cars in emerging markets, with the newly launched GO hatchback being their first offering in India. In other markets too, budget brands are quite common. French automaker Renault has the Dacia brand, while GM operated the now defunct Saturn brand in the U.S.
Currently, the most affordable Volkswagen globally is the Up! small car. However the manufacturing cost of the car does not justify the price in emerging markets. Earlier reports suggested that Volkswagen could not stick to the cost ceiling for the budget brand and quality issues were a major hassle for the company. However, its Chinese partners could play a dominant role for developing affordable parts with decent quality.