Volkswagen SA wants to add a new model to its production line in Uitenhage. Picture: QUICKPIC
Volkswagen SA wants to add a new model to its production line in Uitenhage. Picture: QUICKPIC

The saga of Volkswagen’s on-again, off-again budget brand is officially on again. And, according to the brand’s head of development, it’s never been "off again" at all, in spite of reports insisting on its demise.

Frank Welsch has revealed the budget brand will be launched in China within two years, starting with a small sedan and adding compact and larger SUVs before 2021. He insists reports of the death of the programme mixed a cancelled Skoda-Tata programme for an Indian budget car with Volkswagen’s own gestating budget brand.

"The thing that you might think of is this Tata-Skoda story," Welsch says. "This is India and this is not a budget car for China. This is different and I cannot comment what Skoda is doing."

He first admitted to the budget brand programme at the launch of the Golf 7.5 in 2017, then reiterated its scheduling before the Frankfurt Motor Show.

"The only thing that is not changing in the past six months is the budget car. There is no change, no change in timing or engineering or concept."

Welsch and Volkswagen brand CEO Herbert Diess are aiming to use the brand to emulate Renault’s success with Dacia and are engineering it down to a target price of about 70,000 to 80,000 renminbi (about R140,000 to R162,000). It is also unashamedly targeting Chinese SUV-crossover player Haval.

VW SA will not want to jeopardise its Polo Vivo range. Picture: QUICKPIC
VW SA will not want to jeopardise its Polo Vivo range. Picture: QUICKPIC

Build the brand

It will build the brand, and models, with its Chinese joint-venture partner FAW, to tackle the Chinese market as a priority before going global. The original Volkswagen plan called for a budget sedan, but Haval’s success forced it to flesh it out from one model to three, with two budget SUVs.

"Everybody knows China is a sedan market, but it’s not. The Chinese people who have less money, what do they like? They dream of SUVs. Look at the Haval H6," Welsch pointed out months ago. "We want to be as successful as Haval in that market. If we had added one SUV, then it’s easy to have two versions if we change the wheelbase and add a third seating row. Also, we have to keep in mind the economy segment will be a strong segment not only in China."

China takes about half of the Volkswagen brand’s 6-million car sales a year, but it also has ideas to use it to tackle Mexico, and India. It will face tough competition on the subcontinent, with Renault launching a second standalone brand there because the Dacia range is too expensive to generate mass volumes.

In a market dominated by Suzuki, Renault launched its Kwid crossover with a business model at odds with car-industry tradition. The Kwid’s development centred on new architecture using the platform of the Datsun Go and a Spartan-like discipline to keep costs down, rather than prioritising a launch date as almost all car development programmes do.

Volkswagen won’t do that, but will avoid the more expensive MQB architecture that sits beneath all of its small-to-medium cars and SUVs, including the Polo, Golf, Tiguan, Passat, Arteon and the Teramont-Atlas. It will instead use superseded pieces to keep costs low and Welsch’s team is tweaking the Golf Mark 6’s core engineering,

"But for the budget car, which is lower end, why not use components that are working properly but they have invested in production for 10 years already? This is much better for a project," Welsch said earlier in 2017. "The easiest thing would be to stay in premium products and standardise and leave the low price things to other players.

"But in certain parts of the world, we will need such economy cars and in China, 40% already is with economy cars. To offer cars for 60% of the market or with 65% of the market? If we want to be number one in China we have to address this budget market as well."

A new Volkswagen budget brand will probably be based on the Golf Mk 6. Picture: QUICKPIC
A new Volkswagen budget brand will probably be based on the Golf Mk 6. Picture: QUICKPIC

And in SA?

Could VW’s budget brand come to SA? asks Mark Smyth.

Well, there are rumours that Volkswagen SA (VWSA) is looking at another brand but it will have to tread carefully after the failure of Seat. Taking on the new VW budget brand could impact on not just sales of the VW Polo Vivo but also its production and VWSA will not want to jeopardise that.

GM of group communications at VWSA, Matt Gennrich, told us that "Volkswagen SA currently manufactures the Polo and the Polo Vivo and will continue to do so with the new models expected in early 2018. Ideally we would like to be able to add a third model in the future, if this would be a commercial or passenger derivative would depend on many factors. While a number of studies have been conducted, no concrete plan or decisions have been made or decided on."

The fact that the new budget brand will probably be based on the Golf Mk 6 means it will be bigger than the Polo Vivo, a new version of which is likely to be based on the outgoing current Polo. Pricing might make it difficult for there to be a Volkswagen Golf Vivo in SA, but what about the budget SUVs? Tiguan Vivo anyone?

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