Volkswagen to launch new budget brand in China next year

The Volkswagen Group’s long-anticipated budget brand will launch in China in 2018.

Speaking at the announcement of the Volkswagen Group’s 2016 financial results, Jochem Heizmann, board member responsible for China, confirmed that the first vehicles produced in partnership with Chinese car maker First Automobile Works (FAW) would launch “with a focus on the SUV segment”.

“We want to be competitive in that segment,” said Heizmann. It is believed that the first launch will be a midsized SUV, and that a saloon and hatchback are likely to follow, with entry-level prices ranging from 8,000-11,000 euros (Rs 611,000 to Rs 840,000).

Heizmann claimed that no name for the economy brand has yet been decided, but confirmed that “at the moment it will not be VW”.

The Volkswagen Group has previously struggled to meet its internal minimum standards for manufacturing while still meeting the financial constraints imposed by building a budget car to be profitable. A partnership with Suzuki to work on similar vehicles was dissolved in 2015.

Although the cars will initially only be sold in China, other potential markets include India, Latin America, eastern Europe, the Baltic region and Africa. There are no plans to sell the cars elsewhere in Europe at present.

In a separate project, the Volkswagen Group is also working with Tata Motors on vehicles for the Indian market. Development is being led by the Skoda brand, with Volkswagen Group CEO Matthias Müller confirming that a range of bodystyles would be launched on a small, A0-sized platform from 2019.