SUV added as plans for budget wheels are revived
INDUSTRY NEWS/ Volkswagen to start all-new budget brand by 2019 in China first, writes Michael Taylor
The on-again, off-again saga of Volkswagen’s emerging-market budget brand has just been turned back on, and fast-tracked to hit Chinese showrooms before the end of 2019.
This time around the unnamed new brand will not be based around a single sedan, but a sedan, an SUV and probably a third, larger SUV.
A senior VW official has confirmed the new brand, which hopes to replicate Renault’s success with Dacia. To be built in partnership with its Chinese joint-venture partner FAW, it will specialise in China first, complete with Chinese model names, before spreading around the world.
The new brand is not planned for SA, but with the company planning to expand it beyond China, SA could well be a potential market.
“The budget car is still under development, even more right now,” VW development head Frank Welsch confirmed.
“Two years ago the car you heard about was a sedan. We changed this strategy early [in 2016] because in China the market research was quite easy to see that when we need a budget car, we also need a budget SUV.
“To be successful we thought it would need two cars: a sedan and an SUV. It’s a bit like Jetta and Santana for our brand, but below these cars.”
A big market, too, if the examples of Dacia and Great Wall Motors’ Haval brand are any indication. Welsch admitted the success of Great Wall’s budget SUVs in China helped VW to rethink its own budget brand.
“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.
“We want to be as successful as Haval in that market.
“If we had added one SUV, then it’s quite easy to have two versions of that if we change the wheelbase and add a third seating row. Also, we have to keep in mind that the economy segment will be a strong segment not only in China.”
It only takes a brief look at the VW brand’s global sales to understand why it is focusing its budget car on China first. The company sold 5.99-million cars globally in 2016 and 2.99-million of them, or more or less half, were sold in China.
“It will start in China, but there are a lot of economy markets, like Mexico and Brazil. There’s also India,” the engineering boss said.
“It will probably be two-anda-half years away, plus or minus six months, with two models more or less at the same time.”
While the Volkswagen Group’s MQB architecture is becoming ubiquitous for small to medium-sized Seats, Skodas, Audis and Volkswagens, it plans to follow Renault’s Dacia strategy of using superseded underpinnings to keep costs low.
The company is working to deliver the initial two-model range using the architecture from the Mark 6 Golf, which ceased production in 2013, showing the brand will be based on a front-wheel drive strategy. The SUV would receive a hangon all-wheel drive system.
“It won’t be off MQB. The brand will use some MQB components but not the MQB architecture. If you compare this to Dacia and what it is doing, that’s more like it,” Welsch said.
“Dacia is using models of a former generation of Renault… 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,” he said.
The group is strong in China, with Volkswagen and Audi claiming market leadership in their segments, with almost one in three of Audi’s 1.87-million global sales going to China.
“The easiest thing would be to stay in premium products and standardise… and leave the low price things to other players,” Welsch said. “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.
“It’s not easy, but we have to fight to get that knowledge to make low-price cars that make money….” Welsch defended the idea of recycling old componentry to produce “new” cars for the new brand, insisting it was the only way to short-track build quality and reliability at the right cost, something VW has been doing in SA for years with Polo Vivo models.
“Think about the structures we have. For years, we optimise cars to premium quality for European eyes, but if you look through Chinese or Brazilian eyes, they say we spend a lot of money on things the customers will not see or feel or pay for.
“We have to make a car the best in a certain market, but we don’t necessarily have to put in the same as in Europe to be in the top three of the class.”
That thinking will spread to the car’s parts and key suppliers. “Sometimes in China for a Chinese budget car, should you choose from a supplier like Continental or Bosch or do you just go to the partner company in China,” he asked
“Budget companies mostly have a supplier base that is all Chinese, so we are able to connect with them through our joint venture. The surface quality standards of the chassis parts will be different, but who will see them or care? Nobody would care anywhere else in the world. But we have to lower our standards for what we see in Germany, which is why we haven’t been successful with cheap cars before.
“The cars for that brand have to work properly for 10 years. We will make sure it does that. We will test it for a [257,000km] durability standard,” he said.
IT PLANS TO FOLLOW RENAULT’S DACIA STRATEGY OF USING SUPERSEDED UNDERPINNINGS TO KEEP COSTS LOW THE GROUP IS STRONG IN CHINA, WITH VOLKSWAGEN AND AUDI CLAIMING MARKET LEADERSHIP IN THEIR SEGMENTS