Volkswagen Jetta CKD 15

Reuters has reported that the Volkswagen Group has signed off on the design and basic concept of a sub-€8,000 (RM36k) city car for its yet-to-be-launched budget brand.

Project manager Hans Demant affirmed this at Auto China in Beijing, adding that they would produce all the components in China. At least initially, the new marque’s first model will be built and sold almost exclusively in the Middle Kingdom.

If it does become successful, however, it could reach other emerging markets such as Latin America, Eastern Europe, India and South East Asia, where low-cost, no-frills cars reign supreme, and where brands such as the Renault-Nissan Alliance’s Dacia and Datsun marques have been making significant inroads.

Demant’s comments contrast to those from the research and development chief for the Volkswagen brand, Dr Heinz-Jakob Neusser, at the Geneva Motor Show in March. Neusser claimed that it was becoming more difficult to justify the cost of building the car, saying that it did not make sense to approve a project that did not meet in-house targets.

The group had reportedly been struggling for more than a year to hit cost targets while still meeting its own internal quality standards. But it is clear that the company sees the value in investing in such a project – Volkswagen lacks a strong presence in developing countries, a problem that needs to be addressed promptly if it still intends to be the world’s largest car manufacturer by 2018.