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Volkswagen Intends to Introduce a Low Cost Brand for China

German automaker Volkswagen extended its products on the Chinese market with the introduction of Seat, and now it has plans to debut a new low cost brand on the market in order to cover the entry-level segment, according to Automotive News.

"We are currently evaluating with our partner First Auto Works whether we need to add a domestic brand to enter the low-cost portion of the Chinese market," explained Soh Weiming, executive vice president of sales and marketing for VW Group China.

Volkswagen is not the first manufacturer to bring a new brand to the Chinese market, as General Motors and Honda already did the same with their Baojun marque and Li Nian. At this point, VW is not involved in the 20% of the market’s low cost products, but in association with First Auto Works, the automaker is making the necessary research to find out if a low cost brand is needed on the Chinese market.

"Currently we are not competing in the 20 percent of the market made by low-cost products, but before making a decision we should also look to how this segment could evolve," Weiming said.

This decision comes after the sales increase of 2010, when the German automaker sold 2 million units in China, representing a 37,4 % raise compared to the previous year. At this point, Volkswagen intends to invest in the next few years a staggering $15.6 billion (EUR10.6 billion) in order to increase its sales levels even more.

If Volkswagen doesn’t bring a new brand to China, its annual production capacity is expected to increase up to 4 million units by 2018. In order to do so, the manufacturer plans to build two new factories in the country, which will have a 300,000 unit production capacity each.

Although everything seems to be figured out, it will take up to three years for the new plant to start production. In addition to this, VW will increase assembly capacities of its seven Chinese factories.
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