Volkswagen and FAW Plan New Budget Brand for Chinese Market

Volkswagen is working with its long-time joint venture partner FAW to introduce a new budget car brand in China, targeting entry-level buyers with vehicles priced between €6,000 and €7,000. The move, confirmed by CEO Martin Winterkorn at the company’s annual meeting in April 2013, is designed to strengthen VW’s position in its largest market and to compete directly with rivals offering affordable cars for first-time buyers.

The new brand is expected to launch its first model within three years of the 2013 announcement, focusing on simple, affordable vehicles to attract buyers in China’s lower-cost segments. Volkswagen’s strategy follows similar moves by global competitors, such as Nissan’s Qi Chen brand with Dongfeng and GM’s Baojun sub-brand, both of which have targeted China’s expanding entry-level market.

China’s importance to Volkswagen

China is already Volkswagen’s largest single market, accounting for 31 percent of the group’s global sales in 2012. That year, Volkswagen sold 9.21 million vehicles worldwide, with Chinese buyers forming a crucial part of the company’s growth. The group operates two major joint ventures in China: FAW-Volkswagen and SAIC Volkswagen. The new budget brand will be developed through the FAW partnership.

Volkswagen has set out to overtake General Motors and Toyota as the top-selling carmaker in China by 2018. To support this goal, the company planned to introduce 60 new and updated models globally in 2013, including refreshed versions of the Skoda Octavia, Audi A3 and the Golf. It also announced plans to build seven new plants in China, underlining the scale of its ambitions.