VW brand to go native
- Source: Global Times
- [08:20 January 20 2011]
- Comments
By Sun Zhe
Volkswagen may develop a new domestic brand to break into the nation's small car market, part of a plan to capitalize on second- and third-tier cities as the government seeks to tackle traffic congestion by limiting car sales in major cities, analysts said.
"In general, we see a local brand as an opportunity to get into new market segments, especially those we have not been able to get into so far," said Liu Hongmei, a spokesperson for Volkswagen's China unit, in an email reply.
Volkswagen has yet to sell compact-cars with displacement under 1.3 liters in China. Their smallest model, the Polo, comes with a 1.4-liter engine or larger.
Compact-cars, those with a displacement of 1.3 liters and below, account for less than 10 percent of the country's sales in the past years, but their market share is expected to grow.
These compact-cars are mostly sold in second- and third-tier cities where they are welcomed by more price-sensitive, first-time auto buyers, said Shangguan Zhoudong, a Beijing-based independent auto analyst.
"Auto sales in smaller cities are set to grow, as these markets have not been fully exploited," said Shangguan.
Besides, he added, major cities are still trying to resolve serious traffic congestion issues, spurring automakers to turn to smaller cities for growth.
Beijing has launched from this year a lottery system to limit auto registration, and other traffic-jam plagued cities are likely to follow suit.
According to a Reuters report Wednesday, VW officials plan to price the new brand of vehicles under 8,000 euros ($10,760). One industry watcher, Zeng Zhiling, Shanghai-based analyst at J.D. Power and Associates, asserts that price would not be competitive.
Most domestic automakers, which dominate the compact-car segment, retail their compact cars far below that number around 50,000 yuan ($7,596.00) or less.
QQ, the mini-car sales champion brand under Chery, accounts for 30 to 40 percent of sales in this market segment, while BYD's FO model enjoys a 20 to 30 percent market share. The Chevrolet Spark holds less than a 10 percent share.
