Reports from the Detroit Auto Show suggest that Volkswagen may build its first low-cost car in China, as the German giant considers a move into no-frills vehicles to compete with Renault's Dacia and Nissan's Datsun. VW CEO Martin Winterkorn said at the Detroit Auto Show that a decision on a budget car for emerging markets would be taken this year.

More than 3 million so-called budget cars are sold in China every year, making it the biggest market in that segment and VW would tap growing demand by teaming up with one of its two Chinese joint venture partners if the project is approved according to Volkswagen development chief Ulrich Hackenberg.

VW is looking at a price range of between 5,000 and 10,000 euros for the cars, which may include a minivan, station wagon and a small sedan, company sources said on Oct. 12. The cars would be aimed at fast-growing BRIC nations (Brazil, Russia, India, China), but may also be sold in Europe, according to German media reports.

The company is working on hitting cost targets for the car and has not decided yet whether it would keep the VW badge or have a different brand. "If one enters this segment for the first time, it's necessary to keep investments very low," Hackenberg said.
VW would use pre-existing mechanics from models that have gone out of production or are nearing the end of production, rather than develop new costly underpinnings for the brand from scratch, he said.

Hackenberg said it was unclear whether the automaker would bring the budget car to Europe because it could cannibalize its cheaper brands Seat and Skoda. VW was not yet sure if there would be demand for such a vehicle in Europe, he said.