* Hard to hit cost targets for budget car - VW brand exec
* Says will keep trying to meet internal cost requirements
* Lack of budget car for emerging markets a problem for VW
* Hyundai, Toyota, Renault see strong growth in the segment
(Adds analyst comment, background)
By Andreas Cremer
GENEVA, March 4 Volkswagen's plan to
build a budget car for emerging markets, a key part of its drive
to become the world's biggest automaker, has stalled because the
German group is struggling to meet cost targets for the vehicle,
a VW executive told Reuters.
Europe's largest carmaker has been trying for more than a
year to hit internal cost requirements for the vehicle, which
would likely sell for between 6,000 euros ($8,300) and 8,000
euros and be built in China, the biggest market for budget cars.
"It's becoming more and more difficult" to hit cost goals
necessary to approve production of a budget car, VW brand
development chief Heinz-Jakob Neusser told Reuters at the Geneva
auto show Tuesday.
"It makes no sense to approve a vehicle that's not meeting
our targets," he said, adding VW would keep working on
fulfilling the requirements.
VW lacks a strong presence in markets such as India and
southeast Asia which are dominated by no-frills models, and
without a successful budget car, analysts have questioned
whether the group will be able to meet its goal of becoming the
world's biggest carmaker by 2018.
A 2009 partnership with Suzuki Motor Corp (7269.T), designed
to benefit from the Japanese manufacturer's leading position in
India, fell apart in 2011 in a public squabble.
In the meantime, low cost cars from rivals such as Hyundai
and Toyota have powered ahead in Asia.
France's Renault has also been cushioned from a slump
in European car sales by its expansion into entry-level cars,
which surged to account for 41 percent of its global
registrations from below 30 percent in just two years.
"News regarding cost problems related to VW's internal
structures aren't new," said Arndt Ellinghorst, London-based
analyst at ISI Group. "But the fact that these keep coming up,
despite (the cost-cutting) MQB modular platform and in light of
VW's light outlook, is somewhat alerting."
On Feb. 21, VW toned down its guidance for 2014 operating
profit even after publishing record earnings of 11.7 billion
euros ($16.1 billion) for 2013 which beat company expectations.
If approved, a budget car would undercut VW's 9,850-euro Up!
city car, the brand's smallest and cheapest model that is only
sold in Europe and Japan. The two-door vehicle came to market in
December 2011 and was launched as VW's first electric-powered
car last year.
To keep down assembly costs, VW has said it 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 budget car from
($1 = 0.7260 euros)
(Editing by Ludwig Burger and Mark Potter)