VW to target China's less affluent consumers with new brand

www.autonewschina.com|March 01 , 2019

Christiann Hetzner | 2019/2/26

WOLFSBURG -- Volkswagen is launching a new entry-level brand for the Chinese market targeted at younger, less affluent families who would otherwise have purchased their first vehicle from a domestic competitor.

The new lineup will be sold under the Jetta brand. VW already sells a Jetta compact sedan in the U.S. The compact car is called the Bora or Vento in other markets and Sagitar and Santana in China.

"If there was one vehicle model strong enough to become its own brand, then it’s the Jetta," said VW brand sales chief Juergen Stackmann.

The Jetta brand will launch in China in the third quarter with a sedan and two crossover models. The brand and models have been developed with VW's northern Chinese joint venture partner, FAW.

A third of the Chinese light-vehicle market is positioned below the main volume segment, where the Volkswagen brand is the market leader, VW said. Jetta will aim to capture market share in the entry-level segment, where 80 percent of customers are first-time vehicle buyers.

"We have come to realize that there are large customer groups that we thus far have not been able to reach," Stackmann told reporters at the automaker's headquarters here on Tuesday.

Jetta will be aimed primarily at customers in China's so-called Tier 3 to Tier 5 cities that together comprise roughly half the overall light-vehicle market and are predominantly served by Chinese brands at present.

"In other words there’s an enormous potential that we are not exploiting currently – neither in terms of market segments nor customers," Stackmann said.

Stackmann said VW’s latest brand would be focused on the needs of young, confident, open and progressive 25-35 year olds and serviced by a dealer network of around 200 showrooms when it launches.

Despite its price tag of around 38,000 yuan to 46,000 yuan (5,000 to 6,000 euros) on average, Stackmann said Jetta would not be positioned as a budget or economy brand.

By year end there will be around 200 dealers offering cars under the Jetta brand, VW said. The brand would also directly approach customers, in shopping malls, for example, or via mobile sales trucks.

By launching a new entry brand in China, the main VW brand can be shifted higher, Stackmann said.

VW has been the industry leader ever since it entered China in 1985. The brand wants to more clearly position itself as "top of volume," where it would be considered the most aspirational of all mass-market brands.

Geely, Changan and Great Wall’s Haval unit are three domestic brands that have closed the sales gap with western competitors recently.

The Chinese government, worried that the country's automakers were losing out, in 2009 required joint ventures between foreign automakers and their Chinese peers launch proprietary brands. Over the next few years, most global automakers created new brands under local partnerships. But only the Baojun brand at General Motors' light-vehicle joint venture with SAIC Motor Corp. and the Venucia marque under Nissan Motor Co.'s partnership with Dongfeng Motor Group have routinely rolled out new products.

In 2018, Baojun brand sales fell 16 percent to 839,612 while deliveries at the Venucia brand dropped 6 percent to 134,381. Both Baojun and Venucia are entry-level brands and their target competitors are domestic Chinese brands.  Sales at other brands that foreign automakers have introduced under China joint ventures remain small largely because they typically have only one product – often a rebadged old model which was obtained from a global automaker.

The broad variety of competitors also highlights just how fragmented the Chinese market remains, as only six brands sold more than 1 million cars and light trucks despite some 24.4 million new passenger cars purchased last year.

Reuters contributed to this report.