VW to approve budget car after solving cost issues, report says

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HANOVER, Germany (Reuters) - Volkswagen's management board will sign off on a budget car for emerging markets after ending a long struggle to meet cost targets for the vehicle, a German business magazine said.

VW's senior executives will approve the car in the next few weeks and the supervisory board is expected to sign off on the project by the summer, Manager Magazin said in a report.

VW 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.

The car would be sold under a new brand, which would become VW Group's 13th marque, the magazine said.  It would compete against the General Motors-SAIC Baojun and Toyota Avanza brands in China with annual production of 500,000 units planned, the report said.

The car would launch at the end of 2016 or early 2017 and would be sold in other Asian markets such as India if it is a success.

VW brand development chief Heinz-Jakob Neusser said at the Geneva auto show on March 4 that it was becoming more and more difficult to hit cost goals for the budget car, adding it made no sense to approve a vehicle that was not meeting in-house targets.

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 VW spokesman said the carmaker was working vigorously to develop the budget car but that a decision had not been taken yet.

Automotive News Europe contributed to this report

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