The target market for the VW Lupo is first-time buyers aged between 18 and 25 and second car buyers.
More than half of the Lupo sales will be conquests from competing brands, not other VW models, said Robert Buechelhofer, Volkswagen's director of sales and marketing. It is 'a fully new segment' for Volkswagen, said Buechelhofer.
Volkswagen plans to build 50,000 Lupos at Wolfsburg this year, and more than 100,000 next year. Sales in Germany start 16 October at a base price of DM18,000 ($10,600).
Start of production was on 16 March. Volkswagen plans to reach full production of over 600 cars a day in November.
Videos shown at the launch hint at VW's marketing strategy, calling the Lupo 'the smallest real car.'
Volkswagen expects to sell half its Lupo volume in Germany. The car will be priced 5 percent above its sister car, the Seat Arosa, said VW Chairman Ferdinand Piech.
The Arosa and the Lupo are derived from the VW Polo platform. The Arosa, for example, uses the Polo instrument panel. The Lupo has less than 50 percent of its parts in common with the Polo. It has 75 percent in common with the Arosa.
Major differences between the Lupo and Arosa are front end, rear end, rear doors and bumper styling, plus the wiring harness and instrument panel.
Wolfgang Kreft, director of electric/electronics in the technical development department at Volkswagen, said that the wiring harness is completely new for the Lupo.
'We wanted to do something different with the wiring harness in order to reduce the number of connections, to get a better layout, allow easier assembly and to improve the quality. We expect it will be noticeably better.' Delphi delivers the wiring for the car.
The Lupo also has a new generation of radios, together with the navigation system used in the VW Golf.
Chassis hardware is the same as the Arosa, according to Karl Horst Fuhrmann, general manager of chassis engineering in Volkswagen's r&d department, 'but the chassis settings, the spring rates and the shock absorber settings are very Volkswagen specific. The Lupo is firmer; the Arosa is more comfortable.'
The Lupo will offer a broader range of engines than the Arosa.
The car will initially be offered with three engine variants - 1.0-liter and 1.4-liter gasoline engines, and a 1.7-liter diesel.
The 1.0-liter engine is expected to account for almost 60 percent of sales, while the 1.4-liter is expected to account for just over a quarter of the volume.
The engine range will be expanded downward and upward next year. One will deliver 100km on 3 liters of fuel; the other will be a hot GTI.
Product development required about 600 people at the maximum. Development and tooling cost DM700 million ($400 million).
Early in development there were competing concepts for the car, including proposals for a two-seater and a trunkless car, said Peter Janiszewski, technical project leader on Volkswagen's 1-Class (Lupo).
The chosen concept was a full value car without major handicaps in comfort, security or usability, said Janiszewski.
'The gap between the cockpit and the door is only four millimeters,' said Peter Janiszewski. 'It isn't that small in many vehicles in a higher class. It creates an impression of quality that you perhaps don't notice immediately, but you register it in your subconscious, and recognize it as stable and high-value quality.'
Other examples of attention to detail, he said, are the chromed bridge on the seat-belt feed, chromed button on the handbrake, and the chromed interior door handles.