BEIJING, China - Volkswagen Chairman Ferdinand Pi'ch's plan to build an entry-level world car priced between DM10,000 and DM13,000 (E5,000-E6,500) may be impossible to achieve.
VW engineers in China, where the micro-compact car will be built for global markets starting in 2004, say they cannot design a car that will sell for such a low price.
But VW plans to produce the car anyway - at its plant in Changchun in northeast China.
Plans for the car, code named A000, were disclosed a year ago by Pi'ch in an interview with Automotive News Europe.
The price of the A000 in China would have to be around 70,000 to 80,000 Yuan (E8,750-E10,000), said Erich Schmitt, head of VW operations in China. 'We could not produce this car for a price as low as E6,000. It is currently not possible.'
Schmitt, who is also Audi's management board member in charge of purchasing, said that even with a price of E8,750-10,000, VW would expect to sell 300,000 cars annually.
'We are planning the A000 project, but it has not been finalized yet in every detail,' Schmitt said. 'The car will be produced in Changchun and we will expand the factory there accordingly.'
In China, the cheapest cars cost 60,000 Yuan, but they do not offer the technical and safety features customers in western Europe are used to. But when Piech disclosed the A000 last year he said VW would develop a 'four-seat small car with state-of-the-art technical equipment to meet worldwide safety and environmental requirements for less than DM13,000 (E6,500).'
Piech also insisted that the car would be available wherever demand existed, including Europe. Here the A000 would have to undercut the prices of the VW Lupo and Seat Arosa, VW group's smallest current cars in Europe.
The A000 will face strong price competition after 2004, when China joins the World Trade Organization. Entering the WTO is expected to help open China to cheap imports from Korea, and have a severe impact on local Chinese car manufacturers, of which there are up to 100.
'There will be massive consolidation over the next few years,' Schmitt said. 'And there is no doubt that our Chinese production will have to be more cost efficient.'