VW's Seat brand set to launch small SUV in 2017

Volkswagen Group Spanish subsidiary Seat plans to launch a subcompact SUV/crossover by the end of 2017 as part of its effort to be sustainably profitable, a company source said.

Few details are known about the model but it is expected to be underpinned by parent Volkswagen Group's MQB architecture. Seat's recently face-lifted Ibiza subcompact hatchback is based on the group's older PQ26 platform.

Seat plans a family of different sized SUVs to profit from the popularity of such models, which earn higher margins than hatchbacks. The brand’s first SUV, a compact-sized model, will go on sale next year. A midsize SUV could go on sale by 2020 based on the the 20V20 concept unveiled at the Geneva auto show in March.

Seat CEO Juergen Stackmann told Automotive News Europe in an interview published earlier this month that launching a small crossover was on his to-do list: "It's our next priority since crossovers are the trend," he said.

Stackmann said the there is no final decision and no fixed timetable for the small SUV's launch but a company source said it could come within two years. "Next year the compact SUV hits markets and a year later you can expect to see the smaller SUV," the source said.

The SUV would compete with the Renault Captur, the segment's top-seller in Europe, along with newly launched entries such as the Fiat 500X.

IHS Automotive forecasts that Seat will sell 43,000 of the small SUV in 2018, its first full year of sales.

Connectivity will likely be a key feature of the SUV. The face-lifted Ibiza hatchback is the brand's first model to offer the Seat ConnectApp that has voice-recognition software allowing a driver to respond to email and text messages through dictation. Seat is also the first VW brand to offer smartphone integration via either Apple Carplay, Android Auto or MirrorLink.

Seat declined to comment on its future product strategy.

Sales of small SUVs in Europe increased by 54 percent to 761,000 last year, according JATO Dynamics market researchers, making it the fastest-growing segment in terms of absolute volume.

Seat, which positions itself as VW Group's sporty volume brand, is undergoing a revival after racking up more than 1.4 billion euros in losses in recent years. The brand swung to a small operating income of 33 million euros on revenue of 2.2 billion euros in the first three months, its first quarterly profit in seven years.

The brand's turnaround has been helped by the success of the latest Leon compact. The Leon overtook the Ibiza to become the brand’s best-selling car last year with sales of 154,000 compared with the Ibiza's volume of 150,000.

Improved capacity utilization at Seat's single factory at in Martorell near Barcelona is also helping the bottom line. Production at the plant last year rose 13.5 percent last year to 442,677 units, the factory’s highest level in the past 12 years.

Nick Gibbs contributed to this report