WOLFSBURG -- Volkswagen will launch a new entry brand for the Chinese market targeted at younger, less affluent families who might otherwise purchase their first car from a domestic competitor.
The new lineup will be sold using the name JETTA.
Explaining the choice of the name, VW brand sales chief Juergen Stackmann said: "If there was one vehicle model strong enough to become its own brand, then it’s the Jetta."
VW already sells a Jetta sedan in the U.S. and Europe. The compact car is called the Bora or Vento in other markets and Sagitar and Santana in China.
VW executives said the Chinese Jetta sedan, which does not share any similarities with its U.S. or European namesakes, mobilized the masses in China.
The JETTA brand will launch in China in the third quarter with the existing Jetta sedan based on VW Group's old PQ25 platform and kept fresh with modern infotainment features updated to incorporate the new branding.
Two SUV models based on VW Group's newer MQB architecture will join the sedan later. The brand and its models have been developed with VW's northern Chinese joint venture partner FAW.
Kerrigan Advisors’ proprietary annual OEM Survey of over 100 executives reveals that the majority of respondents are worried about the financial impact of Chinese automakers’ growing global market share, and most expect that the EV transition to be slower than expected. The survey also queried executives on their outlooks for dealership valuations and profitability, as well as their expectations for the future of dealer networks and facility requirements.
JETTA will start with combustion engines but eventually VW aims to offer electric models as well.
A third of the Chinese car market is in a segment which is positioned below the main volume segment, where the Volkswagen brand is market leader, VW said. JETTA will aim to capture market share in the entry-level segment, where 80 percent of customers are first-time car buyers.
"We have come to realize that there are large customer groups that we thus far not been able to reach," Stackmann told reporters at the automaker's headquarters here on Tuesday.
JETTA will be aimed primarily at customers in the so-called Tier 3 to Tier 5 cities that together comprise roughly half the overall car market and are predominantly served by Chinese brands at present. In a typical Tier 4 city, such as Sanya on the southern end of China’s Hainan Island, nearly 37 percent of the new cars sold are entry compared with 57 percent volume.
"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 creation 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 5,000 to 6,000 euros on average, Stackmann said JETTA would not be positioned as a budget or economy brand.
"The logo on the grille uses laser engraving to create a three dimensional effect," said VW brand chief designer Klaus Bischoff. "This kind of attention to detail shows this is not a no-frills brand."
Stackmann declined to provide an investment figure or a volume target, but he said VW had no plans to add a true budget brand in China. There are no plans to export JETTA model outside of China.
While the models can be identified by the Chinese lettering as coming from the FAW-VW joint venture, unlike traditional subbrands, they do not have the VW logo – neither on the grille, rear, rims or steering wheel.
When asked why it is not considered a standalone marque, Stackmann said its value derived from its direct association to the VW brand.
"If it turns out over the next seven or eight years that JETTA is extremely successful, then we could consider giving it its freedom, but for the starting phase it’s very important to maintain that connection," he said.
By the 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,the main VW brand can shift its own image perception 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 are just three domestic names to close the gap to western competitors recently. The Chinese government, worried that its own automakers were losing out, has also pressed automakers to form new brands together with western partners.
The broad variety of competitors also highlights just how fragmented the Chinese market remains, as only six brands sold more than 1 million units despite some 24.4 million new passenger cars purchased last year.
Reuters contributed to this report
