VW targets China's less affluent customers with new brand

WOLFSBURG -- Volkswagen will launch a new entry brand for the Chinese market targeted at younger, less affluent families who would otherwise have purchased 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. The compact car is called the Bora or Vento in other markets and Sagitar and Santana in China.

The JETTA brand will launch in China in the third quarter with a sedan and two SUV models. The brand and models have been developed with VW's northern Chinese joint venture partner FAW.

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 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 $5,700 to $6,800 on average, Stackmann said JETTA would not be positioned as a budget or economy brand.

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