VW to Add New Jetta Brand in China to Lure Younger Buyers

(Bloomberg) -- Volkswagen AG will tap the cachet of its popular Jetta model in China to sell cars designed for younger buyers under a new nameplate, broadening its lineup in its most important sales region in a bid to tackle intensifying competition.

• With the new Jetta marque, “we close the gap in China between the established lead brand VW in the higher volume segment and entry-level mobility, which accounts for about a third of the Chinese market and is primarily served by local brands,” VW sales chief Juergen Stackmann said Tuesday in a statement.

Key Insights

• The new brand will start sales with one new sedan and two SUV models in the third quarter through its own dealership network in China. Vehicles will be produced at VW’s joint venture with FAW Car Co. Ltd. in Chengdu.
• VW is targeting a growing number of middle-class buyers outside big hubs like Shanghai or Beijing and sees substantial additional sales potential in China, despite recent market woes.
• VW plans to lift group revenue and maintain profitability this year, it said last week, despite more challenging global economic conditions, complex new emissions testing in Europe and tougher competition.
• The German manufacturer defended its position as world’s biggest carmaker against Toyota Motor Corp. last year. Toyota this month raised 2019 its vehicle sales forecast while General Motors Co. also defied skeptics to stick to upbeat forecast for 2019.

Market Reaction

• VW shares were down 1 percent at 149.64 euros at 2:59 p.m. in Frankfurt, valuing the German manufacturer at about 76 billion euros ($87 billion).

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• The Jetta brand’s sales strategy will include digital showrooms, mobile sales trucks and a presence in shopping malls. More than 200 dealers will offer the new brand by year-end.
• China accounts for almost half of VW nameplate’s global deliveries. Sales declined 2.1 percent to 3.11 million cars last year, compared with the overall market declining 4.6 percent, as trade tensions with U.S. undermined consumer confidence.
• Jetta won’t be budget brand and will command prices above entry-level offerings of local manufacturers in China that cost between 5,000 euros and 6,000 euros, Stackmann said.
• VW is no longer pursuing plans for a budget model and will focus on the Jetta brand instead for offering affordable vehicles in China. Sales volume is forecast to reach “a six-digit number very quickly,” Stackmann said.

To contact the reporter on this story: Christoph Rauwald in Frankfurt at crauwald@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Iain Rogers, Andrew Blackman

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