The news was reported by German paper Der Spiegel, which quotes senior VW spokesman Eric Felber as saying: “The idea of a low-cost brand has been on the agenda at Volkswagen for some time.”
However, when asked about a time scale for the introduction of a new budget brand, he qualified his statement by adding: “No decision has yet been made.”
The new brand is expected to arrive in 2015, and would be aimed at lucrative emerging markets like Brazil, Russia, India, China and South Africa.
The Latin American market is seen as particularly important, and VW is tipped to unveil an MPV version of the up! (as shown by the space up! concept pictured above) at next week’s Sao Paulo Motor Show.
Felber is not the first VW representative to comment on the firm’s budget brand plans. Earlier this month, head of VW’s Works Council, Bernd Osterloh, told newspaper Handelsblatt: "We need a cheap model below the VW up! for emerging markets."
However, the new budget brand’s cars wouldn’t necessarily be as small as the up!, with cars set to be built on slightly older platforms, like the new SEAT Toledo and Skoda Rapid, and made in factories in China and Russia.
While the budget VWs would be primarily focused on emerging car markets, where Renault has enjoyed huge success with Dacia, they may also be imported to Western Europe. The new brand would slot into the line-up beneath the VW Group’s current value brand, Skoda.
VW was expected to use its tie-up with Suzuki, which has a particularly strong position in the Indian market, to advance its budget car plans. However, that deal has since gone sour, leaving VW to go it alone.