Volkswagen 'to build Dacia rival'

• Cheaper models in the pipeline
• Likely to be built outside Europe
• Should start from as little as £7k

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Volkswagen is planning a budget brand that will provide rivals for the wave of new, cheaper models led by Dacia, according to rumours in Germany.

A report in the Der Spiegel newspaper quotes a senior VW spokesman as saying: 'The idea of a low-cost brand has been on the agenda at Volkswagen for some time.'

VW already develops budget-level cars for sale in emerging markets such as India and Latin America, and has a long-established product line-up in China. It is already working on a cheaper version of the Up for that region, but it's thought that larger front-wheel-drive cars created for China could be built there and then imported back to Europe. Prices would need to be lower than the Up's - which could mean as little as £7000.

The move is in response to Dacia's sales success in continental Europe, where the Renault-owned brand has overtaken its parent company's market share in several key areas, including Germany.

Dacia will launch its UK operations in January with the Duster – a large SUV with a starting price that's £11,700 less than a VW Tiguan's – and the Sandero, a five-door supermini that undercuts the cheapest equivalent VW Polo by £4200.

Read the full Dacia Duster review >>