Exchange-rate threat to VW prices

* Weak pound could mean rises * New production strategy to protect volumes * End of scrappage will hit sales volumes...

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What Car? Staff
13 January 2010

Exchange-rate threat to VW prices

Volkswagen prices will have to rise if the pound continues at its current low level against the euro, says the new group head of sales and marketing, Dr Christian Klingler.

'Up to now we are handling the strength of the Euro, but if the pound stays at a low level prices will rise,' said Klinger.

It is a problem VW faces in other countries with weak currencies, including America. That is one reason why VW is moving away from the idea of global cars -the strategy that Ford is pursuing - and starting to focus on local production tailored to specific markets.

Next Passat unlikely in the US
VW will open its first US factory at Chattannooga, Tennessee, in the middle of 2011. It will produce a Honda Accord-sized saloon for America, Canada and Mexico at the rate of 150,000 models a year, which means the next-generation Passat is unlikely to cross the Atlantic.

'One of the reasons for choosing Chattanooga is exchange rates,' said Klingler, 'but we must also consider the needs of our customers in different areas of the world. We try to adapt our cars for the needs of the market.'

Klingler is expecting a tough year for sales in Europe now that government scrappage deals are all but over, but sees signs of a recovery in America and strong growth in emerging markets. 'In China, India and Brazil no-one is talking about crisis,' he said.

The VW group which includes Audi, Bentley, Bugatti, Lamborghini, Seat, Skoda and now Porsche is the third-largest vehicle producer in the world. Last year it sold 6.3 million vehicles and claimed 11.4% of the global market.

'Audi did better than expected, Skoda was very strong and Seat showed an increase despite the weakness of its domestic market,' said Klingler.

Bentley sales were down by nearly 40%, but Klingler says this was 'a situation that was a consequence of an external crisis'. He forecast: 'It will come back.'