April 22, 2015 / 3:53 PM / in 3 years

VW eyes budget car cooperation with Great Wall: Manager Magazin

BERLIN (Reuters) - German carmaker Volkswagen (VOWG_p.DE) is considering cooperating with China’s Great Wall (601633.SS) on a new budget model, Germany’s Manager Magazin reported on Wednesday, citing company sources.

A woman looks a Volkswagen car during a presentation at the 16th Shanghai International Automobile Industry Exhibition in Shanghai, April 21, 2015. REUTERS/Aly Song

Volkswagen’s China chief Jochem Heizmann had said on Sunday the company was considering developing budget sport-utility vehicles (SUVs) and multi-purpose vehicles (MPVs) in China to keep up with shifts in the market.

Manager Magazin said one option that had been discussed in talks with Great Wall was Volkswagen taking a stake in the Chinese carmaker.

Volkswagen declined to comment on the report. A spokeswoman for Great Wall said the company was not aware of the issue.

Volkswagen, Europe’s biggest carmaker, has struggled to develop a budget car for emerging markets, a key part of its drive to become the world’s biggest automaker, because it found it difficult to keep costs for the vehicle low enough.

“VW has a proven inability to engineer and build low-cost cars,” Singapore-based Bernstein analyst‎ Max Warburton said in a report published on Wednesday. “VW doesn’t know how to do cheap and cheerful, a company like Great Wall does.”

Retail sales of SUVs in China soared more than a third last year to 3.82 million, and have more than doubled since 2012, rapidly outpacing growth in other segments, according to the China Passenger Car Association (CPCA).

Reporting by Andreas Cremer; Additional reporting by Jake Spring; Writing by Maria Sheahan; Editing by Mark Potter

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