Volkswagen is currently conducting an investigation to assess the profitability of its Polo model in light of the upcoming Euro 7 emissions standard. The company is evaluating whether the Polo can remain economically viable considering the costly technology required to comply with the new emissions guidelines and mandatory assistance systems.
Many micro and small cars are expected to face challenges in the near future due to these requirements, as the resulting higher prices may deter customers from purchasing small cars. Furthermore, the growing trend towards SUV and crossover models is also affecting the market for small cars like the Kia Rio.
A spokesperson from Kia confirmed that the European order books for the Rio are closed, indicating a decline in demand. This change in customer preferences towards compact crossover vehicles has prompted Kia to focus on its Stonic model in the compact segment, while still maintaining the Picanto as an important model in the city car segment. Although stock vehicles of the Rio are currently available, new orders from the factory are no longer being accepted.
Similarly, Skoda is facing uncertainty regarding the future of its Fabia model. CEO Klaus Zellmer stated that if the Euro 7 emissions standard is implemented as currently planned, it would spell the end for Fabia. Zellmer cited the need for advanced braking systems, among other factors, that are not yet developed to meet the fine dust emissions requirements. The fate of Fabia is still under consideration by Skoda.
For Volkswagen, the implementation of the Euro 7 standard could result in a significant price increase for the Polo. While the EU Commission projected a price increase of 90 to 150 euros for cars, VW CEO Thomas Schäfer believes that micro and small cars, including the Polo, could see end-customer prices rise by up to 5,000 euros.
This price hike is a significant concern for VW, and if the expectations are confirmed, the company will likely discontinue investing in the Polo model. However, there is a possibility that a less strict interpretation of the Euro 7 standard could allow models like the Polo to continue, providing some relief during the transition. Nonetheless, VW remains committed to its plans for electrification and the development of affordable electric models.
Volkswagen has already announced its intention to introduce two small, fully electric models with entry-level prices below 25,000 euros starting in 2025. The ID.2, a crossover variant of the ID.1, will be part of this lineup.
Also, VW aims to offer a model priced below 20,000 euros, although the company is still grappling with high battery costs and searching for a solution. VW CEO Schäfer suggests that achieving this price point may require compromises in terms of range and the number of variants available.
In terms of branding, Schäfer envisions retaining the “Polo” and “Golf” names as valuable brands, even after the transition to combustion engine-free models. The ID. Golf, an all-electric version of the Golf, will be positioned between the ID.2 and ID.3 models in the future. It is possible that the Polo brand could be utilized for an electric model under the ID.2 designation, potentially serving as a replacement for the ID.1.
The VW Polo, introduced in 1975 as a basic version of the Audi 50, has seen a decline in popularity in 2022. It ranked fourth in its segment with 22,623 new registrations in the first ten months of the year, trailing behind the Toyota Yaris, Mini, and Opel Corsa.
In conclusion, the new Euro 7 emissions standard is making small cars financially unviable. The VW Polo is expected to become significantly more expensive, leading Volkswagen to discontinue its investment in the combustion engine version of the Polo once the Euro 7 standard is implemented. VW’s future plans involve introducing affordable electric models like the ID.1 and ID.2, although the challenge lies in reducing battery costs. A lower-priced variant may have a more limited range.