GFC no handicap for Golf

The sixth-generation Volkswagen Golf is a conundrum on many levels, but not least of all its defiance of conventional wisdom in the area of price setting.

While other car companies are lifting prices by substantial margins to reflect the exchange rates between the Australian dollar and other major currencies, Volkswagen has held price rises to a minimum (see our news story here). Cars of comparable grade but better specification are only a few hundred dollars more expensive from Type 5 to Type 6 Golf.

And the new base-grade variant, the Golf 90TSI with a turbocharged 1.4-litre engine and six-speed manual transmission, takes over from where the Type 5 base model left off, the earlier car featuring a 1.6-litre naturally-aspirated engine and five-speed manual. Both cars are priced at $25,990.

Across the board, the Golf 6 is a better car than the model it replaces, introducing new technology (new seven-speed DSG transmission, common-rail diesel, all-turbo petrol engines). Add to that the car's production base has moved from South Africa to the VW home plant of Wolfsburg in Germany -- plus the car is purchased by the local distributor in Australian dollars -- and you're forced to question how Volkswagen does it.

"We buy them in Australian dollars," we were told by Karl Gehling, General Manager Press and PR for Volkswagen Australia, who went on to explain that the local arm had been able to "secure the prices" for the "immediate near future", short of some future currency exchange rate disaster. There was no indication as to how far the near future extends, but as far as we can tell the 'future' currency exchange rate disaster is already behind us. 18 months ago, the Australian dollar was buying 0.62 Euro, but now it's buying 0.51 Euro.

By comparison, the Australian dollar is buying more South African Rand (ZAR) today than it was 18 months ago, but the decision to source the new generation Golf from Germany has nothing to do with currency exchange rates for the two currencies.

For reasons such as production capacity, the South African plant's purview is now limited to building the Jetta, but all Golf production for Australia is now concentrated in Wolfsburg.

"There are a number of factors involved," Gehling told the Carsales Network as to why production of the Golf has shifted from SA to Wolfsburg, but quality wasn't one of them. Gehling says that the South African plant's quality control is as good as VW plants anywhere else in the world.

The likelihood is that with Volkswagen's ability to reduce the time spent building each car by 10 hours, from the 35 hours originally required for the Type 5 Golf (more here), the Wolfsburg plant now has extra capacity freed up to produce cars for other markets -- at a lower shipped cost.

Has Volkswagen Australia been doing a bit of arm-twisting with the factory, on top of that? With the local economy down but not out, combined with the strength of the new car's design at much the same price as the old car's, now is a good time for Volkswagen to maintain sales volumes and grow market share in Australia -- while every other car company is struggling to maintain sales momentum.

If the Golf, perennial favourite in Volkswagen's local range as it is, can build sales in the current climate, Volkswagen can expect to move up the ladder of top ten car companies in Australia -- and be in quite a favourable position by the time the economy begins picking up again.