22 October 2002: Volkswagen is to drop the VW Lupo and SEAT Arosa mini cars because of disappointing sales in the segment where the Citroen Saxo is the front-runner in Europe.

In the first nine months of 2002, pan-European sales in the segment were Citroen Saxo 122,049; Ford Ka 106,990; Renault Twingo 105,843; Fiat Seicento 82,303; VW Lupo 54,687; Peugeot 106 50,945; Seat Arosa 15,120.

The VW Group cars will be replaced in 2005 with much larger models, according to Wilfried Bockelmann, head of product development for the VW brand.

The Polo on which the chopped-tail cars were based has outgrown its entry-level status and is now a full-size supermini. The same-platform Skoda Fabia and Seat Ibiza also got bigger over the years. The first design proposals for the new small VW show a car about the size of the old Polo.

Part of the problems, according to dealers, were that the Lupo is too expensive for what it offered.

The competition keeps getting hotter in the segment, with the Citroen C2 due in late 2003 or early 2004 being a shorter, two-door version of the C3, and the next Peugeot 107 planned for 2004. Renault's next Twingo is due in 2004.

Meanwhile, a rationalisation of VW Group models over the next few years will see less of an overlap of cars from its main brands of Volkswagen, Audi, SEAT and Skoda.

But VW board member Wilfreid Bocklemann warned that ‘full compatibility’ of the brands may take as long as seven years to achieve.

The shift will see Volkswagen itself continuing to build its image upward in the market, including the provision of luxury models, while Skoda will be targeted at brands like Fiat and some Japanese carmakers.

In future, derivatives in any given brand won’t cross over into another, so Skoda will not get a medium-sized MPV because VW already has the upcoming Golf-based Touran.

Likewise, the Polo wagon will not be replaced because the Fabia already has a wagon version, and the Skoda Superb will not be directly replaced when it completes its current life-cycle, because it would clash with the next version of the Passat.

The Volkswagen brand may also get higher levels of technology than Skoda, to further differentiate the brands.