Volkswagen is reshaping the lower end of its product line to recoup lost sales, according to Automotive News Europe.

VW will bring forward by 12 months the introduction of an all-new Polo small car to 2007, say sources. The new model will have two radical variants including a high-roof minivan similar to the Renault Modus and a roadster based on the VW Concept C.

VW’s also will shift its strategy in the minicar segment. It will sell the new Brazilian-built Fox, which replaces its slow-selling Lupo minicar, only as a two-door version to reduce competition with the Polo. The Fox will be priced up to €2,000 less than the current €10,150 Lupo it replaces despite being 310mm longer.

By introducing the Fox early next year as a sub-€10,000 model, VW is responding to demands from its works council and dealers in Germany. They want a budget-priced car to compete with Asian imports and the top sellers in the segment: the Fiat Panda and Citroen C2.

Christoph StŸrmer, analyst at Global Insight in Frankfurt, said the Fox is VW’s answer to new small cars that Kia will build in Slovakia and Toyota/PSA/Peugeot-Citroen will build in the Czech Republic.

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“VW needed a car that is cheaper to produce in higher volumes than the Lupo,” said StŸrmer. “The company will try to put a significant price distance between the Fox and the Polo.”

Critics complain that the Lupo was priced too high compared with its competitors. A Panda starts at €8,590.

The Fox is built at VW’s Sao Jose dos Pinhais plant in Parana, Brazil. It is sold in Brazil in two-and four-four versions and will be introduced in Europe early next year.

“Customers’ needs have changed,” said Eckart Schmidt, sales manager of a VW dealership in Neckarsulm, Germany. “People nowadays want affordable transport to get them from A to B.”

VW sold just 43,188 Lupos in western Europe last year. In 1999, Lupo volume was 109,062, according to JATO figures.

Dealers complain that the latest Polo, introduced in late 2001 grew too much in size and in price. A facelifted Polo is expected to be shown at the Geneva show next March.