Volkswagen is considering building the next generation Fox in Europe, according to a report carried by dpa-AFX news.

Volkswagen brand CEO Wolfgang Bernard may relocate production from Brazil where a strong Brazilian currency is forcing up the price of exports.

The Fox could be built in Martorell, Spain or in Bratislava, Slovakia, according to German press reports.

At the same time Bernard wants to reposition the next generation Polo in a lower price bracket.

The new car is due to go on sale at the end of 2008, and Volkswagen is hoping that it can be built for around Euros 2,000 less than the out-going model. Most of this cost saving should be passed on to the consumer, which in turn should increase sales and allow Volkswagen to achieve higher economies of scale.

In an interview with Automobilwoche magazine, Bernard said that the design of the next Polo will be 'sportier' than its predecessor, with more powerful engines sourced by boosting the power rating of low-cost engine ranges, rather than by offering a variety of engines, which adds to the overall cost of the model-line.

For low-cost markets Bernard is planning a new low-cost car produced using a new modular assembly concept, so that the car can be adapted to local market requirements.

Separately it was reported that Volkswagen will cut the price of the Jetta in the US, to help increase volume for the model. According to Automotive News, by removing some features the base price for the 2007 model year can be lowered from US$18,515 to US$17,105.

Volkswagen has also cut prices for the Golf, sold as the Rabbit in the US. The base price will be US$15,605, down from the current US$16,660.

Volkswagen expects to sell around 105,000 Jettas in the US this year, compared to the model's peak sales year in 2001 when 145,000 cars were sold.