VW says struggling to meet cost targets for budget car

GENEVA (Reuters) - Volkswagen's plan to enter the no-frills car market in developing countries is stalling because the German carmaker is struggling to meet cost targets for its first budget car, a VW brand executive told Reuters on Tuesday.

Europe's largest automaker has been trying for more than a year to hit internal cost requirements for the vehicle, which would likely sell for between 6,000 euros ($8,300) and 8,000 euros and be built in China, the biggest market for budget cars.

VW lacks a strong presence in markets such as India and Southeast Asia, with their growing small-car segments. A 2009 partnership with Suzuki Motor Corp (7269.T), designed to benefit from the Japanese manufacturer's leading position in India, fell apart in 2011 in a public squabble.

"It's becoming more and more difficult" to hit cost goals necessary to approve production of a budget car, VW brand development chief Heinz-Jakob Neusser said.

"It makes no sense to approve a vehicle that's not meeting our targets," he said, adding that VW would keep working on fulfilling the requirements.

To keep down assembly costs, VW has said it would use pre-existing mechanics from models that have gone out of production or are nearing the end of production, rather than develop new costly underpinnings for the budget car from scratch.

($1 = 0.7260 euros)

(Reporting by Andreas Cremer; Editing by Ludwig Burger and Mark Potter)