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By Nick Tattersall
WOLFSBURG, Germany, Aug 25 (Reuters) - Europe's biggest auto maker, Volkswagen AG , unveiled on Monday the latest version of its best-selling Golf, a model it hopes will revive its fortunes and help kick-start a stagnant German car market.
VW Chief Executive Bernd Pischetsrieder said the company expected 2004 sales of at least 600,000 of the new cars, which look remarkably similar to the old ones, despite a weak economic environment and tough competition in the segment.
"Visually and technically it is the biggest step forward since the first generation Golf. But it remains clearly a Golf," Pischetsrieder told a news conference before a silver hatchback emerged from a puff of smoke to take centre stage.
For many auto critics that means yet another boxy, boring and bland car from the Wolfsburg-based auto giant. Fitting, then, that unlike many of its rivals, VW chose a market research professor rather than a rock star or bevy of scantily-clad models to help launch its latest offering.
Unsexy it may be, but few doubt that, like its predecessors, the Golf V will find plenty of buyers.
VW has sold over 22 million Golfs since launching the first generation in 1974 -- equivalent to over 2,000 a day for 29 years -- making it the second most-popular car in the world after Toyota's Corolla.
The car traditionally accounts for over a third of unit sales and around half of profits at the VW brand. The company is hoping the new, higher-margin model will account for an even higher proportion of sales and around 15 percent of revenues.
Pischetsrieder said he was confident that two-thirds of the new model, which is wider, taller and longer than previous generations, will find homes in Europe.
He said there were currently no signs of a pick-up in the European car market as a whole, and repeated he only saw an improvement at the beginning of next year at the earliest. VW will nonetheless sell more than five million cars this year.
TOUGH COMPETITION VW has in the last two years lost market share to France's PSA Peugeot-Citroen and Japanese rivals which feature fresher product lineups, and the group expects a significantly lower operating profit this year from last year's 4.76 billion euros. Declining demand for cars in Europe and the United States has led to pricing pressure, and the mid-sized auto sector that the Golf once comfortably led has become more competitive than ever with around 130 competitors in the segment now compared to around 10 direct rivals when the first Golf was launched.
The Golf V faces tough competition not only from traditional rivals such as Opel's Astra, also being updated this autumn, and Ford's Focus, but also from multi-purpose vehicles such as Renault's Scenic and VW's own Touran.
JD Power LMC's Charles Young and other industry analysts have said the Golf V may not match the previous generation's peak sales of about 700,000 in western Europe in 1999.
VW repeated that it would build 135,000 Golf Vs this year and that production would be in full swing in the second quarter of 2004. The model goes on sale in Germany on October 18, with prices starting at just over 15,000 euros.
The launch is a key test for Pischetsrieder, the former BMW chief who took over the helm at VW in April last year.
He has been criticised by investors for failing to make his mark on the company, whose brands range from Skoda, VW and Seat to Audi, Bentley and Lamborghini.
The company's operating profit dropped by half to 1.2 billion euros in the first half of the year, hit by costs for new products, a strong euro and sliding demand.
VW shares were trading down 0.8 percent at 1245 GMT, just underperforming European peers .