Volkswagen guns for Mazda2, Fiesta and Yaris with its 'baby Golf', the new-generation Polo city car. But buyers will have to pay a premium.

Volkswagen plans to sell record numbers of Polos in Australia after introducing an all-new model that trades heavily on its famous bigger brother, the Golf.

The Polo has struggled to penetrate a local light-car market that now accounts for a quarter of all passenger-car sales. Toyota last year sold more Yaris city cars (nearly 20,000) than VW has shifted Polos in the past decade (just over 14,000).

The Polo is currently only the seventh most popular Volkswagen in Australia, but the German brand's local subsidiary says it's not happy with the car's current volume and that the new, fifth-generation model will become its third biggest-selling car.

"We have figured it out [why the Polo has struggled]," says VW Australia boss Anke Koeckler. "On the one side it's a lack of awareness. We have had a good product so far, but in recent years we have put more emphasis on Tiguan and then Golf.

"I think we will see a huge success [with the new model]. So far the Polo hasn't played a big [sales] role, but it will become our third volume vehicle. It will have a significant role in our volume growth for the future in Australia."

VW believes the Polo can follow the success of the Golf in appealing to customers both emotionally and rationally.

Koeckler won't reveal specific sales targets, but the Polo would need to at least double current sales to overtake VW's incumbent third-placed volume model - the Passat that is selling at a rate of about 200 units per month. VW has sold only 454 Polos so far in 2010.

Volkswagen has lowered prices fractionally for the new Polo range, which starts at $16,690 for a (Spanish-built) three-door manual and $19,850 for a (South African-built) five-door manual.

The Polo, however, can still only match the starting price of five-door rivals with its three-door. The five-door Polo is up to $3400 - or nearly 20 per cent - more expensive than key competitors that include the Toyota Yaris, Mazda2, Ford Fiesta and Honda Jazz.

Volkswagen argues, however, that the Polo is comparably priced when the overall package is taken into consideration.
"I think you need to compare the whole product price on offer," says Koeckler. "We feel with the engineering and technology we offer with Polo, it has strengths that can't be matched by rivals.

"We are the only one offering six airbags from entry-level model. Safety is a big issue that we put emphasis on. We are the only one to receive a five-star NCAP rating [for every model in the Polo range].

The Polo sets the safety benchmark for the light-car segment with its inclusion of stability control and front, side and curtain airbags on every model. Mazda's rival 2, which arrived in updated form earlier this week, is pipped because it still asks extra for side and curtain airbags on the base model Neo.

The base, three-door Polo is quite sparsely equipped, but standard equipment for the five-door models includes cruise control, trip computer, front armrest with console bin, leather steering wheel with controls, higher-specification cloth seats, full-size spare, and 15-inch alloys instead of 14-inch steel wheels.

Options include metallic paint, Bluetooth, 6.5-inch touch screen, premium 6-CD audio, and alcantara/leatherette sports seats.

The Polo, though, becomes the first 'light' car to offer a dual-clutch automated manual gearbox as an option, the clever transmission that has trickled down from more expensive VWs after debuting on the Golf in 2003.

The seven-speed 'DSG' automatic - autos make up the majority of light car sales - is a $2500 alternative to the five-speed manual standard on the entry-level Trendline three-door and range-topping 66TDI, and six-speed manual standard on the 77TSI.

Powering the three-door Trendline is a carried over but tweaked 1.4-litre four-cylinder with 63kW and 132Nm. It's the slowest (0-100 in 12.1 seconds with manual) and thirstiest (6.1L/100km).

The diesel Polo (66TDI) swaps the old 1.9-litre turbo diesel for a new 1.6-litre unit, and is as expected the most frugal with an official consumption of 4.7L/100km (4.6 DSG).

The fastest Polo (until the arrival of the GTI model later this year) is the 77TSI model, propelled ironically by the smallest engine - a 1.2-litre turbocharged four-cylinder with 77kW and 175Nm.

The 77TSI sprints from standstill to 100km/h in a claimed 9.7 seconds and uses a petrol best-in-class 5.5L/100km. Both petrol Polo models, however, run on more expensive premium unleaded fuel.

Rivals such as Mazda claim any car in the segment not offering regular unleaded fuel is in for trouble owing to the price sensitivity of the light-car market, but Volkswagen argues premium fuel delivers a clear benefit for the Polo by making it the leader for fuel economy.

"I don't think people sit at home with their calculators [working out fuel costs]," says VW Australia's product planning manager Vladan Dimic. "What's important is the feeling of how many times you go to the petrol station. And the fuel consumption for the Polo is impressive."

The Polo's economy improvements are notable considering the car has grown significantly in size.

At 4064mm long, the Polo has gained 148mm over its predecessor to almost match a third-generation '80s Golf in size. The new Polo is also wider (by 32mm) and taller (by 33mm), and the wheelbase increases slightly (by 2mm).

The Polo's design is very much 'baby Golf', sharing the small car's horizontal-grille theme - the new VW family face gradually spreading throughout the company's entire range - as well as similar headlights.

Volkswagen says it's quite happy for people to refer to the new Polo as the 'baby Golf'.

"I think it's a good thing," says Koeckler, "because of the strength of the Golf [image]. It is like a Golf, by the size of the car, how it drives. It has nothing to do with the current model [Polo].

The Polo range will expand with a GTI version towards the end of the year, while VW Australia is also considering the new efficiency-focused Bluemotion turbo diesel model and a three-cylinder petrol model.

A Polo R high-performance hatchback is in the pipeline, though yet to be confirmed officially.