Volkswagen makes good-looking vehicles with terrific interiors, very good fuel economy, and spirited driving dynamics. In the US, those virtues alone don't make a high volume automaker, as price tends to play a major role in buyer's decisions. Due to the strength of the Euro, VW has much higher fixed costs than its competitors, even when production in Mexico is taken into account. As a result of their large financial burden, Volkswagens usually cost more than most of the competition. To strengthen their competitive position and leverage cheap labor in developing countries, VW is planning on producing vehicles in China for the US market.
VW, along with partner SECI Motors, is a juggernaut in the land of the Great Wall, as the Germans automaker has been entrenched in China since 1984. The SECI/VW partnership will replace the Chinese market Passat Lingyu with a sedan that will also be sold on our shores. Many automakers have utilized China's inexpensive labor for cheaper parts, but as of yet, no US-sold vehicles have been assembled there. If VW can make cars in China that can meet US safety and emissions standards, Europe's only volume automaker with a presence in the US will go a long way towards closing the cost gap.
[Source: Auto News (subscription req'd)]