Volkswagen hopes a sleek makeover for its seventh-generation Golf will help it remain a best-selling compact car and allow the automaker to achieve its aim of overtaking General Motors and Toyota in global sales.

Last year, the VW Group sold 8.27 million vehicles, behind GM with 9.05 million and ahead of Toyota with 7.95 million. The company aims to sell a world-leading 10 million vehicles by 2018.

But the mid-range Golf faces an onslaught of competition from cheaper and premium models, just as carmakers grapple with an economic slump in Europe and slowing growth in China.

VW has reported record deliveries and higher profits while rivals have struggled. However, the new Golf, unveiled in Berlin this week, may not be enough to keep Europe's biggest automaker on its winning streak, analysts say.


"The success of the new Golf is absolutely critical to VW's expansion targets but the new version will be battling in a tough environment," says Stefan Bratzel, head of the Center of Automotive Management think-tank near Cologne, Germany.

The new hatchback will boast features aimed at luring buyers away from cheaper rivals made by Hyundai, Skoda and Seat, volume makers including PSA/Peugeot-Citroen and GM's Opel division, as well as from Audi, Mercedes-Benz and BMW at the top end.

"The Golf is by far the most important vehicle" for Volkswagen, says CEO Martin Winterkorn.

"The Golf sets the direction for the future of Volkswagen, for the future of the automobile."

Pricing has not yet been announced for the new Golf, which will be sleeker and more than 100kg lighter than its predecessor, thanks to increased use of ultra-strong steel, making it cheaper to run and cutting emissions.

The new model will be 56.9mm longer and 13.2mm wider than its predecessor, enlarging the interior to compete more effectively with SUVs and minivans. To attract luxury buyers, VW is touting a higher quality cockpit finish with more screens and driving assistance gadgets aimed at fending off a sporty replacement of Mercedes' A-Class and the new BMW 1 Series introduced last year. This still may not keep the competition at bay.

"The European (compact) market is fully saturated and the Golf keeps attracting competition, even from within the VW group," says Ferdinand Dudenhoeffer, director of the Center for Automotive Research at the University of Duisburg-Essen, citing the Audi, Skoda and Seat brands. "It's no synonym for future growth."

Research firm IHS Automotive is confident the Golf, with more than 29 million global sales since its 1974 launch as the iconic Beetle's successor, will keep the top spot. Sales will rise 17.3 per cent to 630,000 units by 2017, it predicts, followed by Toyota's Prius with an 18.7 per cent gain to 488,000 and Ford's Focus with a 2.4 per cent decline to 443,000.

But there are signs the company is worried. With its affiliate Kia Motors, Hyundai is the envy of global rivals such as VW, outgrowing the market during a severe downturn by offering stylish models at affordable prices backed by savvy - if sometimes risky - promotions and helped by a cheaper currency.

VW views Hyundai as a serious contender.

Checking out a Hyundai model at the 2011 Frankfurt auto show, Winterkorn was caught on camera examining the steering wheel adjustment, and saying: "Nothing rattles ... Why can they do it? BMW can't. We can't."

A risk for VW is that it is building its updated best-selling car on its new MQB modular platform, which will allow it to enhance parts-sharing among its car brands. Although the new technology aims to make production of 3.5 million small- and mid-size cars 20 per cent cheaper, and shorten assembly by 30 per cent, the scaling up means any defects could expose VW to the kind of mass recalls that blighted Toyota between 2009 and 2010.

The updated Audi A3 and Seat Leon compacts, both competitors from within the VW family, will be built using the same cost-saving architecture.

The Golf is so crucial to VW's success that it is the only model the company builds on four continents. VW expanded production of the Golf to a new plant in Osnabrueck, Germany, last year, even as the financial crisis exposed chronic overcapacity elsewhere in Europe, forcing rivals Fiat and Opel to close factories in Sicily and Belgium.

"The Golf has a pre-eminent role at VW because of its high production volumes," VW brand development chief Ulrich Hackenberg said recently. "It's the face of VW."

The Golf will have its public debut at the Paris motor show in late September.

The compact car is Europe's best-selling model and VW's top-seller in the region, with European sales of 493,855 in 2011, according to market researchers JATO Dynamics.