While he said the Up was very popular in certain markets, such as Brazil, where VW is localising its production, Diess acknowledged that it was more challenging in Europe.
“We still see a future for that segment but we have to weigh up how much profit contribution and positive CO2 effects we get from [the Up],” said Diess, speaking at the Frankfurt motor show.
“On small cars, it’s very hard to bring [their emissions] below 93g or 95g without adding a lot of cost.
“It becomes complicated. The electric Up makes much more sense.”
He also commented that, as emissions for bigger cars are reduced to less than 100g/km CO2, smaller cars, such as the Up, don't help with manufacturer's overall emission targets in the way they once did.
“We need [a CO2 lessening] contribution from these [smaller] cars or we have to question it - or up the price.”
Diess said no decision had been made on the future of the Up, but added: “Selling small cars is not easy. It’s a very European problem.”
The Up is also used as the basis for sister brand Skoda's Citigo. When asked whether the Citigo was also under threat, Skoda CEO Bernhard Maier said the car would continue to be produced - but didn't rule out a withdrawal from Europe. “Of course, every car needs a sustainable business model and we want to improve on all our KPIs but we must also remember the Citigo is the entry point to our brand. In emerging markets especially it plays a very strong role," he said.