Officials at the German company are planning to introduce a lifestyle version of the new Caddy light van due out next year.
To be called Life, the Golf-based vehicle will be pitched against MPV variants of PSA Peugeot Citroen's Berlingo and Partner and the Renault Kangoo, and will be the first of its kind to offer seven-seat capability.
Longer and taller than the current Caddy, the new model's larger load area will be a key marketing factor when supplies begin reaching the UK in May.
Peter Wyhinny, Volkswagen UK commercial vehicles director, said: 'We have yet to finalise specification levels or pricing, but the fact that our MPV will seat seven should be a critical advantage over the competition. Sales of entry-level people carriers are booming and we're keen to play a leading role in the sector.'
In a first for Volkswagen UK, the Caddy will be sold by both car and LCV networks. Wyhinny added: 'Van and Kombi versions will be handled by Volkswagen Commercial Vehicles, but Life-branded models will be available from a large proportion of our car retailers.
'Half our 240 car dealers will handle the Caravelle, and I think a similar proportion will offer the Caddy. We think the Life packaging represents a good opportunity and we aim to make the best of it.'
According to Wyhinny, the MPV version should generate around 1,000 additional annual sales.
He said: 'This is the start of a significant development for us. We may be late to the MPV scene, but this part of the market has the potential for much more growth.
'Caddy and Caravelle will allow Volkswagen Commercials to top and tail the sector, and by the time the Microbus is launched in 2006, Volkswagen will have a total of six MPV models.'