Bladecutter, I see you're asking for VW to find its niche and sell there. The Audi nameplate can provide the teutonic (German) engineering VW buyers have sought in the past, while avoiding the PR nightmare that taints the VW name.
Noting VW Auto Group sells passenger cars under the Bentley, Bugatti, Lamborghini, Audi, Porsche, SEAT, Škoda and Volkswagen marques; motorcycles under the Ducati brand; and commercial vehicles under the MAN, Scania, Neoplan and Volkswagen Commercial Vehicles marques.
Marketing of new lower-cost Audi models can fill that end of the cheaper market, leaving Porsche to expand and do well with more sports cars as usual.
Gotta be careful Audi doesn't sully their name while doing this though, as their relative exclusivity image (like Lexus, Infiniti, BMW) draws buyers to Audi now.
Similar to what Mercedes has done with the $30,000 CLA 250 sedan, something Mercedes marketed as "Hey, you can now afford a MERCEDES! Wow, you are not super rich, but here is Willem Dafoe playing a devil on TV you can make a deal with...."
http://blog.caranddriver.com/mercedes-benz-cla-class-soul-super-bowl-commercial-its-a-[censored]-of-a-spot-the-ad-section/