Ralf Brandstätter will be responsible for VW’s China business in 2022. But the brand is coming under increasing pressure in the world‘s most important market. picture alliance/dpa | Sven Hoppe
China is Volkswagen’s most important sales market, but it is there that the German carmaker is faced with more and more problems. One of these is e-mobility, which is also becoming increasingly important in China.
The problem for VW? The Chinese market for electric cars is dominated primarily by domestic manufacturers. These are subsidized by the state and are increasingly catching up in terms of innovation.
In order to sell more cars again, VW wanted to cooperate with Chinese manufacturers and may have chosen the wrong local partner.
Falling market shares and competition from highly subsidized local providers – Volkswagen’s China business is in crisis.
Although VW has taken countermeasures, their effectiveness is questionable.
Read too
VW is not making any progress with cheap electric cars – why the works council leader is slowing down CEO Oliver Blume’s prestige project
Volkswagen is weakening in its most important sales market
A week ago, Volkswagen celebrated 40 years of presence on the Chinese market – but apart from the anniversary, there is little reason for the German car maker to be happy. Because things are getting tight for foreign manufacturers in the world‘s largest car market.
Although the problems affect the entire auto industry, VW is likely to be particularly affected because, after all, the manufacturer does the biggest business there and had to hand over market leadership to the Chinese manufacturer BYD last year. So why is the local competition ahead?
E-mobility, subsidies and lack of innovation
As the “Business Week“ writes, the electric car segment in particular is growing in China, in which VW only plays a minor role. In the future, more electric cars will soon be sold in China than combustion engines. The market is clearly dominated by Chinese providers who benefit from high government subsidies. The subsidies allow Chinese manufacturers to reduce their costs. But low prices are not the only trump card of local providers.
As a Study The Center of Automotive Management (CAM) shows that Chinese car manufacturers are also ahead when it comes to innovations. According to CAM, China accounts for 37 percent of global innovation. This means that Chinese manufacturers have overtaken their German competitors for the first time this year.
Read too
Chinese car manufacturer BYD is increasing the pressure on Tesla and Co. with a new electric car discount.
How useful is the cooperation with Xpeng?
Volkswagen is trying to counteract this trend. VW relies on the strategy “in China, for China” and tries to carry out developments locally for the Chinese market. In December it was announced that VW wanted to hire 3,000 engineers in China.
Part of this strategy is also the partnership with the local manufacturer Xpeng. As “Wirtschaftswoche” writes, VW invested 700 million US dollars (around 656 million euros) in the Chinese electric car startup last year. The cooperation is primarily intended to save costs, among other things through an electric car architecture developed specifically for China.
But Xpeng could be a failure for Volkswagen: According to “Wirtschaftswoche”, the company is having a hard time in its home market. Xpeng lost market share last year and is at best in the middle of the field when it comes to innovative strength.
dead