German Volkswagen aims to reinvent itself in China

In recent years, Volkswagen Group's profit margin has declined significantly, primarily due to a sharp drop in sales in the Chinese market and the imposition of special tariffs by the United States. Additionally, Volkswagen has faced criticism for its lack of innovation capability.

According to Germany's Focus magazine: Volkswagen may cut 120,000 jobs. In addition to large-scale layoffs, Volkswagen will also slash hundreds of billions in investments. Four of Volkswagen's factories in Germany—Hanover, Emden, Zwickau, and Neckarsulm—are also at risk of closure. The job-cutting cost-saving plan has triggered employee protests across multiple regions in Germany.

Other German automakers such as BMW and Mercedes-Benz are also experiencing declining performance in the Chinese market.

ARD, Germany's public television channel, has expressed concern over how Volkswagen plans to reinvent itself in China. The network noted: Although Volkswagen has lost some market share in China, China remains its most important market. In China, Volkswagen must adopt development strategies entirely different from those used in Germany.

At this year's Beijing International Automotive Exhibition in May, Volkswagen unveiled several new models specifically designed for the Chinese market. The group hopes to regain lost market share through a major launch campaign of new models. In just this year alone, Volkswagen will introduce more than 20 new or upgraded smart electric vehicles in China. These models follow the principle of "developed in China, manufactured for China." Volkswagen Group CEO Oliver Blume stated that this strategy has been implemented for three years. "We have successfully reduced costs by 40% to 50%. One result is the launch of an entry-level model under the Volkswagen Jetta brand, priced at around €10,000, yet equipped with numerous smart technologies expected by Chinese consumers."

Volkswagen hopes to reclaim its former glory in China. In the 1980s, Volkswagen was among the first foreign automakers to enter the Chinese market, jointly establishing factories with local partners and providing technology. It quickly became a leader in the Chinese market and maintained its dominant position for decades, generating substantial profits.

However, Volkswagen’s management long relied on internal combustion engine vehicles. For over fifteen years, the Chinese government has consistently provided strong support to the new energy vehicle (NEV) industry, investing heavily in research and development, technological innovation, and charging infrastructure. Hundreds of NEV startups have emerged nationwide. Today, China's automotive industry has become a global leader, producing NEVs packed with advanced features such as autonomous driving, massage seats, voice control, and in-car entertainment applications. Meanwhile, driven by government purchase subsidies and policies restricting license plate allocation for gasoline-powered vehicles in cities like Beijing, NEV sales have surged rapidly.

Prices continue to fall, resulting in exceptionally fierce competition. As a result, Volkswagen has continuously lost market share and was surpassed by BYD (BYD) in 2024, losing its title as China's largest automaker. Many Chinese consumers believe that Volkswagen’s electric vehicles developed in Germany lack appeal and are priced too high.

In Volkswagen’s new factory located in Anhui Province, robots handle the majority of production tasks, while human workers mainly focus on quality inspection, effectively reducing production costs. Volkswagen has invested approximately €3 billion in this facility and is developing next-generation electric vehicles at its local R&D center, while also collaborating with multiple Chinese startups. The situation has reversed from what it once was—previously, Chinese companies learned from German ones, but now the dynamic has changed.

Currently, about 100 Chinese programmers and technical experts work at the Anhui plant. Volkswagen’s new strategy is to complete R&D and production at lower cost and faster speed. Leveraging China’s lower labor costs and in-house software development capabilities, the product development cycle has been shortened further to just 18 months.

Li Yanwei, an analyst at the China Automotive Logistics Association, believes that Volkswagen’s transformation is indeed possible. He said: “Consumers realize that their formerly beloved brand hasn’t launched products meeting market demand, so they’ve turned to Chinese brands. If Volkswagen can introduce new models that are closer in design and pricing to Chinese brands, consumers will definitely come back.”

Nevertheless, China’s economic growth is slowing down, and demand in the world’s largest car market is declining again. In the first half of this year, car sales in China dropped by approximately 20% compared to the same period last year. Therefore, Volkswagen’s future plans include emulating Chinese automakers by increasing exports, selling more vehicles produced in China to international markets beyond China.

Source: rfi

Original article: toutiao.com/article/1870700013807623/

Disclaimer: This article reflects the personal views of the author