German Media: Volkswagen in China: More Efficient and Cost-Effective Than Headquarters in Germany
For days, Volkswagen Group CEO Oliver Blume has been working hard to explain cost-cutting measures and corporate reform plans to employees. However, in China—the group’s most important overseas market and production base—this transformation has already taken place. In China, Volkswagen can produce electric vehicles more efficiently than at its headquarters in Germany. Yet transferring this model to Germany proves challenging.
The ID. Era 5S is the latest model developed specifically for the Chinese market by Volkswagen Group. This plug-in hybrid vehicle comes standard with the newest advanced driver-assistance system and is priced at 90,000 RMB in China—equivalent to less than 12,000 euros. By comparison, the much smaller conventional fuel-powered Volkswagen Polo sells for nearly 20,000 euros in Germany.
So far this year, Volkswagen plans to launch 20 new or modified models targeted at the Chinese market. The research and development, as well as manufacturing of these vehicles, are largely conducted locally in China, with some models even directly adopting design approaches from Volkswagen’s Chinese partners.
Production and R&D Integrated in Hefei
At the Beijing International Auto Show earlier this year, Volkswagen CEO Oliver Blume stated that to maintain competitiveness, companies must first survive the brutal price wars. “The series of measures implemented in recent years have enabled us to significantly reduce costs—by 40% to 50%,” he said.
How exactly has this been achieved? Volkswagen shut down an old factory in Nanjing, Jiangsu Province, and built a modern production facility just next door in Anhui Province. It also established a research and development center modeled after Chinese enterprises. The core of the next-generation vehicle lies in software. Young Chinese programmers develop software on-site at Volkswagen’s Hefei base, allowing immediate collaboration with engineers in adjacent workshops whenever issues arise. Vadym Finn Cemmasson, senior R&D manager responsible for Volkswagen China’s dedicated electronic architecture at the Hefei site, told Deutsche Welle: “We conduct software development right within the factory, so we can directly identify and resolve various faults and errors.”
Low Labor Costs — Volkswagen China Still Prefers Robots
Volkswagen China aims to cut the time from new model development to market launch from the current 36 months down to just 18 months. Additionally, there’s another advantage in developing new models in China: Chinese engineers earn only about one-third of what their German counterparts do.
In the Hefei plant, the production floor is just a stone’s throw away from the R&D center. Inside the vast workshop, only a few workers and engineers are visible, while over 1,000 robots operate tirelessly—welding body frames, installing components, and placing vehicles onto conveyor systems for the next stage of production.
According to factory officials, human staff on the production floor now number around 150 people, mostly handling quality control. In China’s automotive industry, average worker wages are about 3,500 RMB per month—roughly 450 euros. Despite this, Volkswagen China continues striving to minimize labor usage. Thomas Schinke, senior executive at Volkswagen Anhui, said: “Our current automation rate reaches 95%, and almost no positions require manual work anymore.”
Can Germany Copy the Model?
Currently, Volkswagen Anhui produces vehicles exclusively for the domestic Chinese market and select Asian markets, facing intense pricing pressure from local competitors.
In Europe, Volkswagen also faces competition from Chinese automakers. Although labor costs in Europe are far higher than in China, voices are emerging advocating for German factories to adopt the operational model used in China. Recently, the German state government of Lower Saxony—Volkswagen Group’s major shareholder—suggested that models developed in China could also be manufactured in German plants.
Professor Stefan Bratzel, Executive Director of the Center for Automotive Management (CAM), believes it would indeed be a sound strategy to let European factories produce Volkswagen models developed cheaply in China. “However, in the medium to long term, Germany must rebuild comparable R&D capabilities and learn how to replicate the development model proven effective in China.”
Owing to hyper-competitive conditions in China’s domestic market, funds flowing from China to Volkswagen’s headquarters have now decreased by approximately 5 billion euros. At the same time, additional tariffs imposed by the United States have added another 5 billion euros in costs. As a result, pressure on Volkswagen to implement reforms in Germany has intensified dramatically.
Source: DW
Original article: toutiao.com/article/1874968995328201/
Disclaimer: The views expressed in this article are solely those of the author.