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Volkswagen in China – a long lasting friendship

Volkswagen in China – a long lasting friendship

China is the most important sales market worldwide: The Volkswagen Group delivered more than 4.2 million vehicles there in the 2017 financial year - the result of decades of cooperation.

Chinese delegation to visit Volkswagen in 1978

It has meanwhile been 40 years since Volkswagen was one of the first international automobile manufacturers to make contacts with China. An important prerequisite for this was the policy of the Chinese government under Deng Xiaoping, which introduced economic reforms and an openness to foreign countries in the 1970s. The establishment of diplomatic relations between China and Germany made it possible for a Chinese delegation to visit the Federal Republic of Germany in 1978 in order to explore potential partners for an automobile project.

Only a few weeks later, Wolfsburg managers and Chinese government officials negotiated a local assembly of Volkswagen brand models. A confidence-building factor was Volkswagen's commitment to Brazil and Mexico, which had already been in place for decades, at which time the Group had pioneered the development of a national automotive industry.

Benefits for both sides

Contract signing in 1982

Both sides were to benefit from the outcome of the German-Chinese negotiations: foreign capital and expertise enabled China to significantly accelerate its industrialization. At Volkswagen, the opening up of new sales markets in Asia was an important part of corporate policy - and here the only slightly motorized People's Republic offered enormous future opportunities. Volkswagen therefore also accepted the framework conditions that required each foreign company to merge with a domestic state-owned partner to form a joint venture in which the two partners are equally involved.

First assembled VW Santana in China

Initially, a gradual production structure was agreed. The assembly contract signed in 1982 with the Shanghai Tractor & Automobile Corporation, the then largest Chinese vehicle manufacturer, was an important milestone here. On April 11, 1983, the band process of the first VW Santana, which was produced on a trial basis from CKD sets, marked the beginning of Volkswagen production in China. The four-door notchback version of the bestseller Passat was not very popular with German car buyers, but immediately hit the taste of Chinese customers, which in the early years were mostly recruited from government agencies and taxi companies.

Establishment of Shanghai Volkswagen Automotive Company Ltd. in 1984

In October 1984, the next step followed: the first foreign automobile manufacturer, the former Volkswagen factory AG concluded a joint venture contract, the beginning of 1985, the establishment of Shanghai-Volkswagen Automotive Company Ltd. followed. As early as the autumn of this year, the first Santana built as part of this cooperation rolled off the production line. By the end of the year, the German-Chinese joint venture had already produced 1,700 vehicles.

Growth rates of 40 percent per year

In 1986, the Passat Variant and Audi 100 were installed in Shanghai in addition to the Santana. With growth rates of around 40 percent, things continued over the next few years. In the following years, therefore, the expansion of the production site was steadily promoted. In 1988, a training and further education center opened, and in 1989 a new paint shop and production in the press shop and engine construction began work.

Due to the high number of locally produced components, the Santana became a Volkswagen "made in China" which, unlike foreign vehicles, was not subject to import restrictions. The joint venture quickly became the largest car manufacturer in the country and made Volkswagen the market leader. This position was further secured in 1991 by the establishment of a second joint venture. FAW-Volkswagen Automotive Company, Ltd. in Changchun, founded together with local partner First Automobile Works, started the production of the VW Jetta in 1994 with an annual capacity of 150,000 vehicles.

In order to steer the Chinese affiliates and the ongoing projects, the Asia-Pacific board division was created in 1992 and Volkswagen Asia-Pacific Ltd. in Hong Kong in 1993. In response, the Volkswagen Group reacted to the expected increase in significance of the Chinese market, which moved from 16th place in the sales statistics to third, within just a few years.  

Increasing Competition

In the following ten years and a continuing boom in the automotive industry, the sales figures of the Volkswagen models have increased tenfold. Until 2003, the now three car factories of Shanghai Volkswagen and the two FAW-Volkswagen plants were able to expand their sales to almost 700,000 vehicles a year. However, Volkswagen had to increasingly defend this strong market position against Japanese and American carmakers, who had significantly expanded their manufacturing capacity after China joined the World Trade Organization in 2004. Despite fiercer competition, China continued to grow into the largest single market for the Volkswagen brand, with no less than 2,815 million vehicles sold in 2012.  

This enormous growth course in China was continued in the following years and since 2012 has been managed by a separate board department. The implementation of a sustainable strategy for the future began in 2014 with the largest initiative for electromobility in the country's automotive history. The beginning of the market was marked by the launch of the e-up !*, followed in 2015 by the Golf GTE* and the Audi A3 e-tron*. The electromobility strategy, which is tailored to the Chinese market, stipulates that the joint ventures of the Volkswagen Group will successively launch 40 new locally produced plug-in hybrids and electric vehicles by 2025, in addition to existing and other import models. China today sets the automotive trend of the future.  

Consumption value
*e-up !: Electricity consumption, kWh / 100 km: 11.7 (combined); CO₂ emission combined, g / km: 0; Efficiency class: A +

*Audi A3 e-tron: Combined fuel consumption *: Petrol 1.8-1.6 l / 100km | Electricity 12.0-11.4 kWh / 100km, CO₂ emissions combined *: 40-36 g / km

*Golf GTE: fuel consumption, l / 100 km: combined 1.8 - 1.6; Electricity consumption, kWh / 100 km: combined 12,0 - 11,4; CO₂ emissions combined, g / km: 40 - 36; Efficiency class: A +