In 2018, the 40th year since China’s economic liberalization, the country remains one of the most significant markets for Volkswagen – and Volkswagen the most important partner of the Chinese automotive industry.
China plays a central role in the Group’s strategy, not just as a retail market but also as a development location and driver of the mobility of tomorrow. “Without a doubt, China is propelling global transformation in terms of alternative drive types, digitalization, connectivity and artificial intelligence,” says Jochem Heizmann. He has been the Volkswagen Aktiengesellschaft board member responsible for China, as well as president and CEO of Volkswagen Group China, since 2012.
During his time in China, he has experienced the country’s continuous transformation and the rise of the automotive industry, which is still ongoing. The Volkswagen Group has already delivered more than three million vehicles to Chinese customers in 2018. “The performance in the nine months to September is notable. The response from our customers indicates we are heading in the right direction with our comprehensive model offensives, especially in the SUV segment” says Heizmann, underlining China’s new role in global interaction.
From zero to 4.18 million
Right at the start of the economic reforms in China in 1978, Chinese government representatives had initial discussions with Volkswagen, which eventually resulted in a joint venture in 1984: today’s SAIC VOLKSWAGEN. A further joint venture followed in 1990: FAW-Volkswagen. The foundation stone was laid for success on the Chinese market. In 2017, more than 30 years after entry onto the market, 4.18 million vehicles were delivered to customers. The company hit the million mark for vehicles sold for the first time in 2008. Chinese economic growth, averaging seven percent per year recently, has enabled this sharp increase on the automobile market which continues to this day.
For a long time, Volkswagen has been known in China as “Da Zhong”, which roughly translates as a car for the masses. This lettering is inscribed on the back of every Volkswagen built in China. In order to continue to do justice to this description in the future, the company is adapting its strategy to new customer wishes and needs: customer demands in a rapidly growing segment will be met by a large-scale SUV campaign. Volkswagen is also pursuing a comprehensive e-mobility strategy in China, in the form of Roadmap E.
Electric vehicles for China
Nowhere in the world is the market for e-vehicles as great as in China. The turnover of battery and hybrid vehicles grew in 2017 by nearly 80 percent compared with the previous year, reaching 555,000 units and putting China in top position in the world. All signs therefore point to electricity. In response to this, a further joint venture was founded last year with JAC-Volkswagen, exclusively dedicated to the production of e-vehicles. The first model, the electric SUV E20X1, will come onto the market at the end of this year.
Volkswagen Group China is consistently promoting e-mobility: by 2025, around 10 billion euros will be made available for the industrialization of e-mobility. The Group aims to offer 40 locally produced e-models by then. Herbert Diess, CEO of the Volkswagen Group, also announced at the Beijing Motor Show in April that electric vehicles for the Chinese market would be built in at least six plants in China by 2021. Volkswagen Group China is simultaneously preparing to be able to sell 1.5 million e-vehicles in the Middle Kingdom by 2025.
The desire to own an SUV is also growing in China, and is reflected in the expansion of the brands’ product range. Between 2018 and 2020, twelve Volkswagen SUV models, six ŠKODA SUV vehicles and by 2022 ten Audi SUV vehicles will be launched on the market. It is expected that, by 2020, at least 40 percent of all Group vehicles sold in China will be SUVs. In the recently opened FAW Volkswagen plant in Tianjin alone, 300,000 SUV models will be rolling off the production line each year from now on.
In addition to these developments, however, Beijing is also looking much further into the future. At the beginning of this year, Volkswagen sent a clear signal about its long-term commitment to China by opening the Future Center Asia in Beijing. This center and the Volkswagen Group Future Centers in Potsdam and Belmont, California, form a network aiming to develop ideas for new mobility solutions which go beyond purely automotive concepts. “The Future Center Asia is a strategic step toward the further development of mobility in China,” says Jochem Heizmann. “The fast pace at which our Chinese customers accept digitalization and electrification must be reflected in construction and services. Our aim is to transform ourselves from being simply a car manufacturer to being a provider of sustainable mobility.”
Volkswagen: part of Chinese society
After more than thirty years, the working ties between Volkswagen and its Chinese partners are stronger than ever. Over 35 million Chinese people have already chosen a model from the Volkswagen Group. Around 100,000 people are employed by Volkswagen Group China, and a further 380,000 work for around 3,000 dealerships. “We want to be a strong and reliable partner, both for the Chinese automotive industry and for Chinese society as a whole,” says Heizmann. The foundation stone for this was laid 40 years ago in Wolfsburg.