CEO Exclusive: Volkswagen in China
Volkswagen is the most successful foreign automaker operating in China.
In the first half of last year, Europe’s top car manufacturer sold more than 1.8 million vehicles in what is becoming a leading market for quality, high-end cars.
Audi, what VW describes as its premium (as opposed to luxury) brand, set new records in the months leading to September 2014, showing that consumers in the world’s most formidable economy are growing a taste for European autos.
The company is also investing billions into the Chinese market over the next five years as it looks to cement its position as the number one foreign brand.
With this in mind, Business Review Europe spoke exclusively to Volkswagen Group China President and CEO Prof. Dr. Jochem Heizmann, also Member of the Board of Management of Volkswagen Group.
Our Q&A looks at what lies behind VW’s Chinese success, and what the company is investing into the future to remain the market leader.
BR EME: How big is the Chinese luxury/premium car market for VW? Why is it expanding so rapidly?
JH: We differentiate between the luxury and premium market. Our luxury models distinguish themselves through highest automotive individuality and emotion, heritage, the most exclusive and exquisite materials and finest craftsmanship for a distinguished clientele, for example Bentley.
In the first nine months of this year, our premium brand Audi set a new record in the Chinese market (including Hong Kong and Macau). Unit sales from January through September increased by 16 percent to a total of 415,704 cars.
In September alone, the brand with the Four Rings delivered 51,614 automobiles, representing growth of 13.4 percent compared with the same month last year. We think luxury and premium car market will continue to grow faster than the overall car market.
Describe Volkswagen’s approach to this market and your success to date.
Volkswagen Group China’s pioneering spirit represents a key to success on the Chinese market. Together with our joint ventures FAW-Volkswagen and Shanghai Volkswagen we were and are able to provide tailor-made cars for the Chinese market and the Chinese taste.
If we look at the just recently introduced Lamando and the New Sagitar GP of Volkswagen brand, we see models especially made for China in China. Throughout our different brands we offer a broad model range with an overall massive product portfolio in different price segments – we have the right car for every customer need.
And we are continuously pushing forward the innovative technology – no matter in our products or our production chain. That is why at the recent Guangzhou Auto Show we announced our Volkswagen Efficiency strategy.
We are committed to be the most sustainable car manufacturer in China. Innovation and efficiency are the keys to a sustainable lifestyle. Therefore Volkswagen Group China takes over the responsibility for a sustainable development in China, focusing on efficient products, energy-saving production and social responsibilities.
How are VW’s cars suited to the Chinese market? What cars are selling well?
Since the Volkswagen Group has entered the Chinese market we have prioritized the demands of our customers and have sold brand models like the Santana and the Jetta back then and today.
Both are still big hits on the market today. Our most popular cars sold in China are the Sagitar, the Lavida, the Jetta and the Bora.
Different car-setups with special technological as well as colour configurations for both exterior and interior design are part of our offer for real individuality for our customers. Our success is based on a combination of a good price/performance ratio, high quality and comfort that is specifically tailored to the needs of Chinese customers.
What must VW do to remain competitive in China? What are your targets moving forward?
Volkswagen Group China will need to target various aspects of the Chinese market to remain competitive.
First, we will continue to set the standard in the Chinese automotive industry with our forward-looking technologies and tailor-made products. We are a strong driver for technology and innovation also here in China. Top of our list are ecofriendly technology innovations “Made in China” and “Especially made for China”.
Second, it is our goal to strengthen our leading position in the Chinese market. For us, customer satisfaction is the key to success: we will continue to extend our Group model range in the upcoming years and more of which will be electrified in the future. IN addition to that we will consistently extend our dealer network: Till 2018 up to more than 3.600
Third, until 2019 our Chinese joint ventures invest € 22 billion in the newest products and engines as well as green technologies and resource saving plants - the largest invest program in the history of the Chinese automotive industry.
Fourth, our success is only made possible by our highly-skilled employees. They design and craft our cars, they invent the technologies and innovations that ensure we always meet our high standard. Therefore we will continue to invest in the best trained workforce in China.
And last but not least, everything we do - is about people. At the core of our company is our responsibility to our customers, our employees, to society and the environment. For us it's about community and playing an active role in the society focusing on the safety and soccer education of children in China.
Where do you see this market in five years’ time? E.g. will electric vehicles play an increasingly important part?
In five years’ time we will strive to strengthen our leading position in China. And we are convinced that the topic of a sustainable life style and eco-friendly technologies will be one of the factors to be successful in China. People here are concerned about the development of environmental conditions.
And therefore we have started our Volkswagen efficiency strategy – a holistic approach towards a more sustainable future: Including green production, innovative logistic concepts and eco-friendly technologies in our products. We think in all possible technical solutions to reduce fuel consumption and CO2 emissions substantially.
New gearboxes in combination with new combustion engines will reduce the fuel consumption half a litre per one hundred kilometres.
In addition to that we kicked off your e-revolution introducing the electric up! this year, followed by the plug-in hybrid Golf GTE and e-Golf in 2015. These three models prove impressively that e-mobility no longer is a dream of the future but already the reality. In 2016 Volkswagen will offer a locally produced mid-size sedan as plug-in hybrid. Audi will provide two plug-in hybrids starting with the A3 e-tron in 2015 followed by the locally produced A6 e-tron in 2016.
Depending on various needs customers can choose between pure electric drives and plug-in hybrids. Especially the latter occupy great potential for China: For urban areas pure electric driving enables their mobility without emissions. For long distances the efficient combustion engine allows great flexibility. Not to forget the driving fun that we offer with every model of our brands.
Our strategy is simple: An electric car has to be perfect in every way – technically mature, practical, safe and affordable! And we will flexibly produce these perfect electric cars bumper by bumper with our combustion engine models depending on our customers’ demands.
Eventually, we will always need to be at least one step ahead of the competition creating innovations and reinventing our products as well as our company, as we have the target to not only satisfy but actually inspire our Chinese customers with our fascinating cars.
By 2018 our production capacity will reach more than four million units per year. Through our pioneering technologies, green production and our high qualified workforce we will not only reach this amount but also increase sustainability even further. To push this development forward faster we have announced an investment sum of €22.0 billion by our Chinese joint ventures between 2015 and 2019, which will strongly benefit our sustainable growth in all fields.
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