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08.12.2023 | Automotive Industry | dpa | Nachrichten

VW Breaks Away from Wolfsburg in China

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This is a partly automated translation of this german article by dpa.

VW has hardly played a role in the e-car market in China to date. The Germans want to catch up with the competition with more speed and lower costs – and are relying more on the Chinese. 

Volkswagen wants to rely more on Chinese suppliers in the highly competitive Chinese car market in the future and thus also protect itself from international crises. Political sanctions are a challenge for international manufacturers in China, and crises such as those in Ukraine or the Middle East are affecting the economy, said Ralf Brandstätter, VW Group Board Member for China, in the eastern Chinese city of Hefei. According to him, the Wolfsburg-based company therefore wants to produce "in China, for China". "We are striving for an autonomous, controllable value chain," he explained. Volkswagen wants to rely on local suppliers in China in order to no longer be too dependent on imports or exports.

However, this is not only due to political uncertainties. The Wolfsburg-based company, which is still strong in the combustion engine segment, must make up ground in the e-car market of the world's second-largest economy, as Chinese manufacturers have overtaken Volkswagen there: first and foremost BYD, which sells significantly more electrically powered vehicles in China. Volkswagen therefore decided to expand its site in Hefei, a provincial capital characterized by countless residential towers just 500 km west of Shanghai.

China's Buyers Have Different Demands

Within 2.5 years, the Wolfsburg-based company had built new production and development halls in the city of around eight million inhabitants, where previously there was only a barren parking lot. "In a dynamic market environment, a high pace of development is crucial for competitiveness," said Brandstätter. In other words, e-car buyers in China have different expectations to those in Germany, partly because, according to VW, they are significantly younger with an average age of 34 and their driving habits are different. In Chinese cities, for example, drivers spend a lot of time in traffic jams. Entertainment is therefore more important than lots of horsepower.

But it won't be quite that easy: In Brandstätter's own words, he expects "a very aggressive price level". In addition to the major manufacturers, China's e-car market is home to many small brands that are largely unknown in Germany. Xpeng is one of them. VW entered into a cooperation with the southern Chinese company in order to secure new customers. Industry observers expect that smaller competitors in particular will not be able to withstand the price war and that many brands will disappear.

Away From Wolfsburg

Brandstätter and his fellow managers like to talk about "China speed". For VW, this means that the Group must become faster in developing models and adapting to customer requirements. The Wolfsburg-based company wants to launch 30 new e-car models in China by 2030. One key to this is the Volkswagen China Technology Company (VCTC) in Hefei, which, in short, is intended to transfer the development of models for the Chinese market from Wolfsburg to China and thus shorten the time to market for vehicles and components by 30%. The Group has invested around one billion euros. By the end of 2024, around 3,000 people will be working there, developing models for the three joint ventures - the partnerships between VW and Chinese companies.

Volkswagen China expects a significant reduction in costs from the focus on Chinese suppliers. Why did the Wolfsburg-based company only decide to do this now? "We have learned that you can't do this from 8,000 kilometers away with only a six-hour time overlap," said Marcus Hafkemeyer, the VW manager responsible for research and development, in Hefei. Until now, each platform, the vehicle substructure so to speak, had been developed in Germany for China and then transferred. Now this is to be done in Hefei in order to save development costs and time. In addition, from Volkswagen's point of view, Chinese suppliers have only grown up in the last three to four years and have been able to deliver the quality that VW requires.



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