In the future, VW wants to produce “in China, for China” and is developing its own electric car platform. The company wants to make up for the gap in the race with BYD and other competitors. VW has ambitious savings targets for 2024.
In order to reduce the gap to Chinese suppliers such as BYD, VW is breaking new ground in China with its own electric car platform. The car manufacturer wants to specifically respond to the wishes of Chinese customers with the cars, said VW China boss Ralf Brandstätter.
The vehicles based on the new platform should come onto the market from 2026 and be in the price range of 140,000 to 170,000 yuan, which corresponds to 18,000 to 22,000 euros. The development time is therefore a third faster than usual, he said. “In a dynamic market environment, a high pace of development is crucial for competitiveness,” said Brandstätter.
With the Volkswagen China Technology Company (VCTC) in Hefei, the development of models for the Chinese market is to be relocated from Wolfsburg to China, thereby shortening the time until vehicles and components are ready for the market by 30 percent. The group invested around one billion euros. By the end of 2024, around 3,000 people are expected to work there and develop models for the three joint ventures, the partnerships between VW and Chinese companies.
Autonomous Value chains
In addition, the group is increasingly relying on Chinese suppliers in order to 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 being observed that are affecting the economy, said Brandstätter.
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 so that it is no longer too dependent on imports or exports.
Chinese buyers with different habits
But the reason is not just political imponderables. VW also expects a significant cost reduction in China by focusing on Chinese suppliers. “There is no argument for us why we cannot develop and produce vehicles in China in the medium term on the same cost basis as our Chinese competitors,” VW boss Oliver Blume told the “Frankfurter Allgemeine Zeitung” (FAZ).
The Wolfsburg-based company, which is still strong in the combustion engine segment, also has to make up ground on the electric car market in the world’s second-largest economy, as Chinese manufacturers have overtaken Volkswagen there. This is particularly true for BYD, which sells significantly more electrically powered vehicles in China.
Because e-car buyers in China have different requirements than in Germany. On the one hand, according to VW, they are significantly younger, with an average age of 34. On the other hand, driving habits are different: In major Chinese cities, drivers spend a lot of time in traffic jams. Entertainment in the car is therefore more important than lots of horsepower.
Jobs will also be lost
VW also wants to benefit significantly from the savings efforts in its brands as early as 2024. In the summer, Blume set new return targets for all of the group’s brands, which are to be achieved through savings and additional revenue opportunities.
“As early as next year, we plan to achieve an impact of more than ten billion euros for the group through our brands’ performance programs,” Blume told the FAZ. The efficiency gains would not have a one-to-one impact on the result, but would at least help to offset expected burdens next year.
“In order to increase our efficiency, it is also about reducing staff,” he said. Blume did not want to specify exactly how many positions would be eliminated. “We use socially acceptable instruments such as the demographic curve or regulations for partial retirement.”
The employee side could imagine a works meeting on December 6th in Wolfsburg to present details, and there should be clarity at a VW management conference shortly before Christmas at the latest, the FAZ said.