For a long time, Volkswagen was the top dog in China. But now brutal competition is raging in the market for electric cars. The Wolfsburg team are behind, but they think they have good chances in the long term.
When Volkswagen’s China boss talks about the situation in the world’s largest car market, it becomes clear that his company has already experienced simpler times in the Middle Kingdom. “The prices are falling and falling, the competition is getting tougher,” is how Ralf Brandstätter describes the situation shortly before the auto show in Beijing that begins this Thursday.
The business with conventional cars with combustion engines is still “highly profitable” for VW. Thanks to bubbling profits, you have enough funds to invest heavily and restructure.
VW: 693,600 vehicles delivered in the first quarter
However, that also seems necessary. Because in China the market is developing rapidly towards smart electric cars. According to its own information, the Volkswagen Group delivered 693,600 vehicles to customers in China in the first quarter. Of these, 41,000 were purely electric vehicles. Although this is an improvement for VW, it is still relatively small compared to the overall market for electric cars.
The state newspaper “China Daily” recently reported that 40 percent of all vehicles sold in China will be electric cars this year. Next year, every second new vehicle sold in China is likely to be an electric car.
When it comes to combustion engines, Chinese manufacturers have never been able to keep up with the Germans’ sophisticated technology. But when it comes to electric cars, the cards have been reshuffled. It is no longer VW that sells most of the vehicles, but rather the Chinese manufacturer BYD, which entered the electric segment early on. With the help of government subsidies, but at least as much ingenuity, the Chinese have managed to build cars that meet the tastes of buyers.
The established manufacturers are joined by dozens of new Chinese suppliers who are literally flooding the market with technically sophisticated vehicles. There are now so many different brands of electric cars on the streets of major Chinese cities that it is sometimes difficult to keep track.
Weakening Chinese economy
And then of course there is Tesla, which can also offer its vehicles locally at reasonable prices thanks to a huge factory in Shanghai. A whole armada of manufacturers want to assert themselves on the market. Cui Dongshu, Secretary General of the Chinese Automobile Association CPCA, speaks of a real “price war”.
All of this is happening against the backdrop of a weakening Chinese economy. People think twice about whether it is the right time to buy a new car. The manufacturers have no choice but to grant high discounts. A profitable business is hardly possible like this.
The motor show in Beijing, now the most important industry meeting in the world for many manufacturers, will once again present a number of models. Volkswagen alone wants to show 44 vehicles at the trade fair with its corporate brands such as Audi and Porsche, including six world premieres. CEO Oliver Blume promises to demonstrate the “innovative strength” of the German car manufacturer.
Experts: Stay on the ball in the Middle Kingdom
Despite the debate about the German economy being too dependent on China, car experts see little alternative for manufacturers other than to stay on the ball in the Middle Kingdom.
“China must remain an important market for German car manufacturers. You cannot simply redistribute the sales volumes in this huge market to the USA, for example,” says Frank Schwope, who teaches automotive economics at the Fachhochschule des Mittelstands in Cologne and Hanover. A lot of growth is still possible in China. Simply because, relative to the total population, significantly fewer people there own a car than in America or Europe.
Other experts also point out that the Germans must try to keep up with domestic manufacturers in China, otherwise they could outcompete them on the international market. “It’s also about the future markets of Southeast Asia, such as Indonesia, which are currently heavily occupied by the Chinese,” says Philipp Kupferschmidt, who is responsible for the automotive industry in the German-speaking region at the management consultancy Accenture.
However, one must also keep an eye on political developments. “There is some uncertainty. In particular, the sword of Damocles hangs over the market in Taiwan,” warns Kupferschmidt. There are always tensions between the island state and China because Beijing counts the island as part of China, even though an independent and democratically elected government has been in power in Taiwan for decades.
Source: Stern
