China is Volkswagen’s biggest and most important market, so big in fact that 40% of its global deliveries are made within the country alone. Electric car adoption in China is also surging exponentially (2.91 million EVs sold in 2021, more than double from 2020), thanks to government subsidies and various other incentives.
To capitalise on this, Volkswagen CEO Ralf Brandstaetter will be relocating to Beijing to oversee Volkswagen China’s operations. In an interview with Nikkei, he said the company is capable of an EV production capacity of one million units annually by 2023, especially when the new EV plant in Anhui Province goes fully online next year.
The new plant has an annual production cap of 300,000 units, while the remainder will come from plants under joint ventures with FAW Group and SAIC Motor. Volkswagen will also put more emphasis on tech and features loved by Chinese consumers, such as internet-connected vehicles and self-driving EVs.
These are among the reasons for which Tesla is so popular in China. Just so you know, the US automaker sold 480,000 units of EVs in China in 2021, followed by BYD with 320,000 EVs (numbers by research firm MarkLines). Volkswagen, on the other hand, delivered 70,000 units of its ID models, which is short of its 80,000 to 100,000 units estimate.
However, Brandstaetter said the shortfall is due to supply chain issues which worsened in the second half of 2021. “The electric offensive is on track even despite the supply bottlenecks. Customer demand isn’t declining. The impact was not driven by demand, but by availability of semiconductors,” he explained.
To drive sales, Volkswagen China will grow its ID. Store sales network from 115 locations to 200 this year, with the goal of doubling EV sales volume. “Volkswagen changed its customer approach. We created our own look and feel, the ID. Stores, to address young early adopters in China better,” the CEO said.
“In the past, our approach was to develop in Germany and localise in China,” Brandstaetter noted. “But this approach will be changed significantly by setting up more local resources for R&D, especially for software, to be faster, to be more independent in China.” At least 500 new engineers will be employed at the Anhui plant this year, bringing the total to over 5,000 in China.
Whether Volkswagen can succeed with EVs as it has with conventional gasoline vehicles remains to be seen as competition intensifies. The automaker has a 20% market share for ICE-powered vehicles in the country.
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