As the international countercurrent of decoupling and disconnection intensifies, the domestic market environment and market competition are becoming increasingly fierce. Today Bitauto was honored to participate in the Volkswagen brand's 2023 mid-year media communication meeting. In response to complex domestic and international trends, how has Volkswagen's "In China, for China" strategy been adjusted and how does Volkswagen view it? What is the market landscape like in the second half of the year? And what position does Volkswagen Anhui occupy in Volkswagen's overall business, and what kind of positioning does it have? I had a conversation with Volkswagen senior management and many other questions. The following is the content of the exclusive interview.
Thomas Schäfer CEO of Volkswagen Passenger Car Brand
Shi Wentao: First, let’s give an introduction from the perspective of the international market, and then talk about the promotion of our “in China, for China ” strategy. There are more and more so-called decouplings in the international market. In the automotive industry, decoupling is definitely not a good thing because automotive is a global and globally linked industry. Therefore, we hope that the automotive industry will become more globalized in the future. We have been vigorously promoting the "In China, for China" strategy and have made good progress. During the Shanghai Auto Show, we announced the establishment of Volkswagen (China) Technology Co., Ltd., and we are making every effort to promote various tasks at both the group and brand levels. Not long ago, we announced our cooperation with Xpeng Motors, which will further strengthen the implementation of our "in China, for China" strategy. Therefore, while maintaining performance, we also attach great importance to meeting the expectations of Chinese users with more exciting products.
About Volkswagen Anhui’s positioning. Volkswagen Anhui is advancing all work in an orderly manner, its team is constantly expanding, and it is fully preparing for the first model. We also reviewed the latest progress a few days ago and are very pleased with the status of the progress.
Mr. Stefan Mecha CEO of Volkswagen Passenger Car Brand China
Meng Xia: The Volkswagen brand is deeply rooted in China and continues to strengthen its capabilities to actively respond to changes in the Chinese market situation. In terms of fuel vehicles, Volkswagen maintains its number one position in market share. In the first seven months, Volkswagen delivered a total of approximately 1.26 million new cars, with its market share increasing by 1% year-on-year. It can be seen that Volkswagen is still a strong brand in China. But we see that the sales of fuel vehicles are gradually decreasing, with an average annual decrease of about 9%, which also prompts us to prepare for the future.
Current policies are conducive to the sales of new energy vehicles. For example, the purchase tax exemption has been extended to 2027. Volkswagen ID.7 VIZZON will be officially launched and delivered soon, which will further accelerate our electrification transformation process in China. This year, Volkswagen sold more than 60,000 pure electric vehicles in China. The market competition is very fierce. Many new brands have launched many new products, and users have an extremely rich choice. In the fierce market, ID.4 ranks among the top three in the A-class pure electric SUV market. ID.3 has also improved in the past two months, and we also look forward to selling more pure electric models in China. With the launch of ID.7 VIZZION, there will be more good news. Facing the extremely important pure electric car market, we will also launch more models.
Q: The Volkswagen brand is now the benchmark for fuel vehicle sales in China. How does Volkswagen assess the future electric vehicle market trend? At what market proportion will fuel vehicles and electric vehicles reach a balance?
The current hot sales of ID. models are achieved in exchange for large price discounts. Although other competitors are now using the same method to gain market share, what other means or measures does Volkswagen have in addition to price in the future to ensure that the ID. family continues to sell well?
Regarding Volkswagen’s investment in Xpeng Motors, is the form of cooperation between the two parties as speculated by the outside world, with Volkswagen leading the hardware and Xpeng Motors leading the software?
Meng Xia: Volkswagen is very confident about China's auto market this year. The annual auto market is expected to reach about 22 million vehicles, of which about 14 million are fuel vehicles. This is very important for Volkswagen. Fuel vehicles are still an important part of our business and we have delivered strong results in the fuel vehicle market. In China, Volkswagen has a solid market foundation, and we are fully prepared for the transformation in the next three to four years.
China is vigorously promoting the electrification of vehicles and creating a zero-carbon travel future. This is a very good strategy, supported by the market and fully supported by Volkswagen. By 2025, the sales of new energy vehicles are expected to exceed that of fuel vehicles, more than half will be new energy models, and the overall market volume will increase slightly, so we must be prepared. Of course, there is still room and demand for fuel vehicles in the Chinese auto market in the next ten years.
In the next few years, Volkswagen Group brands will launchMore models. We have previously announced our cooperation with Xpeng Motors, hoping to better respond to the rapid development of the Chinese market and further accelerate Volkswagen's electric travel transformation. Our cooperation with Horizon on autonomous driving technology has also been very smooth. Volkswagen has always been open to collaboration and we have proven to be good at it. Our Chinese partners are a perfect fit for us both strategically and technologically.
The launch of the pure electric sedan ID.7 VIZZON will be our next focus in the field of electric travel. In 2024, another pure electric ID. model from SAIC Volkswagen will also be unveiled. Volkswagen's pure electric sedans will be equipped with new features and support OTA online upgrades. At the same time, we will continue to launch new models in the Chinese market.
Shi Wentao: Price war is a short-term competition method. We should enrich the product lineup and bring a richer experience to users. Therefore, Volkswagen is committed to allowing Chinese users to enjoy more through cooperation with Thunder, Horizon, and CARIAD China. In the face of fierce competition in the market, this is the long-term way to compete.
Q: Volkswagen is the earliest automobile brand to enter China and defines the joint venture model. If the foreign-dominated model in the past 30 years is called the joint venture and cooperation stage 1.0, then with the establishment of Volkswagen Anhui and BMW Brilliance holding 75%, I personally think it is the joint venture and cooperation stage 2.0, breaking through the 50% foreign shareholding ratio. restrictions, foreign parties have more say. However, what I didn’t expect was that in the next two or three years, the Chinese market has changed rapidly, including the cooperation between Volkswagen and Xpeng Motors, the cooperation between Audi and SAIC, and the intention to cooperate between Mercedes-Benz and NIO. I personally think that the joint venture The cooperation has entered the 3.0 stage. Please comment on the future development trend of Volkswagen's joint ventures and cooperation in China. Do you agree with the 3.0 stage?
Shi Wentao: Obviously, Chinese automobiles have developed very fast in the past few years. 2024 will be Volkswagen's 40th year in China. It can be seen that the friendship between China and Germany has a long history, which can also be seen from the development of China's automobile industry. It should be said that over the past 40 years, Volkswagen has achieved vigorous development based on partnerships and achieved remarkable results. Now, Volkswagen Anhui has made Volkswagen's business in China even more powerful and embarked on another journey.
At the same time, Volkswagen should promote more cooperation on the existing basis, and its cooperation with Xpeng Motors is a proof. These cooperations are to ensure that Volkswagen's technology can be welcomed and recognized by the market. Especially in the past two or three years, the Chinese market has developed very fast, and Volkswagen must adapt to this speed of change. Volkswagen must not only catch up with China's speed, but also exceed this speed and run faster than others. Therefore, it is necessary for Volkswagen to further and better penetrate the Chinese market and achieve Volkswagen's long-term goals through partners. Our 40 years of experience in the Chinese market tells us that we need to have better motivation and better partners, and we need to find a point of advancement in the market.Only in this way can we achieve better development.
Part of the reason for the tight schedule is due to flight delays. We often come to China because for the Volkswagen brand, China is our largest single market in the world, and its position in our global territory is unshakable and irreplaceable.
Global brands should face future challenges with a new look. Although Volkswagen has achieved outstanding results in the past, time waits for no time. We must rely on our Chinese team to better promote future work in China. I believe that the team including Mr. Meng Xia can help Volkswagen achieve its global goals.
Meng Xia: In order to speed up Volkswagen's development in the Chinese market, board members visit China more frequently, participate in test drives, and become more deeply immersed in the development rhythm and pulse of the Chinese market. This will not only help promote Volkswagen's future development in China and around the world, but is also crucial to the healthy development of the automotive industry. Everyone is very welcome to visit the Chinese market, witness China’s development, and draw a blueprint for future development.
Between the end of 2023 and the beginning of 2024, Volkswagen will usher in an important milestone of 40 years in China. Volkswagen has been in China for 40 years, achieved many milestones, and witnessed the breathtaking rapid development of the Chinese market. Indeed, Volkswagen has also experienced many challenges, which has also prompted us to continue to rapidly expand in China. An important approach is to launch different types of products covering different market segments in a short period of time. Only in this way can Volkswagen catch up with the pace of development of other manufacturers in the Chinese market.
In fact, for Volkswagen, there are not only versions 1.0, 2.0, and 3.0, but there will be more possibilities in the future. The Chinese market has been developing and changing at an alarming rate. Volkswagen is full of expectations for future changes and hopes to contribute to the development of the Chinese automobile industry and make people's lives better. In the Chinese market ecosystem, Volkswagen must adapt to this speed of change. In the past 6 or 7 months, Volkswagen and Xpeng Motors have maintained close cooperation and communication. As a brand founded in 2015 and built by a very charismatic leader, it is amazing that Xpeng Motors has achieved such good results in just a few years. Volkswagen needs to find out what its unique value is and see if there is more alignment between its value and Volkswagen's value. Xpeng Motors has reached a very high level in advanced autonomous driving and other technologies and achieved economies of scale. Volkswagen hopes to learn from its experience and expand it into Volkswagen's products, thereby taking full advantage of its partners. In the future, Volkswagen and Xpeng Motors will work closely together to further reduce costs, improve work efficiency, and enhance research and development results.
Q: How is the joint venture between Volkswagen and Horizon going now?
In the past year, Volkswagen’s most high-profile move in China has been its cooperation with China’s emerging technology companies, including artificial intelligence"Unicorn" Horizon and Xpeng Motors have reached a strategic cooperation. Has Volkswagen identified the next technology company to cooperate with in China? If so, which area will it focus on?
Meng Xia: This is a very interesting question. I will answer it from the first question. Today I drove an ID.4 here. This ID.4 is equipped with a series of sensors jointly developed with Horizon. The joint venture with it is now in preparation, but the two parties have already started various works. It can be seen that although no information has been released to the outside world, we are effectively promoting cooperation and will announce it when the time is right.
As for your second question, we have previously announced joint research and development with Thunderstar on user experience and human-machine aspects. We also felt during this period that China's technology ecosystem is very outstanding. Our cooperation with Xpeng Motors has just started, and we are currently focusing on launching two models. We will have a meeting with Xpeng Motors next week to discuss and strive to launch these two cars in early 2026. In addition, we are paying close attention to the development of the Chinese market, but the next direction of cooperation has not yet been finalized.
Q: As Volkswagen gradually increases its products, what changes will it make to channel merchants? Will it place more emphasis on the existing agency model, return to the traditional dealer model, or embrace a new model like ID. Store?
Meng Xia: In China, the sales model has undergone great changes. Although the traditional dealer system is not the only factor in product success, Volkswagen's cooperation with more than 2,000 dealers has been very successful. Volkswagen's development in China cannot be separated from the contributions of dealer partners, so NIO will continue to cooperate with dealer partners.
The agency system is a new model launched for pure electric vehicles and it runs very smoothly. Although this model is different from the dealer model, both models have their own advantages and will continue to work in parallel. Currently, given the strong partners we have, we have not tried new models such as direct sales. Sales channel structures vary, and channel structure is not the only factor that determines business success.
Volkswagen will continue to optimize its channel model, and dealers’ profit margins are always our focus. Only dealers with healthy profits can better support the Volkswagen brand.
Q: In June this year, the Volkswagen Group announced a strategic adjustment at its "Investor Day ", which will set targets for return sales growth for its brands. Although this goal is relatively low, the task is relatively arduous. Especially in China, half of the Volkswagen brand's market is in China, but due to price wars or various reasons in the Chinese market, profits should not be as good as before. How will the Chinese market support the Volkswagen brand's global growth?
In China, what new plans does Volkswagen have for batteries?
Shi Wentao: Throughout the Volkswagen Group, each brand willDevelop a plan to improve return on sales. Currently, the Volkswagen brand aims to achieve a global return on sales of 6.5%, which is a challenging goal. Although it does not seem very high, the 6.5% return on sales does not include gearboxes, leasing, financial services and other businesses, and is independent.
The Chinese market is very important to Volkswagen, but the figures for the joint venture partners are not reflected in the return on sales. We have also launched the "Shaping Plan " including China, which means reducing operating costs, improving efficiency, optimizing processes and systems, and seizing market opportunities. In these ways, we hope to further increase return on sales. We held a review meeting last week and the review showed that Volkswagen is well positioned to further improve return on sales globally and is moving in the right direction.
Meng Xia: As we all know, the competition in the Chinese market is very fierce, but the Volkswagen brand is one of the few car companies to increase prices this year. how so? Because at the beginning of this year, subsidies for electric vehicles were reduced. The price increase of Volkswagen brand products also surprised many people.
The Volkswagen brand not only has pure electric vehicles, but also fuel vehicles. The main cost of electric vehicles is the battery, so the car-building concepts are different. We are satisfied with Volkswagen's leading position in the fuel vehicle market, which has laid the foundation for us to accelerate our electric transformation and enable us to remain competitive while transforming. We have formulated a clear plan to further increase efficiency and reduce costs while maintaining product price competitiveness.
Let’s talk about batteries and our battery strategy in China. Volkswagen has steadily developed its parts and subsystem business, and has also jointly developed unified standard batteries with Guoxuan Hi-Tech. Guoxuan Hi-Tech is strong in lithium iron phosphate batteries, and CATL is also our important battery partner. Through these strong technical partners, we support Volkswagen's global battery research and development.
Q: Please evaluate Volkswagen’s market performance in the first half of the year in more detail. In addition to the estimated sales of 22 million vehicles in the overall auto market this year, what other market expectations do you have?
Meng Xia: In the first seven months, the Volkswagen brand performed very well in China, with delivery volume reaching approximately 1.26 million vehicles. In a highly competitive market, this is a good sales result. We also expect to sell more vehicles in the pure electric vehicle market, and the current actual sales volume is more than 61,000 vehicles. We will further optimize the lineup of plug-in hybrid and pure electric models.
In the second half of the year, competition in the pure electric vehicle market will still be fierce. Given that plug-in hybrid models have received a lot of policy support, their sales may increase by 200,000 units, while pure electric vehicles may decrease by 200,000 units. Chinese consumers are increasingly accepting plug-in hybrid models, with an average year-on-year growth rate of more than 100%. All in all, the market share of new energy vehicles will accelerate. In the foreseeable future, China's auto market will not undergo fundamental changes. We see constantNew models are launched, new car companies have joined the competition, and there are also international car companies launching pure electric models in China. The entire Chinese auto market will continue to be extremely competitive.
Q: It has been nearly 40 years since Volkswagen entered China. In the past stage, Volkswagen has always had the dominant power in product definition and price definition in China. Next, what measures will Volkswagen take to explore user needs and define products in the Chinese market?
Volkswagen has a range of technology partners, but advanced technology does not equal product success. In addition to technology, what systematic work has Volkswagen carried out in product definition and demand mining?
In the era of fuel vehicles, Volkswagen relied on the TSI+DSG power combination to establish its technical brand image, which greatly promoted brand building and product sales. In the future, Volkswagen will cooperate with a large number of technology companies. How can the brand strength of technology companies empower product sales?
Shi Wentao: Volkswagen is about to celebrate its 40th year in China, and our products and technological advantages have been integrated into China's development. We have worked hand in hand with our Chinese partners for more than 40 years, which is also an important advantage for us.
As time goes by, our understanding of the Chinese market has changed, and the preferences of Chinese consumers have also changed. In the future, we will do better. At the board of directors level, we communicate and discuss closely every month and often make very important decisions, such as how to better understand the changing needs of consumers and win their favor. Our purpose is to continuously capture the latest trends in the market, including design, products, market demand, etc., in order to fulfill our commitment to long-term development in China. Everyone can expect that in the next 40 years, Volkswagen will continue to delve deeply into China, and at the same time, it will show a new image and continue to move forward based on the advantages of the past 40 years.
Meng Xia: The automobile industry is driven by innovation. The top priority for Volkswagen in the next stage is innovation, and it will always remain innovative. We maintain very close communication with the design director and the head of the design department, and have very fruitful discussions - for example, how to better make decisions based on the needs of the Chinese market; how to make our global models also popular in China. welcome.
When I came to China a year ago, I saw so many amazing cars and all different types of technology on the streets. The changes in China have opened my eyes. After 5 or 6 months I went back to Europe and went to the United States and saw the cars there which were also great. However, my perspective of observation is different because the models in each market are different. In the Chinese market, many models have similar appearances and are in line with the trend. However, Volkswagen does not want to follow suit. We have our own value rules.
Volkswagen hopes to become a more popular brand, adhere to our DNA, and consistently create products for Chinese users that they expect in the future. These products have industry commonalities while maintaining uniqueness. thisThat's why everything we do now is to prepare for future development. We hope to understand the preferences of Chinese consumers to determine how to take every step in China in the future.
Currently, we are steadily advancing many automotive design and research and development projects. For example, in our cooperation with Xpeng Motors, we plan to launch two models that meet the needs of the Chinese market. Of course, we hope this time comes as early as possible. In addition, the SSP platform will become the cornerstone of future development and will also be introduced to China. Based on this platform, we can bring more technologies and product features to the Chinese market, but this will also take some time, and we need to continuously shorten this time. Compared with introducing a platform, through cooperation with Xpeng Motors, we can effectively shorten the cycle of new product launches, and the results of the cooperation can also become an important cornerstone of our future development in China.
·The cooperation between Volkswagen and Xpeng Motors includes two B-class vehicles. Will Volkswagen extend Xpeng Motors' intelligent driving technology to other models besides these two? Will technology be introduced into CARIAD?
Regarding the ID. family, the ID.3 originally had some shortcomings, but the current price is very attractive. There are rumors in the market that the ID.3's price advantage has led to a longer delivery period. I wonder if you are aware of this situation? Is the pricing strategy for ID.3 and other models short-term or long-term? What do you think of the current price trends in the Chinese market?
Meng Xia: ID.3 is one of the best in the market, accounting for about 30% of the market. The model itself is also excellent, and demand currently exceeds supply. We are constantly increasing production capacity, but we also need to make a balance, so there is a situation where we are waiting to pick up cars. Of course, we were a bit surprised by the market's eager response. In the future, everyone can rest assured that we will continue to ensure the competitiveness of this car in the market, including price, product and other aspects, which is also closely related to the positioning of this car in the market.
Market competition will not become weaker in the short term. Whether on the product side or on the price side, competition will become increasingly fierce. In the future, more market participants will join, and they will continue to increase production capacity to meet market demand and pursue sales growth, making competition more intense, especially in the electric vehicle market.
In terms of technology, Volkswagen will cooperate with Xpeng Motors to develop two models. We will also cooperate with Horizon on the MEB platform, which are two different lines of work. As mentioned just now, this will be a research and development model in the future. Everyone must also know that we have invested about 5% of Xpeng's shares. Why do this? Because this will ensure long-term and in-depth cooperation between both parties. We do hope to accomplish a lot by working with our partners. In the future, we will successively announce the results of our cooperation to everyone, and Xpeng Motors is just one of them. The advantage of industry scale is also extremely important, which will ensure that users can continue to obtain Volkswagen services and products.
Q: Why does VolkswagenWhy cooperate with Xpeng Motors on the G9 platform instead of the Fuyao G6 platform?
The ID. series is priced cheaper in China than in Europe, which has caused some controversy in Europe. What do you think of this phenomenon? In the future, will the pricing of global products in the era of electric vehicles be like this, different from the pricing of previous fuel vehicles?
Regarding the product strategy of the ID. series, the ID. series has two models, one is the ID.5 coupe-style electric car, and the other is the ID.2 concept car. Why haven't these two cars been introduced to China? Is the judgment a bit niche, or is there another reason? Will you introduce slightly more personalized and niche products in the future?
Shi Wentao: The ID.5 is a coupe SUV built for Germany, but it is not completely impossible to introduce it into China. ID. 2all is a concept car displayed in Hamburg. There are no plans to bring it to China during the concept car stage.
China is a fiercely competitive market for both fuel vehicles and pure electric vehicles, and the price in China may be lower than in other markets in the world.
As for why the G9 platform was used instead of the G6 platform in cooperation with Xiaopeng Motors, it is because Xiaopeng Motors is constantly upgrading the platform. The two parties will first cooperate based on the G9. Before launching these two cars in 2026, Volkswagen will continue to pay attention to the development and upgrade of its platform.
Meng Xia: First of all, G6 is a relatively small platform, while G9 is relatively larger. This is Volkswagen’s current gap in the pure electric field. Secondly, G9 is technically similar to G6, especially its electrical architecture and core technology. When developing a new platform, we need to consider a variety of factors. As mentioned just now, we are going to launch a mid-size car, which is a gap in the market at the moment.
In addition, Volkswagen will always pay attention to market developments and changes when deciding which models to launch. Maybe in the future, we will change our minds.
When it comes to the price difference between China and Europe, I have worked in marketing and sales for many years. When I was in Germany, our products were 40% more expensive than the Netherlands, and more expensive than Denmark in the north. Differences between countries are not uncommon.
Q: The changes in the Chinese automobile market are indeed changing rapidly and dazzlingly. This time last year, when Mr. Meng Xia first arrived in China, I remember communicating with you about the Chinese automobile market. In terms of new energy vehicles, we talked about many new car-making forces. More than a year has passed, and the changes in China's automobile market can be said to be earth-shaking. Traditional automobile companies such as BYD and GAC have risen strongly. I would like to ask Mr. Meng Xia, what do you think about the ebb and flow of new energy between traditional car companies and new car-making forces? As a traditional brand, what are the main reasons why Volkswagen has not met expectations or is still in the climbing stage in terms of electric vehicles? What are the countermeasures?
A new pure electric vehicle of the Volkswagen brand will be produced by Volkswagen Anhui in the first half of next year. Is there more information about the Volkswagen brand and Volkswagen Anhui in the agreement?Can you share the latest information on the same topic? Such as vehicle production, parts matching and R&D support, etc.
Meng Xia: China is the "fitness center" of Volkswagen. It is full of vitality and there are new things and new developments every day. This requires Volkswagen to always keep pace with the times, make quick decisions, and keep a pulse on the market.
The first two to three months after I took office were the most stressful. First of all, I have to get used to and adapt to the Chinese market. There are many new things that need my attention. I need to strategically make the right decisions for the brand in the next 3 to 5 years, or even longer. I keep thinking about what the entire auto market will look like in five years. In terms of the current competitive environment, the Chinese auto market in five years will definitely be very different from today. The Volkswagen brand has great room for growth, and user trust is our advantage. We firmly believe that Volkswagen will continue to have a strong position in the Chinese market five years from now. Of course, it will be very different from the Volkswagen of five or ten years ago.
Q: In the cooperation between Volkswagen and Xpeng Motors, the new car software created by both parties is built using Xpeng’s software technology according to previously released information. So what role will the Volkswagen Group Software Company play in this process? ? The first car will be launched in 2026. Between now and 2026, what is the Volkswagen brand’s plan for electrified products in China?
Chinese automobile brands now account for more than 50% of the market, and the sales volume of some Chinese automobile companies is almost the same as that of the Volkswagen brand in China. Will it become normal for Chinese car brands to account for more than half of the market?
Meng Xia: CARIAD is responsible for software development in the Volkswagen Group. Volkswagen has three different software stacks, one is 1.1, which is MEB; 1.2 is the platform it is currently promoting; 2.0 is SSP, and CARIAD spans all platforms. 1.1 is mainly for MEB models in China, and we will develop new software in the future. There is no duplication of functions between CARIAD and Xpeng Motors. We plan to expand CARIAD's R&D personnel to 1,200 this year to ensure the provision of more software technology capabilities.
As for the plan before 2026, the launch of ID.7 VIZZON is our current focus. The second step is the SAIC Volkswagen ID.NEXT. This model has already made its debut at the Shanghai Auto Show and will be launched in the future. The next car comes from Volkswagen Anhui and will roll off the assembly line in 2024. By 2025, new cars will be unveiled one after another, some of which will come from Volkswagen Anhui. Of course, fuel models such as Tanyue and Tiguan will also be iterated one after another.
Q: I heard that Volkswagen’s Anhui cars will roll off the assembly line next year. How does Volkswagen Anhui layout its channels? Which network will it be sold on?
Meng Xia: About two years ago, Volkswagen (Anhui) Digital Sales Service Co., Ltd. (DSSO) was established, and it will become the sales channel of Volkswagen Anhui. In addition, we are communicating with partners in our dealer network in China. It is currently being pushed forward and cannot be disclosed yet.There are too many specifics, and we will share more information with you when the time comes.
Shi Wentao: When I am with friends from the media, I hear many enlightening questions every time. Volkswagen has been in China for nearly 40 years. We will further deepen our market penetration and maintain our commitment and focus on China. Volkswagen has taken a series of measures in China and is confident in further enhancing our development in the Chinese market.