Volkswagen sells China-made cars in Southeast Asia, helping partners scale export readiness

Until 2022, German car giant and its joint-venture partners are expected to invest US$18b in China on developing electric and self-driving vehicles, and other new-mobility services

PUBLISHED : Wednesday, 25 April, 2018, 10:54am
UPDATED : Tuesday, 03 July, 2018, 8:22pm

Volkswagen, the world’s largest carmaker, plans to sell China-built vehicles in Southeast Asia, in a step that would help its Chinese partners FAW Car and SAIC Motor scale their capacity to export. 

“We will look at where it makes sense to sell China-built cars, maybe because of price competition compared with cars out of Europe,” Volkswagen Group China’s President Jochem Heizmann said in an interview at the Beijing Auto Show.

“We have just started [this process]. Of course, the more we sell, the better. But we have to clarify the acceptance of these cars, and whether we could offer a good enough service.” 

Infographic: Global carmakers and their Chinese venture partners in the world’s largest car market

The export push, which started with the Philippines in January, was fully underway last month, after agreements between Volkswagen and FAW and SAIC. The 12-brand German automaker plans to deliver several thousand cars to customers in Southeast Asia in the years to come, Heizmann said.

Volkswagen was among the first global carmaker to assemble in China, establishing a venture with SAIC in Shanghai 33 years ago to produce the Santana, which quickly became the most popular model when car ownership took off in the country. 

Volkswagen followed up six years later in 1991 with a venture with FAW in the Jilin provincial capital of Changchun in northeast China, where they produce the Volkswagen Jetta and the Audi premium brand.

Audi already makes six models in China with FAW, with plans to introduce 10 more by 2022, seven of which will be made locally with FAW. The premium brand aims to introduce the A7, the Q8 SUV and the e-tron electric sports utility vehicle, in addition to the A8 four-door executive vehicles.

SAIC, China’s largest home-grown carmaker, harbours export ambitions itself. The Shanghai company, which also makes vehicles with General Motors, also owns the MG brand that it bought from the British namesake carmaker. SAIC assembles the MG in Thailand, and has been exporting small numbers of GM’s Chevrolet-branded vehicles to India.

Separately, SAIC and Audi are studying the feasibility of assembling vehicles together, possibly starting in 2022, according to a report in China Daily, quoting Audi China’s President Joachim Wedler.

“We are progressing. These are intensive discussions,” Heizmann said, in response to a question about Audi’s discussions with SAIC, stressing that its likely export agreement with FAW is also strengthening. 

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Until 2022, Volkswagen and its joint-venture partners are expected to invest 15 billion euros (US$18 billion) in China on developing electric and self-driving vehicles, and other new-mobility services. 

Herbert Diess, Volkswagen’s new group chief executive officer, also said on Tuesday that he sees “positive momentum in all regions”, pinpointing China as a strong driver. 

“The Chinese auto market is key for the international auto industry and it is key to our success,” Diess said in Beijing, on his first foreign trip since taking the steering at Volkswagen on April 12.

VW’s global deliveries expanded 7.4 per cent in the first quarter to 2.7 million vehicles. In the first three months, it sold over 1 million cars in mainland China and Hong Kong, a 13.4 per cent increase. During the period, it saw SUV sales soar 34 per cent to 100,000 units.

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Audi also closed the first quarter with stunning growth, delivering 154,300 cars, a 41.9 per cent increase from the same period last year.

Global carmakers received a double dose of good news from China’s President Xi Jinping earlier this month – a reduction in import tariffs and a raised investment cap with regards to mainland-based factories.

New-energy carmakers, especially, are set to become the top beneficiaries of a relaxation by Beijing on foreign ownership in the automobile sector, following statements by Xi in Hainan province.

He told the Boao Forum that China will further loosen its grip on manufacturing industries as it seeks more foreign investment in the car, shipbuilding and aircraft sectors.