Volkswagen powers towards reshaping mobility, sustainability
As the world's biggest automotive producer and market, China is positioned to transform the entire car industry - ushering innovations that range from powerful and elegant vehicles to new-energy models that redefine greener mobility.
This scenario is a far cry from China's vehicle industry just three decades ago, when annual output was less than 2 million units. Today, more than 20 million vehicles roll off China-based factories and assembly plants year after year. Last year alone, the country produced more than 23 million vehicles and accounted for about 26 per cent of total production globally. It has also overtaken the United States as the largest vehicle market globally, accounting for more than 15 million units sold each year.
Volkswagen Group China (VGC), China's earliest and biggest global automotive industry partner, experienced all these transitions as they unfolded - and led some of the biggest transformations that steered the industry to its leading position.
"We were a pioneer at that time, and we still are a pioneer today," says Dr Jochem Heizmann, member of the board of management of Volkswagen and president and CEO of VGC. "When we first came here, a lot of international suppliers came with us - and together with local partners, we built China's automotive industry," he adds.
Since its first joint ventures with Shanghai Automotive Industry Corp (SAIC) and First Automobile Works, the group has also become China's most successful carmaker with group brands such as Audi, Å koda, Bentley, Lamborghini and Porsche, among others, operating successfully in the market. It has likewise expanded to 16 subsidiaries, and continues to build plants - and communities - across the country.
"More than 30 years on, China has become Volkswagen's second home, where our sense of responsibility extends from our factories to the society," says Heizmann, whose involvement in Volkswagen's China operations stems from 1991 and has ranged from the industrial engineering side to production and planning.
VGC achieved a new record last year, delivering almost 3.7 million vehicles with a year-on-year growth of 10 per cent. Popular models including the Lavida, Santana, New Jetta and Sagitar helped drive growth, which was also augmented by strong sales in VGC's premium and luxury segments.
"We have strong brands. We are a technological, innovative leader in China. We are well-known for our product strength, product quality and product durability," Heizmann says. "Beyond all these, however, we take pride in building and supporting communities where we are present."
Elevating car making to community building
About 3.7 million cars out of the 10 million that the entire Volkswagen Group produced worldwide last year were sold in China - that is how significant the market is to the carmaker's overall business. VGC's commitment, however, goes far beyond sales and profits.
"Our commitment to China customers is translated to the very products we develop, as the climate, road conditions and personal preferences in the country vastly differ from anywhere else," Heizmann says. "This is where three decades of in-depth know-how and understanding of the China market bridge the gap between the specialised needs of car buyers and the right vehicle for them."
This year alone, Volkswagen is introducing about 60 models and derivatives to the China market. About 15 models will be locally produced, including the Lamando, which is made and sold exclusively in the country.
A series of new-energy vehicles, such as the new e-Golf, Golf GTE and the Audi A3 e-tron, are also headlining Volkswagen's environment-friendly line.
The carmaker will also focus on plug-in hybrid vehicles to reduce fuel consumption, and new-generation, fuel-efficient engines and transmission. A key milestone is Volkswagen's intensified cooperation with SAIC through their joint venture Shanghai Volkswagen, whose Anting plant is slated for expansion to accommodate the gradual full localisation of the group's electric vehicle production in China.
More than 15 different electric vehicle models, including plug-in hybrids and fully electric vehicles, are scheduled to be produced locally over the next four years.
Next to implementing local production of electric vehicles and components, Volkswagen is set to further strengthen its research and development activities centred on fuel cells and plug-in hybrid vehicles.
"Electro-mobility is imperative in shaping the future of vehicles in China, which we aim to help make great gains in maximising alternative energy sources and fuel efficiency," Heizmann says.
Volkswagen's vision to be China's most sustainable car manufacturer continues to take concrete shape, as demonstrated by the company's newly opened Changsha plant. A key focus of the plant since its initial design is optimising efficiency and minimising environmental impact.
The plant is equipped with solar panels that can produce up to 13MW of power per hour - enough to produce 10,000 vehicles. The traditional wet-flashing paint system has been replaced with a dry "E-Scrub" system to reduce fresh water usage by 23 per cent and electricity consumption by 26 per cent, while the waste water treatment installation is targeting 100 per cent recycling of waste water.
"On top of stepping up VGC's technological advancement, the Changsha plant sets a new benchmark across the entire group for efficiency and productivity," Heizmann says.
A part of the company's "Go South" strategy that started with its Foshan plant in Guangzhou, the Changsha plant helps Volkswagen connect to the local community - better understanding the wishes and needs of the people there, and responding with job creation and support programmes.
VGC has created about 8,000 highly skilled jobs through the plant itself, with another 4,000 jobs on the supplier side. It has also trained and educated about 2,000 employees on practical aspects.
"We want to be present in every major region in China, reaching not only new customers but also local communities," Heizmann says.
In addition to fulfilling its corporate social responsibilities, VGC has funded more than 50 million yuan (HK$63.2 million) for various charity projects in the country, where it is committed to promote sustainable development.
Among these projects is the Child Safety Initiative, which conducted road safety seminars and donated 5,000 child seats to families across China. The group also partners with diverse organisations to support other initiatives such as disaster reconstruction efforts, education and sports programmes.
Improving the role cars play in people's lives
Since their invention, vehicles have been the embodiment of technological advancement - pushing the boundaries of speed, power and aesthetics. For Volkswagen Group, it is time to reshape these innovations into better lives.
"As in the past 30 years, our role is to further develop the Chinese automobile and car industry," Heizmann says. "That includes improving the role cars play in people's lives through our technology and innovation."
At the Consumer Electronics Show Asia held in Shanghai in May, Volkswagen stated that the industry finds itself at a vital turning point - the gradual convergence of the car and the computer.
This was showcased by a fleet of new and upcoming Volkswagen models highlighting four main aspects of the convergence: computer-driven drive systems; smartphone and app integration; intuitive vehicle operation; and autonomous and semi-autonomous driving.
The Volkswagen Golf R Touch concept led the fleet, boasting a buttonless cockpit with touch screens replacing all the conventional switches, buttons and dials. It is equipped with a gesture control system using a 3D camera for hands-free operation of climate control, the audio system, sunroof and other functions.
The Golf is also set to soon feature "Parking Perfect", an advanced self-park assistance system that will allow autonomous parking without a driver on board. One of the most practical applications of this feature is the ability to park in narrower, more challenging parking spaces, which are expected to be more common in the future.
"We see the car as a part of an integrated mobility system, which can improve the lifestyle of our customers living in the digital era," Heizmann says. "Through these groundbreaking innovations, we aim to be not only the most successful, but also the most sustainable carmaker in China."
Notwithstanding the country's recent regulatory amendments, including the extended parallel import scheme, which is expected to affect foreign carmakers, Volkswagen maintains an optimistic view that its clear goals and valuable contributions will buoy its position in the market.
The group also believes that despite a slight slowdown from its so-called "golden age" of rapid, exponential growth, automotive sales in China remain sustainable - and are projected to continue rising by as much as 1 million units per year. From nearly 14 per cent in 2013, sales growth dipped to just below 7 per cent last year - but VGC is unfazed about further increasing its investment to expand and improve its China operations.
"There may no longer be double-digit growth, but China's growth rate will continue to be higher than any other relevant country or market," Heizmann says. "China has a fantastic future, and I am convinced that the 'new normal' is a healthy situation - and we aim to grow alongside our communities, partners and customers for the next three decades and beyond."
Reinforcing its confidence in the market, the Volkswagen Group is slated to invest a total of Euro22 billion (HK$188.8 billion) locally by 2019 in collaboration with its partners. This makes the largest investment programme in China's vehicle industry to date.
"It is astonishing how quickly things are developing here, from the country itself to the society - and that in combination with the Volkswagen communities," Heizmann says. "It is also tremendous how much we are selling, investing and building here. We look forward to more transformations for better lives."
Volkswagen Group China
http://www.vw.com.cn