Text | Yang Lei
China, as the largest sales market for Ashkenazi automobile brands, has allowed Ashkenazi brands to make a lot of money without having to consider a single market demand alone. However, with the transformation of the automotive industry to electrification and the change of consumer demand for vehicle performance, Ashkenazi brands that thought they could win in the Chinese market with the strength of high-quality car manufacturing suddenly realized that they needed to develop a single market strategy for the Chinese market, and that their golden age in China had passed.
The Great Leap Forward in Vehicle Electrification in Europe contrasts with the Chinese market
Most countries in the EUROPEAN Union plan to achieve 100% zero emissions by 2050, and all German car manufacturers are working intensively to develop electric models and actively transform to achieve this goal. However, China, as the earliest and largest electric vehicle market for electrification development, suddenly became less in a hurry when europe's electrification took the Great Leap Forward.
According to a recent study by Berylls Strategy Adivisors in Europe, while China plans to have at least 40% of new vehicles in its license plate by 2030, the reality is that Chinese fuel vehicles are still growing at an average annual rate of 3%. Even if the share of fuel vehicles in the total number of new car registrations declines year by year, in absolute terms, there will still be about 300 million fuel vehicles on the road in China by 2030.
At the same time, China has reduced the subsidy for the purchase of electric vehicles year by year from 2019 and has decided to completely eliminate it by the end of 2022. Under the market situation where the price of electric vehicles is still generally higher than that of fuel vehicles, the trend of the Chinese market is still dominated by fuel vehicles is not expected to suddenly reverse, after all, the breakthrough of the electric vehicle market still depends to a large extent on the price of vehicles.
Volkswagen ID: Defeated by a lack of understanding of Chinese customers
Since 2014, a number of outstanding electric vehicle innovation brands such as Weilai, Xiaopeng and Ideal have emerged in China. Chinese electric vehicle brands are not only better than the conservative Ofbes brands in appearance, but also better able to meet the preferences of Chinese customers in terms of interior, connectivity and entertainment functions.
The setback of the Volkswagen ID series in China is a case in point.
Volkswagen has developed the ID series for its European market, rather than for the Chinese market alone. The ID series concept was established by Volkswagen in 2015, but the focus of research and development was on electric drives and less on software functions.
A manager in Volkswagen's software division said in a recent media talk: "If computer scientists compare Volkswagen's hardware to hardware at the current level of technology, they will be very surprised." ”
Taking main memory as an example, the memory of volkswagen ID is only equivalent to that of a smartphone more than a decade ago. In terms of software, a lot of programming still uses the Java language, and software programmed in Java has much higher memory requirements than programs developed by the more complex programming language "C", which puts more pressure on weak hardware.
Not only does Volkswagen lag behind China's Wei Xiaoli in hardware and software equipment, but Germany's Audi, Mercedes-Benz and BMW have no advantage in the competition. When Chinese customers have driven domestic electric vehicles equipped with luxurious interiors and smooth Internet software and entertainment functions, Mercedes-Benz sales staff will be pale and weak when they emphasize to Chinese customers that "Mercedes-Benz pays more attention to the driving experience of vehicles".
Ashkenazi brands ignore the basic needs of Chinese customers. The demand for Internet entertainment from Chinese customers and the stop-and-go mobility rhythm of metropolises doom vehicle connectivity and entertainment functions to be far more important than engine performance.
Zhang Xiang, an automotive expert at North China University of Science and Technology, pointed out in an interview with the Hanjiang Times that German manufacturers lag behind Chinese automakers in terms of information and network technology. When it comes to software in cars, German automakers are doing poorly. Volkswagen ID is much worse than Tesla in terms of software systems, and the customer experience is not good.
In addition to Volkswagen's ID series, other German-branded electric vehicles such as Audi's e-tron and Mercedes-Benz EQC also performed sluggishly in sales. The lack of software skills and relatively less brilliant electric performance are the main reasons why Ashkenazi brands are struggling in China.
According to W llenstein, president of Volkswagen China, at the 2021 annual press conference in Beijing in January, Volkswagen's profit in China fell by 14% year-on-year to 2.7 billion euros. Compared with Volkswagen's profit of 5.2 billion euros in 2014/2015, which was at its highlight moment in China, Volkswagen's profit in the Chinese market has fallen by almost 50%.
In 2022, this downward trend has not weakened. According to a February 15 Volkswagen Group report, sales in China in January 2022 fell 18% year-on-year.
German brands are collectively weak in the electric vehicle market
Although the share of Volkswagen brands in the Chinese market has always been around 20%, with the rapid development of China's electric vehicle market, Volkswagen brands have felt obvious pressure. In 2021, China's total sales of electric vehicles will be 2.9 million, but Volkswagen has not achieved its sales target of 100,000 IDs in China, selling only 70,000 vehicles.
In contrast, Tesla will sell more than 480,000 vehicles in China in 2021, BYD will sell 590,000 vehicles, and even the innovative brand Weilai will sell 90,000 vehicles more than Volkswagen. So W llenstein, president of Volkswagen China, said he wouldn't be surprised if more than half of the Chinese auto market in a few years' time were Chinese brands.
In the field of German luxury brands, China is still the largest single market for Mercedes-Benz in the world, accounting for 35% of Mercedes-Benz's total sales share, but in the field of electric vehicles, even Mercedes-Benz's new electric flagship version EQS has not convinced the Chinese electric vehicle market.
UBS analyst Patrick Hummel said in a recent media interview, "Although the range of the Mercedes-Benz EQS 780 km is not low, the 400-volt charging system and the lack of heat pumps are no longer in line with current industry standards. ”
How to start the Battle to Defend the Chinese Market?
In response to the inconsistency between Europe and China in the process of electrification transformation, Ashkenazi brands have launched their China strategies.
Daimler's Headquarters in Germany, on the one hand, closely followed the pace of the Great European Electrification Leap Forward, actively developed electric models in Germany and eliminated internal combustion engine models. But in China, Daimler is using the production capacity of its partner Geely to gradually withdraw its expertise in gasoline and diesel drives from Germany and transfer it to China.
Audi plans to stop producing fuel models in Germany from 2033, but will continue to supply fuel models in the Chinese market.
To defend the Chinese market, Volkswagen has developed a technology upgrade project called "Trinity" inside, which was originally scheduled to be completed in 2026, but German automotive professionals believe that it is more realistic to complete in 2027.
In addition, Volkswagen is trying to do something that can be achieved in the short term, such as sending Ralph Brandstedt, a member of the Board of Directors of the Volkswagen Group and a Manager of the Volkswagen brand, to take over from Diess' current presidency of Volkswagen China this summer.
Ralf Brandst tter will be responsible for its China operations from August 2022
Ralf Brandst tter, president of Volkswagen China, who will take office this summer, pointed out at last week's press conference that it is absolutely necessary for Volkswagen to develop more software technology solutions in China, starting with software to have a chance to defend the Chinese market. Therefore, Volkswagen will continue to increase the number of IT experts in China and transfer more R&D capabilities to China.
Despite the small share of Mercedes-Benz electric models in the Chinese market, Hubertus Troska, a member of Daimler China's board of directors, remains optimistic about the future, believing that Daimler is ready to compete in China's electric vehicle sector. Because in the high-end market of electric vehicles, there are few local competitors in China.
Daimler will use the production capacity of its Chinese shareholder Geely to expand production of electric models in China. In 2022, Mercedes-Benz will launch five EQ brand electric vehicles in China, four of which will be produced in China.
In addition, the Smart joint venture established by Geely and Mercedes-Benz also exhibited a Smart brand electric SUV at the 2020 Munich IAA Motor Show, indicating that the Smart brand has begun to actively transform to open up the Chinese market.
BMW plans to defend its Chinese market by increasing its stake in the joint venture. Recently, BMW announced that it will increase its joint venture with Brilliance Automobile by another 25%. This makes BMW the first foreign automaker to have a majority stake in a joint venture in China.
After a long period of negotiations, the joint venture between Audi and FAW to build an electric vehicle production plant in Changchun, which has been repeatedly postponed, finally reached an agreement in October 2020, and then signed a corresponding contract in January 2021.
It is reported that audi FAW new energy vehicle project was announced by the industrial department of the Jilin Provincial Development and Reform Commission on February 11, 2022. According to the announcement, the construction of new energy vehicles will start in April and is expected to be completed in December 2024, with a production capacity of 150,000 units per year.