Source of this article: Times Finance Author: Liao Wei
Entering 2022, the recovery momentum of Volkswagen in the Chinese market is still uncertain.
According to the latest data from the Association, FAW-Volkswagen narrow retail sales fell 9.6% year-on-year to 105,000 units in February this year, and SAIC Volkswagen fell 19% year-on-year to 80,000 units. BYD, on the other hand, soared 340% to 89,000 monthly sales, surpassing SAIC Volkswagen in the top two.
It is worth noting that in previous years, "North and South Volkswagen" often occupied the top two positions in the sales list of car companies, but since 2021, this pattern has been broken, in addition to BYD, Geely Automobile and Changan Automobile have also once surpassed SAIC Volkswagen in sales.
Behind the lack of optimism in sales of the two joint ventures, official data shows that Volkswagen Group delivered 3.3 million vehicles in China in 2021, down 14.1% year-on-year, and the Volkswagen brand delivered about 2.428 million vehicles in China, down 14.8% year-on-year. For reference, in 2019, the Volkswagen brand and the Volkswagen Group delivered 3.16 million units and 4.23 million units respectively in China. This also means that in just three years, the Volkswagen brand and the Volkswagen Group in China have fallen by 732,000 and 930,000 annual sales respectively.
However, with the liberalization of the joint venture share ratio, Volkswagen's development in China has ushered in a new opportunity. On March 8, the Public Relations, Communication and Corporate Social Responsibility Department of Volkswagen Group (China) said in an interview with Times Finance that Volkswagen Group is vigorously promoting the development of Volkswagen Anhui. "Volkswagen Anhui is not only a manufacturing center with high technology integration, but also an innovation center around NEV. Volkswagen Anhui will produce new energy vehicles based on the Group's MEB platform. ”
Volkswagen Anhui is the third joint venture of the Volkswagen Group in China and plays an important role in the Group's new energy vehicle strategy. It is reported that among the three joint venture car companies in China, Volkswagen holds the highest share ratio of Volkswagen (Anhui), which is also jokingly called Volkswagen's "pro-son".
Source | Volkswagen Group China official website transformation pain
In fact, many views have attributed Volkswagen's weak performance in China and the global market in the past two years to the pain of transformation.
Some insiders pointed out to Times Finance that "traditional car companies have been affected by multiple factors in the past two years, the first is that the epidemic has a negative impact on the supply chain and travel demand, and the second is the rise of new energy vehicles, although it is not enough to hit traditional fuel vehicles as a whole, but it is better in terms of topic and momentum, especially the stock price performance inhibits the positive effect of the capital market on traditional car companies."
According to public data, between 2017 and 2021, Volkswagen Group's global sales were 10.54 million units, 10.83 million units, 10.97 million units, 9.3 million units and 8.88 million units, while its rival Toyota Motor Group sold 10.38 million units, 10.59 million units, 10.74 million units, 9.52 million units and 10.5 million units respectively.
Source | Volkswagen Group China official website
As for the deep-seated reason for the decline in Volkswagen's sales in the global market in the past two years, Cui Dongshu, secretary general of the Association, believes that Volkswagen is at the peak of the planning of the impact of the transformation of intelligent electrification, "This kind of determination of a brave man to break his wrist is rare." In the wave of new energy, European car companies represented by Volkswagen are accelerating the transformation of intelligent electrification, while Japanese car companies represented by Toyota are still on the traditional track. Although Toyota's sales in the past two years have surpassed Volkswagen's in the past two years, it is not as rapid as Volkswagen's transformation."
As the saying goes, the sky makes up for the roof. Volkswagen's advance layout is to hope that it will be more active in the new energy wave and be able to face the unprecedented major changes in the automotive industry in a hundred years.
Volkswagen Group reportedly said that driven by its electric vehicles, the company achieved the statutory target for carbon dioxide emissions from the European Union last year. According to the data, in 2021, Volkswagen delivered a total of 452,900 electric vehicles, an increase of 96% year-on-year. At a media briefing in March last year, Volkswagen CEO Herbert Diess claimed that the Volkswagen Group's 2021 electric vehicle sales target is 1 million units, becoming the global leader in the electric vehicle market by 2025 at the latest. This also shows that its annual new energy vehicle sales target completion rate is less than 50%.
It is worth mentioning that Volkswagen delivered 119,000 new energy vehicles in the Chinese market last year, an increase of 128% year-on-year. Among them, the main ID. family has delivered a total of 70,000 vehicles per month since its listing in March, and although it has not completed the annual sales target, this achievement is very close to the new force of China's head car manufacturing.
"Traditional car companies develop new energy models, compared with new energy vehicle companies, the business and historical burden is too large, which will affect the resource investment and production and marketing docking of new energy business, so the sales results achieved by Volkswagen are already valuable." A senior industry insider told Times Finance that "the transformation of multinational large car companies is as difficult as multinational large enterprises in any other industry." Therefore, Volkswagen's transformation results are far better than those of other similar enterprises, especially traditional Car Companies in the United States. Volkswagen has determined the transformation direction of electrification, and will also be more active in the allocation of electrification resources, if the relationship between new and old core products can be better resolved, Volkswagen may be a traditional large multinational car company transformation more successful."
"Volkswagen Group China is solidly promoting its electrification strategy. Despite the impact of the new crown epidemic and the shortage of chip supply, the Group's cumulative deliveries in the Chinese market in 2021 decreased year-on-year, but still maintained its market leadership, especially the sales of pure electric vehicles showed a strong upward momentum. In an interview with Times Finance, the Public Relations, Communications and Corporate Social Responsibility Department of Volkswagen Group (China) said that in 2022, the group hopes to double the sales volume of the ID. series based on more models and alleviate supply difficulties through measures.
Intelligence is a short board
"Smart (self-driving) cars are the real 'game changers' in the automotive industry, not electric vehicles." Volkswagen Group CEO Herbert Diess said last year.
However, it is worth mentioning that volkswagen's main ID. series models are more well-known for mechanical qualities such as driving control experience, rather than being intelligent. In the eyes of the industry, this also means that the public is still competing with their own experience accumulated in the old era, and the short board is still the short board.
Earlier, Zhang Xiaoliang, founder of SoCar Product Strategy Consulting, said in an interview, "Volkswagen does not understand the logic of the Chinese market at all, and the starting point of product strategy is wrong." If it is still for the purpose of equivalent substitution, it is actually a consumption downgrade, and what we need is an electric vehicle that gives us the experience and performance that fuel vehicles cannot give."
PwC once said in a research report that the ID series is an excellent electric vehicle, but it is not smart enough. Driven by Tesla, Weilai, Xiaopeng and Ideal, the Chinese market has entered the second stage of electric vehicles: electric vehicles + smart cars. Europe is still in the first stage, so the ID series can sell well in Europe, but in China, the response is mediocre.
According to the data, the Chinese market accounts for about 40% of the total market of Volkswagen, which is also an important reason why Volkswagen has been able to repeatedly win the top of the car company in the past few years. In the era of vehicle electrification, Volkswagen can still stabilize the European base camp, but in order to obtain the status of the era of fuel vehicles, Volkswagen must have more achievements in the Chinese market.
However, a Volkswagen Chinese insider told Times Finance that traditional car companies such as Volkswagen, which are lagging behind in terms of intelligence, still hope to catch up with new forces in the future, "on the one hand, the cycle of achieving full automatic driving is very long, and traditional car companies can slow down and work carefully; on the other hand, car companies can rely on Tie1 or Tie2 suppliers, but profits may be swallowed up a large part."
At present, Volkswagen is also constantly laying out the field of intelligence. The Public Relations, Communications and Corporate Social Responsibility Department of Volkswagen Group (China) told Times Finance that earlier this year, the ID. family ushered in an important software upgrade to further enhance many functions in the car, including AR-HUD (Augmented Reality Head-Up Display System). Later this year, China's ID. products will also open OTA remote over-the-air upgrades. At the same time, the Group is further expanding and enriching its R&D deployment and strength in China. By 2025, the Group will enhance the intelligent interconnection function on the existing platform and launch the L2++ autonomous driving function. In addition, it is also vigorously promoting the development of automotive software and digital company CARIAD.
It is worth mentioning that according to recent reports by foreign media, the German Volkswagen Group is negotiating with Huawei to acquire its autonomous driving division for billions of euros. The group's top brass has been negotiating the deal for months, which also involves a technical system that Volkswagen is not good at.
In this regard, the Public Relations, Communication and Corporate Social Responsibility Department of Volkswagen Group (China) told Times Finance, "We will not comment on Huawei-related topics for the time being." Although neither Volkswagen nor Huawei has made a clear response to the above rumors, the market is very concerned. Some insiders said that if Huawei's automatic driving department can be acquired, it will not only help the public to better make up for the shortcomings of intelligent cockpits and automatic driving, but also achieve localization innovation relatively well. If it can occupy a place in the Chinese market, it will also have a strong competitiveness in the global market.
The real resistance is inside
In the industry's view, product and technical problems, I believe that volkswagen will eventually catch up by strengthening layout and cooperation, but the premise is to solve internal resistance.
In fact, since the beginning of the transformation, the struggle within the masses has never stopped.
"Accelerate the transition to electrification and digital transformation, or repeat Nokia's mistakes in smartphones." In January 2020, Diess said at the Volkswagen Group's global board of directors. In late 2020, Diess released a long article on LinkedIn, "How Volkswagen Is Transforming," "As CEO, I think the key question is: How can we get this huge team and its stakeholders to rethink their own perspectives, let go of past successes, fundamentally change priorities, and work to develop new capabilities."
Reform is the redistribution of interests, which will inevitably hurt the interests of some people. In addition, it is an objective law that reform must go through a period of pain, from one kind of stability to another, and a period of instability in the middle. As a reformer, Dies also knows this truth, but the surging wave of new energy does not have time for him to carry out "gradual reforms".
"The time window left for the transformation of various car companies is actually very small, basically there are 3-5 years, and the pattern of intelligent new energy vehicles will form a relatively stable situation." Zheng Yun, global senior partner at Roland Berger and head of the Automotive Industry Center in Greater China, said in an interview with Caijing magazine.
"We honed our system and decentralized in Wolfsburg, reorganizing our series of processes with a more modern structure to remove bottlenecks that hinder product decisions." In order to accelerate the pace of transformation, Diess has promoted drastic reforms. Through layoffs and other means to reduce costs, to new energy vehicles tilt a lot of resources.
The overly drastic measure also directly triggered the contradiction between Dies and the mass union. In the past few years, Disces has often clashed with the union, and its voice and prestige within the group have gradually decreased. In October last year, According to Reuters, Diess said at a meeting of the supervisory board that if Volkswagen's electrification transition is too slow, it may lose 30,000 jobs.
It is worth mentioning that if the road to mass transformation is smooth, internal reform gradually enters the deep water area, when the public from product design and development, supply chain management to sales model will have great changes, and now the workers who are still working for the public in the traditional mode, how many can still be successfully left after the successful transformation, with a question mark.
Some insiders told Times Finance, "Even if everyone knows that transformation is the only way out for the public in the new era, everyone wants to be able to retire safely, rather than being a victim."
For the difficulties and obstacles that Volkswagen will encounter in the transformation process, the senior industry insiders said, "The biggest problem lies in internal constraints, the traditional business and interest pattern is deeply rooted, how to break the barriers, in the condition of not choking on food, better handle the relationship between traditional vehicles and new energy vehicles, is a great test." On the one hand, the pace of transformation is too fast, which will impact the original dominant business, after all, the current sales share is still dominated by traditional cars, but on the other hand, excessive conservatism may miss opportunities and sacrifice the future."
Perhaps Volkswagen's biggest obstacle is its deep-seated culture, built around a seven-year car cycle, according to a Bloomberg review article. Traditionally, production line and brand managers have almost complete control over what they do with their vehicles, and Volkswagen's powerful unions can influence almost all decisions.
Needless to say, Dies is an excellent professional manager, but he is also only a professional manager, and he does not have the power to make decisions within the group as Musk did in Tesla, but needs to constantly coordinate the relationship between shareholders, unions, and sub-brands, and deal with the balance between long-term goals and short-term gains.
Under many pressures, many European car companies, including Volkswagen, announced their transformation plans. Volkswagen plans to invest a total of 159 billion euros over the next five years, of which 89 billion euros will be spent on technologies such as software and electric vehicles, accounting for 56% of the total investment. In addition, the Volkswagen Group also expects that by 2026, a quarter of the cars sold by the Volkswagen Group will have pure electric systems.
At the same time, Volkswagen's Supervisory Board announced a change in executive personnel, and the current Ceo of Volkswagen Group, Herbert Diess, remained in office, but his authority was reduced, and the CEO of the Volkswagen brand was removed and will be mainly responsible for the responsibilities of Cariad, the company's software division.
Compared with the previous market rumors, The Retention of Diess is undoubtedly the best result for the public and itself. In an interview with foreign media, Dees said, "I will not complain about losing some of my power, I still think I have full responsibility for the company."
"Dis's re-election is a sign of good for Volkswagen, and accelerating the pace of transformation is an important measure to put Volkswagen in a sustainable development advantage in the future." Cui Dongshu said. The above-mentioned senior industry insiders also said that the transformation of multinational large car companies is more difficult than that of multinational large enterprises in any other industry, and even the internal obstacles are greater than the external environment. Therefore, Volkswagen's transformation results are far better than those of other similar enterprises, especially traditional Car Companies in the United States. Volkswagen has determined the transformation direction of electrification, and will also be more active in the allocation of electrification resources, if the relationship between new and old core products can be better solved, Volkswagen may be the traditional large multinational car company transformation more successful.