The debut of Wen Zeyue, the new president of Audi China, was achieved during the release of Audi's global financial report. "I've been in China for 6 weeks and I'm studying every day, and I need to get a quick overview of everything that's going on in the last two years." Wen Zeyue told the Economic Observation Network reporter that he was well aware that he was in charge of an irreplaceable and important market. Making Audi more Chinese and allowing Audi to return to the first place in Huahao is the goal set by Wen Zeyue. His first task is to ensure the construction of the newly started Audi FAW New Energy Automobile Co., Ltd.
Wen Zeyue became president of Audi China on January 1 this year, which is not an easy and comfortable position in the Audi system. This can be seen from the fact that Audi China has changed five heads in the past 8 years. Its predecessor, Nesperau, had a good reputation and business fortune in China because he was in charge of the China business twice, but Nexer announced his retirement immediately after completing the icebreaking responsibility for the North-South Audi stalemate. This also allows Wen Zeyue to face a complex situation in which a new pattern has just been opened after taking over.
Dusman, chairman of the board of management of Audi AG, who is headquartered in Germany, supported Wen Zeyue's first appearance by linking a special interview with Chinese media. Of course, between the Dominance of the Chinese market over global auto consumption trends, the frequency with which President OpalBen connected to China has itself been on the rise over the past two years.
For Dusman, on the occasion of his second anniversary at the helm of the global luxury car leader, this eye-catching earnings report has doubled his confidence. In the context of the grand transformation strategy, the financial data of the overall increase in revenue in 2021 has become the most powerful proof that Audi is "moving in the right direction".
"Audi is firmly pushing its transformation process", Dusman uses as a note on the "right direction". On this road, in addition to the end of the transformation of full electrification, more decisive products and investment plans are becoming the most attractive chips for Audi shareholders in the short term, including changes from China and the new electric ecology that Audi wants to form in China.
Abandon the demand for small cars
According to the financial report released on March 17, the Audi brand delivered a total of 1.68 million vehicles to customers in fiscal 2021, down 0.7% compared to 1.69 million in 2020. Dusman said that due to the shortage of chips, there are six-figure models that cannot be delivered on time.
But thanks to good pricing and strong market performance of the Audi Q3, Audi Q5, Audi e-tron family, as well as lamborghini and Ducati brands, Audi's sales revenue reached around 53 billion euros, an increase of 6.2% compared to the previous year.
In addition, Audi's operating profit in fiscal 2021 doubled from €2,569 million in fiscal 2020, driven by continuous cost optimization, raw material hedging, and positive effects on currency exchange rates, doubled to 10.4 percent in fiscal 2020 at 2020 at 5.1 percent.
If the Chinese business, which will exist in the form of "investment income", is included, the Operating Margin of the Audi Group has reached 12.5%. In FY2021, the Audi Group achieved financial results of EUR 1,430 million (FY2020: EUR 1,618 million), of which sales in China amounted to EUR 1,140 million (FY2020: EUR 1,009 million).
Audi also set the best record in net cash flow, the most intuitive measure of the company's operating conditions. In 2021, the Audi Group's net cash flow reached 7.757 billion euros, an increase of almost 70% from 4.589 billion euros in 2020. This, According to Audi, is due to "higher profitability, working capital management during semiconductor supply shortages, and ongoing investment optimization."
In the case of chip shortage crisis, soaring raw material prices, epidemics all over the world, and declining sales, is Audi's revenue boom due to a brief recovery in 2020 when the base is too low, or has it opened a new round of upward channels? To this, Dusman replied that "Audi is systematically transitioning to a sustainable business model."
"In the future, Audi intends to reduce the number of small vehicles, and we will further strengthen our development in large vehicles. In the Chinese market, we will continue to provide Audi Q2L models according to customer needs. Dusman said.
A more accurate way to put this product change is: "Through the synergy between the volkswagen group's brands, Audi will gradually shift its positioning to the high-end luxury field." After Audi reduces the number of small cars, other Volkswagen Group brands can take over this market. ”
This strategy will be implemented in all product systems. "In the future, our comprehensive electrification strategy will play a very important guiding role, and in the future we will focus our research and development work on high-end electric vehicles." In the future, we will continue to adjust our product lineup in China according to the needs and wishes of Chinese customers. ”
In fact, the effect of this product reform idea has been emphasized in the financial summary of high-end models that bring a "higher profitability level". Moreover, at present, it seems that the main focus on high-end is the common idea of almost all luxury car brands at present.
However, from the perspective of audi fuel vehicles with only 5 years left to push the new deadline, electric vehicles will be the main executors of this route. Audi became the first German high-end automaker to announce a roadmap for the exit of its fuel vehicle business in mid-2021. As an important part of its "Vorsprung 2030" strategy, Audi will stop developing gasoline and diesel engines until 2025; after 2026, Audi will put on the market all pure electric vehicles; and in 2033, it will stop selling fuel vehicles. However, the above-mentioned discontinued fuel vehicles do not include the Chinese market, and China will continue to produce Audi fuel models locally after 2033.
In 2021, Audi's pure electric vehicle deliveries increased by 57.5% year-on-year. According to the plan. In 2026, Audi plans to offer more than 20 pure electric models.
"Exception" to China New Joint Venture Variable
"The challenge is very big, we are moving from internal combustion engines to electric vehicles, and this transformation will not be completed until 2030." Wen Zeyue said.
China's "exception" status in Audi's strategy makes Wen Zeyue's work more challenging. Audi fully considers the particularities of the huge Chinese market, so the abandonment of the small car strategy is in China, the fuel vehicle suspension plan is in China, and the high-end electric vehicle plan is considered in China. However, judging from the fact that the sales of Audi's entry-level models in China have declined, and the strength and speed of the electric intelligence revolution in China's automotive industry, it is difficult to say whether Audi's "exceptions" are necessary.
In fact, these exceptions have not hindered the rapid implementation of Audi's electric strategy in China. In addition to the domestic production of the e-tron series of electric vehicles, in China, the start of construction of a new company has become a positive expectation for the future in Audi's financial report.
The new joint venture, Audi FAW New Energy Automobile Co., Ltd. (Audi FAW New Energy), which has just been approved by the Chinese government, was frequently mentioned during the release of Audi's earnings report. Dusman calls it the "PPE Project" because when it is completed, it will be put into production on the PPE electric vehicle platform jointly developed by Audi and Porsche.
Dusman bluntly said that the new energy vehicle company, which is controlled by Volkswagen and Audi and is a joint venture with its "old partner" FAW, will strengthen Audi's position in the Chinese market. The company was approved at the end of 2021 and construction will begin in April this year. "The PPE plant will be a modern factory, which is also a milestone in the history of Audi China's development." Wen Zeyue said.
Audi's resume shows that Dr. Winzer has a degree in mechanical engineering. He joined the Volkswagen Group in 2004 and held management positions in the production departments of Volkswagen Commercial Vehicles and Audi, as well as in the production planning and production strategy departments of the Volkswagen Group. In 2013, Wen Zeyue was appointed as the deputy general manager and director of FAW-Volkswagen Motor Co., Ltd. (Technology), responsible for technology research and development, product management and manufacturing.
"Experienced automotive manufacturing and technology experts" is Dusman's evaluation of Wen Zeyue, which also partly explains why Wen Zeyue will take over as Neseo at this time, and leading the PPE project in Changchun will be Wen Zeyue's top priority. In addition, he is responsible for formulating Audi's product strategy in China, research and development, and sales operations, which are also the scope of his work as president of Audi China.
In 2021, the north-south Audi deadlock caused by the formation of the SAIC Audi joint venture between Audi and SAIC motor was resolved, clarifying the "boss" position of FAW-Volkswagen Audi in the Audi joint venture structure, and Wen Zeyue believes that the structure of "dual joint venture partners" has landed smoothly, symbolizing that Audi has taken a key first step in the adjustment of its business model in China.
But the establishment of Audi FAW BJEV means that the next second step is already waiting for him. Audi FAW BJEV is jointly owned by Audi and Volkswagen for 60%, and the holding label gives it a natural advantage in Audi's joint venture system in China, which also brings new problems.
Regarding the sensitive question raised by the reporter, "whether the importance of FAW-Volkswagen Audi in the joint venture system will decline in the next decade", Wen Zeyue admitted, "This topic is indeed very important, and we are also studying the plan in this regard", he revealed that the relevant information will be released at the Beijing Auto Show.
"We will look at this issue from a more macro perspective", in Wen Zeyue's view, this is not only a problem for Audi to think about, but a long-term problem for the entire Volkswagen Group to solve.
As the first beneficiary of China's liberalization of the restrictions on automobile joint venture policies, Volkswagen has taken the lead in the electric vehicle business in China in a substantial sense with the help of two new energy companies, Volkswagen Anhui and Audi FAW New Energy. So in the context of the full electrification of new products in ten years, how will the traditional joint venture car companies formed by Volkswagen, FAW and SAIC change their positioning? How will the public's resources be allocated? This needs to be given as soon as possible.
From the perspective of the development of new energy vehicles, ten years is not a very long cycle. The Volkswagen Group's strategies for the past two years have all been geared towards the next decade. Judging from this strategic cycle, the new Positioning Map of Chinese Joint Ventures should have become a topic for Volkswagen.
The 2.6 billion-billion-dollar Audi FAW project will be completed and put into operation by the end of 2024 with an annual production capacity of 150,000 units, and the first phase will launch three models, including the Audi A6 e-tron and Audi Q6 e-tron families. At that time, Audi will officially join the competition in China's luxury electric vehicle market with systematic products.
It is worth mentioning that according to the agreement reached last year, the cars produced by the joint venture company will also be sold by FAW Audi Sales Co., Ltd. As an important result of the North-South negotiations, the sales company is a wholly-owned subsidiary of FAW-Volkswagen Audi and will be responsible for the sales of Audi models in China.
With the imminent relocation of FAW Audi sales company to Hangzhou and the opening of Audi's southern strategy, Wen Zeyue will become an important strategic implementer in the repositioning of a number of joint venture car companies with different share ratios and the allocation of resources for multiple electric vehicle platforms.
New poses developed in collaboration
In addition to the new joint venture layout in the vehicle field, another change in the next phase of Audi in China will be reflected in the new cooperation chain in the field of research and development.
Wen Zeyue is full of interest in the new ecology of China's automotive field, he is surprised by the speed of product landing of new car brands, full of admiration for the creativity of China's local Internet technology companies, and revealed that Audi does not rule out working with two or three of them. In 2021, Audi China has signed a strategic cooperation agreement with Tencent, and Audi has become the first brand in the luxury car market to truly apply the WeChat in-car version to the real car.
"As the head of R&D at volkswagen group, I would like to tell you that Audi will further expand its R&D work in model design, intelligent cockpits and interconnect systems, as well as electrification and autonomous driving in the future." While being named CEO of Audi in 2020, Dusman also became a director of R&D for Volkswagen, responsible for the R&D of the Volkswagen Group, which demonstrated Volkswagen's strengthening of Audi's strategic position. Audi headquarters Ingolstadt has also become the core of the Volkswagen Group's automotive software business, which hopes that the proportion of automotive software developed by itself will grow rapidly.
Dusman's "part-time job" and Audi's pioneering role in R&D in the Volkswagen Group give Audi's China business another importance.
"Last year, Audi developed a new global corporate strategy. In China, we are also working on a localization strategy. Wen Zeyue revealed, "Our development strategy in China includes a research and development strategy, which is the core of China's localization strategy." ”
According to Wen Zeyue's statement, in the use of R&D resources, Audi will integrate China's R&D work, so that the R&D of the two joint venture partners will be combined with Audi's own R&D capabilities and consistent with Audi headquarters. At present, Audi has about 1,400 R&D personnel in China responsible for the research and development of Audi-related technologies, which are from the Audi Group and Audi's joint venture partners in China. Audi established the Asia R&D Center in Beijing in 2013, which is said to be the only R&D center for end-to-end development besides its headquarters in Germany.
"Further expansion of the field of intelligent driving and the development of electronic architectures for models" is the focus of Audi's new localization strategy in China. CARIAD, a software company owned by the Volkswagen Group, is now involved in research and development in the Chinese market. In terms of specific division of labor, intelligent interconnection will be led by CARIAD, and the development of the entire architecture design and driver assistance system will also be led by CARIAD, but at the same time it will work closely with Chinese partners; human-computer interaction will be developed in China; and the responsibility for the interior and exterior design of the model will gradually shift from Germany to China in the future.
"These R&D efforts are progressing as planned and will be implemented one by one in the near future." Wen Zeyue said that when it comes to products developed specifically for the Chinese market, the local R& D team will undertake more work, which has made the products more suitable for the needs of the Chinese market.
"One thing is very clear, that is, we will increase investment in the Chinese market." By 2024, Audi, volkswagen group and joint venture partners will invest around 15 billion euros in electrification in China. In addition to continuing to expand its lineup of electric models, Audi will also invest in innovative technologies such as autonomous driving and automotive electronics.
In addition to leveraging China's intelligent research and development strength to feed back the German headquarters, re-establishing the technological leading edge in China's luxury car market is another important idea of Audi. In the era of intelligent electric vehicles, this advantage has been divided among more and more local Chinese car companies.
At the Beijing Auto Show, which was scheduled to be held in April, Audi plans to exhibit the urbansphere concept car, as well as two sphere series concept cars that have been unveiled before. "In China, intelligent driving is an important and hot topic. I think in the next 2-10 years, this field will change a lot," said Wen Zeyue, who hopes that some of the ideas and technologies on the Audi concept car will appear in the production car in the future.
In the new competition of software-defined vehicles, in the face of the reality that China has occupied the high point of intelligent electric technology application, the localization of research and development that multinational car companies have been slow to land in the era of fuel vehicle joint ventures is being realized. At a deeper level, China also presents the possibility of transforming from Audi's most lucrative market into Audi's most important R&D branch.
Since last year, the BBA (Mercedes-Benz Audi BMW) has begun to publicly accelerate in absorbing China's intelligent car research and development capabilities. BMW has established a technology incubation and investment center in Shanghai in cooperation with government agencies to actively absorb the power of new technologies in China as an angel investor. During the release of Audi's earnings report, Mercedes-Benz announced the establishment of an R&D center in Shanghai to further expand its R&D layout in China, which will focus on the fields of intelligent interconnection, autonomous driving, software and hardware development and big data, just seven months after Mercedes-Benz put into operation at the China R&D Technology Center in Beijing.