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Wei Zhibo, the vice president of Volkswagen, oversees 54 factories worldwide and spends most of his time in the air. Yet, flying to China always brings him a sense of joy. Despite this, he is quietly concerned about the long-standing "boss" status of the Chinese market that has lasted for two decades. However, who can truly deny that the public's preferences are ever-changing? Who would dare to say that after such changes, the public won’t still hold its dominant position? At the groundbreaking ceremony for the Volkswagen FAW platform parts factory on July 14th, Wei Zhibo appeared confident. He looked at the audience and said, “Thanks to the leadership of Yan Yanfeng and Jilin Province.†In closing his speech, he wished, “I hope the factory will be built smoothly, everything will be safe, and all goals will be achieved.†His words reflect an understanding of Chinese culture.
It’s often said that Volkswagen products come with a high price tag. Some critics argue that the company hasn’t fully adapted to the evolving Chinese market. For example, many part certifications are still conducted in Germany. After being in China for 20 years, why hasn’t Volkswagen established its own local supply chain? The company hasn’t directly addressed these questions. But the real issue lies in one word: profit. Who would willingly give up profits when they’re already reaping the benefits? Germans, known for their straightforwardness, don’t often engage in polite talk. This makes some practices seem less appealing. However, the situation has changed significantly now.
In China, Volkswagen now faces strong competition from GM, Ford, and others. If it continues to stick to its old principles, its market share could drop from 50% to 40%, and eventually to 32%. To survive, change is necessary. Reducing production costs is the key, and shifting more part development and certification work from Germany to China is the only path forward. The joint venture with FAW to build a parts factory in Changchun is a crucial step. While Volkswagen had previously collaborated with SAIC in Shanghai, those were limited to single components. The new FAW Platform Parts Factory will produce all major vehicle components, including front and rear axles, suspension systems, steering, and braking systems.
According to Wei Zhibo, this facility will be one of the most technologically advanced parts factories globally. Once completed in 2005, it is expected to have a capacity of 400,000 units annually. Initially, it will mainly supply models like the Kaidi and New Bora. The total investment in the project is 1.42 billion yuan, with Volkswagen holding 60% and FAW 40%. Additionally, Volkswagen announced plans to invest in a new engine plant in Dalian with FAW. These moves indicate that Volkswagen, once the undisputed leader in China, has finally realized the importance of localizing its supply chain. This shift is a positive and encouraging step. However, some remain skeptical about whether the market will give them enough time. As firecrackers exploded at the groundbreaking ceremony, both Wei Zhibo and Yan Yanfeng looked into the future with hope.