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Wei Zhibo, the vice president of Volkswagen, oversees 54 factories across the globe and spends most of his time traveling by air. However, flying to China always brings him a sense of joy. Despite this, he is quietly concerned about the long-standing dominance of the Chinese market, which has been in place for over two decades. Yet, who can truly say that the public’s position as the “boss†is unshakable? After all, change is inevitable, and no one can predict what the future holds. At the groundbreaking ceremony of the Volkswagen FAW Platform Parts Factory on July 14th, Wei Zhibo appeared confident and optimistic. He expressed gratitude to the leadership of FAW under Yan Yanfeng and to Jilin Province, saying, “I hope the factory will start construction smoothly, everything will be safe, and all goals will be achieved.†His words reflect a deep understanding of Chinese culture.
It’s often said that Volkswagen vehicles are expensive, and some critics argue that the company hasn’t fully adapted to the evolving Chinese market. For instance, many parts and components are still certified in Germany, even though Volkswagen has been in China for 20 years. Why hasn’t the company established its own local supply chain? While Volkswagen hasn’t directly addressed these concerns, the real issue lies in profit. It’s not easy for a company to give up its margins and share them with local partners. Germans, known for their straightforwardness, tend to prioritize clarity and efficiency, which sometimes comes off as rigid or less diplomatic.
However, times are changing. With strong competition from GM, Ford, and other multinational automakers, Volkswagen must adapt or risk losing market share. If it continues with its traditional approach, its market share could drop from 50% to 40%, and eventually to 32%. To stay competitive, the company needs to make significant changes—especially in reducing production costs. Shifting more parts development and certification functions from Germany to China is the only way forward.
The joint investment with FAW in Changchun to build a parts factory is a key step in this direction. While Volkswagen has previously collaborated with SAIC and FAW in Shanghai on single-component projects, this new factory will produce all critical 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 plants globally. Once completed in 2005, it is expected to have a capacity of 400,000 units annually. The project, costing 1.42 billion yuan, will mainly supply models like the Kaidi and New Bora.
In addition, Volkswagen announced plans to build a new engine plant in Dalian with FAW. These developments signal that the once-dominant brand is finally recognizing the importance of localizing its supply chain. This shift is a positive move, although some remain skeptical about whether the Chinese market will support such investments in the long run.
As fireworks exploded at the groundbreaking ceremony, both Wei Zhibo and Yan Yanfeng looked into the future with hope. (He Beishi)