FAW – VW China, continuing leadership in China
The Sino-German joint venture FAW-VW has confirmed again its strong position in China and has achieved an all-time record share in the total VW sales. Of every 100 cars sold globally by VW in 2017, 49 were delivered in China. In terms of volume, this represents almost 3,5 million vehicles. On the Chinese market, Volkswagen is the most popular brand and the 2018 Q1 figures confirm the trend: a YOY increase of 8.6% for a volume of 755K units.
Impressive figures, but this doesn’t mean that FAW-VW can sit back and relax. Today we’re asking feedback from Oliver Lajara, sales director for Central China. Oliver has lived and worked in Europe, Asia and the US before moving to China. Very quickly into our conversation, Oliver tells GlobalFleet that China is the most exciting market he’s ever worked in. But now, more about VW.
Oliver starts: “We’re number one in 2017 and we were number one in 2010. What has changed, is the competitor landscape and the client.”
Oliver explains how the popularity of certain OEMs has drastically shifted over the last couple of years. “The market in 2010 was dominated by Japanese, Korean and US OEM’s. VW was the only European EOM present in the top 10. Today, Toyota has been pushed back to number 5 where they used to be number 2 in 2010. Geely has come out of nowhere and is now on number 3 – the Chinese consumer seems to trust a brand with strong European links. Honda has started to focus on SUV’s and it’s catching on with the Chinese buyer, who is turning away from sedans and prefers higher and bulkier vehicles. Honda is now number 2.”
As any OEM, VW is monitoring closely how their clientele is evolving. Today’s target client has become a lot more demanding than the previous generations. 10 years ago, clients walking into the showroom were not well informed about the car market. Nowadays, the customer is much more sophisticated, much more interested in innovation and design and wants its preferred brands to reflect hipness and sophistication.
When the client changes, sales strategy and product development need to follow. VW China’s 2025 strategy is unsurprisingly focusing on NEV (aiming to reach a volume of 4 million units by 2025) and reducing the average consumption of ICE’s to 4 litre per 100 km. Besides that, VW will be producing a bigger variety of body styles with a focus on SUVs and Cross-Overs and has announced that new technologies will be rolled out much quicker.
The Joint Venture
FAW – VW is owned 60% by the Chinese and 40% by Volkswagen. Decisions are made jointly, regardless of the nature of the topic, but there’s an underlaying split of responsibilities. The Chinese are driving most of the practical and operational aspects of the business, whereas VW’s opinion matters more on a strategic level. This is true for the 2 joint ventures: the Shanghai VW joint venture and the FAW – VW JV.
“Corporate Sales only count for about 10% of the total sales”, says Oliver. “It comes from the fact that car scheme programs are not very developed. Leasing and rental are not common either; in other words, there’s a small potential. You could say that the Chinese corporate client is usually either Government, SOE’s (state own enterprises), Taxi, Driving Schools or Car Hailing providers. There are not that many traditional corporate clients. Nevertheless, we have at least one fleet responsible in each of the 6 regional sales districts plus a bigger team at the HQ in Changchun.”
Tips for the fleet managers
Oliver explains: “Don’t expect anyone to speak English. Make sure you either learn the language or have a good translator available. Focus on relationship – no deal in China is done in the office. If you’re sympathetic with your stakeholder or counterpart, things will become a lot easier, so spend enough time on building the relationships with your suppliers, but also with your Chinese counterparts, if you’re not based in China. Forget about “yes” and “no”; those words don’t mean much in China as people will always try to find a solutions that is mutually acceptable. It’s much more flexible. Finally, be fast.”
Oliver also mentions the importance of regulations: ”The National Government sets the pace and local authorities follow. Whatever you do, make sure you are connected to people who know the regulations and connect with lobbyers to understand what’s really happening.”