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Is Volkswagen All Set In China

September 02, 2014 | About:

China is the second-largest automotive market and Volkswagen (VLKAY) has been able to create its indelible footprint in the country. While in the U.S. Toyota (NYSE:TM) has been the ruler with Volkswagen trailing behind, in China the story seems to be a bit different. Let’s have a sneak peek into what Volkswagen is doing in China to keep its footage steady amid intense competition.

A quick look at the numbers

China is the single largest market for Volkswagen. Though the German automotive honcho is trailing in terms of unit sales in the U.S., it has a strong hold in the Chinese auto market where it even leads the race with the world’s largest automaker Toyota trailing behind. In June, Volkswagen’s passenger cars sales volume grew by a whopping 18.5% whereas Toyota experienced a sales drop by 7.6% the same month.

In China this year, Toyota is expected to bag a potential 1.1 million unit sales while Volkswagen is expected to sell around 3.5 million units – this clearly indicates that Volkswagen is about to emerge the winner in the foreign land surpassing the Japanese behemoth by a huge margin.

Solid strategies for China

CEO Martin Winterkorn, has stated that the Volkswagen group would be investing 2 billion euros ($2.7 billion) to construct two more assembly plants in China. This is part to the greater plan of spending 18.2 billion euros in China through 2108 for capacity expansion, and increasing the number of models sold in the Asian country.

"China has become our largest and most important market," VW CEO Martin Winterkorn stated. "To satisfy the demands of our customers in the country, we are engaging in a further substantial expansion of our capacities in China together with our Chinese partner FAW Volkswagen."

Indeed, with two more plants operational in China, it would improve the production numbers largely and will play a vital role in surpassing Toyota – a dream to be accomplished by the German giant by 2018. As the second largest world economy grows, the number of licensed drivers is estimated to swell to 1 billion in the next 10 to 15 years. Thus, the improvement in terms of production capacities would aid in catering to the growing demand for economical and fuel efficient powertrains.

In addition the German automaker intends to strengthen its dealership network from the current 2,400 to about 3,600 in the coming few years. As the Chinese government is trying hard to formulate regulations for promotion of green cars and strict emission norms are being enforced, Volkswagen too has set the introduction of ten new green car models in the market as the top priority in its agenda.

Final word

Nevertheless, all the above statements point to the fact that Volkswagen is on a fabulous growth trajectory in China and is taking all measures to secure its position when compared to its immediate rival, Toyota. Though China’s GDP is presently facing stagnation issues, yet the automarket is slated to keep improving in the near future. Auto companies like Volkswagen will reap the ultimate benefit if their plans in China see the light of the day. Let’s stay tuned and keep a close watch on how Volkswagen keeps its presence strong in the country and whether it’s able to oust its competitor completely, when it comes to China.

About the author:

We are a group of analysts exploring and analyzing different domains of business and writing reviews based on information available in public domain web portals. We do not hold any stock or investment position in any of the companies that we write for.

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