VW's mainland sales soar 94pc
Monday, April 21, 2003
biz.scmp.com
MARK O'NEILL in Shanghai
Volkswagen's (VW) China sales increased 94 per cent in the first quarter and the company expects its mainland plants could start exporting from next year, Volkswagen Asia-Pacific president Bernd Leissner says.
Mr Leissner was speaking on media day at the Shanghai Auto Show, China's biggest car event, at which more than 700 companies are displaying their products in an 80,000 square metre Pudong exhibition hall.
Last year, VW sold a record 513,000 vehicles in China. They were made at joint ventures in Shanghai and Changchun, Jilin province, its biggest market in the world after Germany. This was 43 per cent more than in 2001 and accounted for about 44 per cent of the total passenger car market.
Mr Leissner said VW sold 162,000 vehicles in the first three months, an increase of 94.1 per cent over the same period last year.
"Our plants are working almost 24 hours a day, including weekends," he said. "They will work on May 1 and we have no stocks. We have never seen such growth in China. The private buyer has taken over. The growth makes this year's target of 600,000 units comfortably within range. Our plan was over one million cars by 2007 and we will have to bring that target forward."
To meet these targets, cities, including Beijing, are courting VW to build a third plant. In turn, VW has lobbied Beijing's Communist Party chief Liu Qi to be the automotive supplier for the 2008 Olympics.
Mr Leissner said VW would first expand capacity at its two joint ventures.
"If it were more, that would be something else and that question has not been answered yet," he said.
On exports, he said production costs in China were higher than the world level, with those of personnel higher than in the Czech Republic.
"If we went into a new location, we would only hire 25 per cent of current personnel," he said.
Materials, which account for 78 per cent of the cost of the finished vehicle in China, are also higher than world averages. "Our suppliers were protected for too long before entry into the World Trade Organisation. They have to come down to earth. To export from China, we have to bring down costs to world levels. We are working to bring costs down."
Mr Leissner said China could be a major export base to manufacture cars and VW should export 10 to 15 per cent of its output from the mainland. "We should be ready for export business from the start of [next year]."
As the market leader in passenger cars, VW is the most vulnerable to new entrants in the market. As late as 1996, 11 years after the foundation of its Shanghai joint venture, it was earning a net profit of 15,000 yuan (about HK$14,000) to 20,000 yuan per car - twice its average global profit level - thanks to the government's policy of keeping car prices high.
But the government has shifted policy, aiming to turn the car into a mass product, and has approved the entry of VW's global rivals in the market, provoking fierce competition. Toyota has started a joint venture with state-owned First Auto Works, one of VW's two partners, and is offering better salaries and conditions to lure VW's staff.
A European manager said: "Of course, Toyota is targeting VW because it is the market leader.
"It is attacking the Chinese market with the same seriousness it attacked the American one . . . a new entrant is quicker and more aggressive." |
