China Business

Volkswagen Doubles Down in China. Should You?

international lawyers Thailand Vietnam

Easy for me to say because I am in a market sector (boutique international law firms) which is actually seeing increasing market penetration and growth during and because of the economic downturn, but I think now is the time for foreign businesses to increase or commence their China market presence.

And I know I am not alone in this.

I know this because my firm has seen increased business over the last six months from new clients choosing to go into China now. These businesses are telling us essentially one or both of two things. One, China is their best chance for growth now. Two, they had been planning to go into China for years, but did not have sufficient personnel capacity to make their move. The downturn has freed up employee time domestically, and they are repositioning that time for their China move.

I also know this because of an article I read on Volkswagen’s increasing its China presence for similar reasons. China Stakes just came out with an article, entitled, Volkswagen Ignores the Economic Winter, Plans to Thrive in China, [link no longer exists] setting out Volkswagen’s big long term plans for China.

Dubbed the “2018 Strategy,” Volkswagen’s plan is to double its China sales by 2018. Between now and then, Volkswagen and its sub-brands, including Audi, and Skoda, will launch at least four new models each year and to greatly increase their China capital investment:.

“Despite the market depression, our plan to invest €2.4 billion in China between 2008 and 2010 remains unchanged,” says Volkswagen (China) President and CEO Winfried Vahland. He adds that the company’s investment in China will focus on development of new technology, introduction of new products, brand enhancement, sales networks, and service upgrading.

Volkswagen sees China as central to its success globally:

Mr. Vahland regards VW’s success on the Chinese market as an important element in the company’s worldwide success. “Our strategy is to introduce our most advanced power assembly technology and most advanced car types into China, for example the TSI engine and DSG double-clutch gearbox.”

For VW, China will soon become its largest single market. “Despite temporary difficulties, Volkswagen will continue high investment in product development.

Volkswagen’s plans are based on its confidence in the long-term trends of the Chinese economy. It sees China restoring “high GDP growth by 2011” and it is positioning itself for then. Volkswagen is certainly not the only company taking advantage of the worldwide economic downtown to increase its penetration of the China market.

I would love to hear about other companies doing the same thing.

One response to “Volkswagen Doubles Down in China. Should You?”

  1. As strange as this may sound, this is not as aggressive a move as it may seem. I think this is more of a defensive move by Volkswagen.
    The manufacturers of Chinese independent brands are all cranking out new models as if the economic crisis has been a mere bump in the road. Chery plans to introduce 15 new models in 2009. Geely plans 12.
    Volkswagen is just trying to stay in the game. Yes, they do have the advantage of a perception of higher quality, but the better selling vehicles right now are in the 1.6l and below class that enjoy tax breaks. VW offers little in that range.
    Furthermore, the government has indicated its support for independent brands with the ultimate goal to (I think) displace foreign brands. As the quality perception of independent brands begins to reach that of foreign brands, it will be harder to move the more expensive cars.
    The only question is how quickly the independent brands can step up quality. My guess is that, when Chinese cars begin to be exported to the U.S., Chinese will take that as a signal that their quality has improved.

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