VW plots China push as trouble looms at home

FRANKFURT • A year into his tenure, Volkswagen AG (VW) CEO Herbert Diess is entering critical months as he seeks to expand the carmaker’s sprawling Chinese operations, while containing tensions at home in Germany.

The Chinese market is leading a global shift toward electric vehicles and will take on a bigger role for the German automaker as both a production hub and a research and development centre, Diess told reporters on Sunday at a presentation near Shanghai.

“China emerged as a powerhouse of the automotive industry,” Diess said.

“As a brand, we want to be No.1 in terms of electric mobility, in China and beyond.”

Diess indicated last month that VW is considering increasing local joint-venture (JV) stakes to expand in the world’s largest automobile market, part of a strategy review due to be completed by early next year.

At the same time, he’s planning cutbacks in Germany to free up more cash to invest in the company’s ambitious technology shift.

His chances of boosting VW’s equity ties in China have risen as authorities ease restrictions for foreign manufacturers and a slowing market adds to pressure on local peers. VW intends to do more with “all three JVs”, Diess said on Sunday.

After Chinese auto sales posted their first annual decline in decades last year, VW said yesterday that demand in the market is picking up. VW brand global sales chief Juergen Stackmann told reporters a reduction in value-added tax is helping sales, and he expects car sales in China to be roughly even with 2018 — despite a decline in the first quarter.

VW shares were little changed at €153.22 (RM712.47) as of 9:43am in Frankfurt yesterday.

VW has ties with SAIC Motor Corp Ltd and FAW Car Co Ltd, two of China’s largest manufacturers, after being one of the first foreign automakers to arrive in China more than three decades ago.

As part of the strategy review, VW is exploring options to acquire a stake in its third partner, Anhui Jianghuai Automobile Group Corp Ltd, which is much smaller than SAIC or FAW. Any broader initiative would still have to involve those two as well.

“We have a lot to offer — and together we can be the strongest alliance in the industry,” Diess told the company’s staff newspaper in March. “This is a great opportunity for us and we need to take advantage of it.”

China accounts for 40% of the VW group’s global deliveries and a large chunk of profit.

The two main JVs generated another year of double-digit pretax profit margins in 2018 despite the market’s decline, according to a presentation published on the corporate website. — Bloomberg