VW Bets on EVs for China Growth as Chip Shortage Hits Sales
VW Bets on EVs for China Growth After Chip Shortage Hits Sales
(Bloomberg) -- Volkswagen AG is betting demand for electric vehicles and easing supply constraints will help it return to growth in China this year, after the global chip shortage dented sales in 2021.
Deliveries fell to 3.3 million vehicles last year, down 14% from 2020 when the first wave of coronavirus swept through the country, China Chief Executive Officer Stephan Wollenstein told reporters in Beijing on Tuesday. That missed the group’s internal target, he said.
The VW brand accounted for about 2.26 million deliveries, or around 11% of the national auto market. That compares to a previous share of 14%-15%, which Wollenstein described as a “substantial loss.”
The German automaker’s under-performance in one of its key markets illustrates how global carmakers have been hit by the semiconductor shortage that started in late 2020, as well as coronavirus outbreaks that have prompted swift lockdowns as China adheres to a strict Covid-Zero policy.
“If you talk to our logistic and production colleagues, it’s probably the hardest time in their business life,” said Wollenstein. “We have to adjust our production programs more or less weekly, depending on what we are getting as supplies on a global basis, and what difficulties we have to deal with on a local basis.”
Recent outbreaks in the cities of Ningbo and Tianjin have caused shutdowns at Volkswagen’s joint-venture plant and key suppliers, which affected production of the ID series of electric cars. The company has delivered 70,625 IDs since its launch in March, missing the original target of 80,000 to 100,000.
For 2022, the group is targeting a return to 2020 levels, which would add 500,000 to 600,000 units to sales, Wollenstein said. The company is confident of doubling sales of the ID series, to about 140,000, he said. In comparison, local EV makers Nio Inc., Xpeng Inc. and Li Auto Inc. delivered between 90,000 to 100,000 vehicles last year.
While China has lifted restrictions on foreign automaker’s shareholding in local joint ventures, Wollenstein said the move “effectively will not mean a lot” given the costs and willingness to change current partnerships. VW has a 40% stake in a venture with China FAW Group and a 50-50 venture with SAIC Motor Corp.
Despite some frictions, the partnerships are “overall very beneficial” and “there is no reason for us to turn away,” he said.
Cui Dongshu, secretary general of China’s Passenger Car Association, said at a separate briefing Tuesday that the “wholly-foreign-owned model might not be the best choice as carmakers are still dependent on the infrastructure and other facilities provided by their local partners.”
Wollenstein will step down by the end of August after serving more than 10 years in China. He will be replaced by Volkswagen Brand CEO Ralf Brandstaetter, the company said last month.
©2022 Bloomberg L.P.
With assistance from Bloomberg