A bright orange robot, 10 feet tall, looms over Volkswagen’s new electric car assembly line in central China. It was imported from Germany. The factory’s other 1,074 robots were made in Shanghai.
Instead of importing shock absorbers from Central Europe for cars made at their Chinese factories, Volkswagen now buys them from a company in China for 40 percent less. Additionally, Volkswagen is hiring nearly 3,000 Chinese engineers to design cars at the Hefei complex, reflecting how China’s commanding lead in electric vehicles is disrupting global auto making.
Volkswagen’s new strategy is called “In China, for China” and is a sign of how China’s dominance in electric vehicles has changed global auto making. Chinese car brands are becoming more prevalent in Europe and causing concern about job losses. Despite this, Volkswagen aims to match the speed and efficiency of Chinese electric car manufacturers, which have taken a growing share of the Chinese car market.
To ensure competitive pricing for their electric cars, Volkswagen plans to start production of the new Tavascan sport utility vehicle at the Hefei plant in the coming weeks. However, Volkswagen is facing the need to reduce costs and has announced reductions in the European work force as part of a broader cost-cutting plan.
Volkswagen is also looking at importing electric car parts from China as part of its cost-cutting efforts. The shift to electric vehicles is expected to result in job losses in Germany and shrink the auto industry, which has been a mainstay of the country’s economy.
Volkswagen’s move is reflective of the challenges faced by traditional multinational car companies, who are seeking to adapt to China’s rapid shift to electric cars and the success of Chinese automakers in reducing costs. Electric cars account for over 30 percent of China’s car market, up from 5 percent three years ago, and multinational companies have been slower to adapt compared to their Chinese counterparts.
Volkswagen’s new factory in Hefei is designed to produce 350,000 cars a year initially, and the company is racing to catch up with Chinese electric car manufacturers. Despite this aggressive push in China, Volkswagen must compete with a domestic auto sector that receives heavy government assistance and is involved in building up the country’s car industry.
Ultimately, Volkswagen’s new strategy reflects the need to adapt to the rapid changes in the Chinese market and meet the demands of the growing electric vehicle industry.
