FAW-Volkswagen stands on a new playing field

Author | Zhou Zhiyu

Editor | Zhang Xiaoling

"The aircraft carrier has completed its turn and is now setting sail at full speed," said Wu Yingkai, Secretary of the Party Committee and General Manager of FAW-Volkswagen Sales Company, expressing confidence in the future development of FAW-Volkswagen at a media communication meeting before the auto show.

In the past, the unexpected growth of the new energy vehicle industry has allowed FAW-Volkswagen, the elder brother in this joint venture, to be surpassed by its "younger brothers." There were even voices in the market suggesting that joint venture car companies would transition from market leaders to a "minority" in the market.

Wu Yingkai believes that it is an objective fact that foreign brands and joint venture car companies are lagging behind in the new energy track, but joint venture car companies still hold an absolute advantage in the fuel vehicle market. Moving forward, as joint venture brands address the issues of new energy products and align more closely with the Chinese market, they will also encounter new development opportunities.

At the Shanghai Auto Show, which opened on April 23, FAW-Volkswagen showcased the ID. AURA, the first global CMP platform concept car developed by the Volkswagen brand, along with several upgraded models, fully demonstrating its capabilities in fuel, electrification, and intelligence.

Wu Yingkai stated that the current market sees a coexistence of fuel and new energy vehicles, and in the short term, consumer focus on safety, vehicle costs, and driving experience is changing. Fuel vehicles will continue to exist in the Chinese automotive market for a long time.

The core demands of fuel vehicle users have never changed: safety, reliability, and low operating costs. FAW-Volkswagen has also made the hidden advantages of fuel vehicles more visible by launching a "dual lifetime warranty" (lifetime free maintenance and lifetime warranty), embodying "long-termism."

Of course, such commitments come at a significant cost. However, Wu Yingkai calculated that compared to other car companies, FAW-Volkswagen's models have better quality and lower failure rates, which keeps warranty costs far below the industry average and within a controllable budget.

If sticking to fuel vehicles is about stabilizing the position, then the transition to new energy is key for FAW-Volkswagen to win in the future. In recent years, the slow pace of joint venture brands in electrification has been criticized, but details revealed by Wu Yingkai indicate that changes are happening deep within.

According to FAW-Volkswagen's plan, starting in 2026, it will launch 10 new models, 9 of which will be new energy vehicles. By 2030, FAW-Volkswagen's various brands will introduce more than 20 models.

FAW-Volkswagen's R&D progress is also accelerating. Wu Yingkai revealed that in the design proposal for a new model, both Chinese and German design teams submitted plans, with the Chinese design ultimately winning. In the past, design proposals were typically handled by the design team in Wolfsburg, Germany.

Additionally, Wu Yingkai stated that senior executives at Volkswagen in Germany deeply understand that to be competitive in the Chinese market, R&D must be based on local market demands. The R&D model for the Volkswagen brand in China is also being restructured accordingly.

Channels are an important advantage for FAW-Volkswagen, with nearly 900 quality dealers, most of whom have over twenty years of cooperation history. Under the impact of the new energy transformation, the profitability of dealers has become a prominent issue in the industry. FAW-Volkswagen adheres to altruism, using dealer profit margins as an important reference for policy adjustments to ensure channel health "We monitor the dealers' ROS (Return on Sales) every year and every month to ensure that policy adjustments are linked to the health of the end market," said Eddie Wu.

In terms of efficiency improvement, FAW-Volkswagen is undergoing comprehensive reforms internally. From decision-making efficiency to personnel efficiency, from communication efficiency to organizational efficiency, everything is user, market, and result-oriented. This breakthrough in efficiency allows it to respond more quickly to market changes and launch suitable products and services.

When asked whether the joint venture brands have reached a low point in market share, Eddie Wu stated that the distinction between joint ventures and independent brands should be blurred. Cars are made in China, technology is used in China, and the industrial chain supports the Chinese people.

In the future, there will be no distinction between joint ventures and independent brands. When technological barriers are broken, only by transforming local insights into product definition rights can one break through in the red ocean competition.

The "new game" that FAW-Volkswagen is playing is by no means a simple product offensive, but a comprehensive upgrade of the survival logic of joint venture car companies in the era of new energy. With the dominance of localized R&D, strategic synergy between fuel vehicles and new energy is formed, and the reconstruction of user value breaks the curse of price wars. This old joint venture car company is using its wisdom to increase its chances of winning at the table of the new era of joint ventures.

Eddie Wu repeatedly emphasized in the interview, "Be pessimistic about the past, but optimistic about the future"—this is not only an honest acknowledgment of the current operational pressures but also a confidence in the strength of the FAW-Volkswagen system.

When "German craftsmanship" is deeply integrated with "Chinese speed," this transformation has long exceeded the scope of a single enterprise and has become a microcosm of the value reconstruction of the Chinese automotive industry.

The following is the full dialogue between Wall Street Insights and Eddie Wu (edited):

Q: How can joint venture brands make Volkswagen's implicit advantages explicit this year, given the special background, and cultivate their own system's competitiveness?

Eddie Wu: The core of Volkswagen's brand implicit advantages lies in high product quality and performance, as well as a long-standing commitment to customer-centricity. It indeed needs to be made explicit so that more users can perceive it, which is why we have been strengthening the communication of our car-making philosophy and quality, and launching dual lifetime warranty policies, etc. In the future, we will also provide more experiences and services to help users gain a deeper understanding of FAW-Volkswagen.

The advantage of the Volkswagen brand lies in adhering to and leading the basic logic of car manufacturing, but the current public opinion environment has deviated from this basic logic, focusing mainly on auxiliary functions. How to guide the logic back is also a challenge we face.

Q: What is the biggest market opportunity for FAW-Volkswagen this year?

Eddie Wu: The current market can be said to be a coexistence of fuel and new energy, but objectively speaking, the overall market for fuel vehicles is declining, which is an irreversible trend. However, from a phased perspective, consumer attention to safety, vehicle costs, and driving experience is changing. Fuel vehicles will still exist in the Chinese automotive market for a long time and will have a scale of over ten million.

What does ten million mean? Apart from the United States, there is no other single market in the world that can reach ten million.

In the field of fuel vehicles, FAW-Volkswagen's Volkswagen brand is undoubtedly a leading player, which is our biggest opportunity, and we will strive to capture more market share. For electric vehicles, we will continue to provide users with more services through the ID. models this year. Starting in 2026, as nine new energy products are successively launched, we will bring users a brand new product experience and provide consumers with more goods on the path of coexistence of fuel and electric vehicles Question: According to your understanding and observation, how does the public perceive localization, and how is this reflected in FAW-Volkswagen as the most important joint venture of Volkswagen?

Eddie Wu: I will answer this question based on my personal experiences from the past few months of work.

Firstly, Volkswagen is quite resolute about localization. I believe there are several aspects to its localization, such as technological localization. It established many technology-related companies in China early on, and this localization has been very effective. For example, our current CEA electronic and electrical architecture is also based on localization, utilizing many Chinese technologies. Regarding R&D localization, Volkswagen has many R&D centers in China, and currently, a lot of development is done by local Chinese employees, which is from Volkswagen's perspective.

Additionally, from the joint venture perspective, objectively speaking, in the past few years, our product introduction was essentially dominated by Volkswagen (the German side), with limited participation from the Chinese side. This is a common model for joint ventures. However, with changes in market competition, the new joint venture model will inevitably push us, or naturally transition us, towards R&D localization. Decisions must be made by those who understand Chinese users and the Chinese market better, whether they are Chinese or foreign; this is not important. What matters is understanding the Chinese decision-making process, which is also a form of localization to some extent.

This is also why we feel very confident about the future of the Volkswagen brand at FAW-Volkswagen after signing off on 10 models on March 3rd. We have already seen many cutting-edge and market-appropriate innovations we have incubated being implemented, which is different from before; this is the change.

Question: What are your feelings about the shift from collaboration to localization leadership that you experienced during your recent visit to Volkswagen in Wolfsburg? What new changes can we expect in product definition, R&D, and even development pace in the future?

Eddie Wu: The first story is that during our visit to Germany, we saw a lot of data, and many media professionals can also see that the Volkswagen brand's sales outside the Chinese market this year are very good, with significant year-on-year increases, including in Germany, where ID. models are selling very well, and ID.7 is in short supply. However, objectively speaking, sales in the Chinese market are facing tremendous pressure and challenges. This is why our cooperation with Volkswagen in Germany must be based on local development in China. Because the current automotive market in China is the most advanced in the world, it is something that other markets cannot learn from or understand. Yet, it is precisely this market that all multinational car companies need to adapt to, understand, and generate competitiveness and influence globally. This is what we felt during our time in Germany. Therefore, the senior management of Volkswagen in Germany also deeply realizes this point; they are vigilant and do not become complacent, nor do they think that the Volkswagen brand is doing well in other parts of the world. It is not like that. Thus, based on this thinking, both parties' shareholders strongly agree on this direction, which must be based on local market demand for R&D.

The second story is about internal decision-making, which I can share a bit. We have just made a decision on the styling of a certain model. In the past, the proposal for this styling was always made by the design team in Wolfsburg, but this time it was different. Both the Wolfsburg design team and the Chinese design team made proposals simultaneously, and the final decision was made together Of course, there is no doubt that the decision resulted in the adoption of the Chinese team's design proposal.

I believe these two stories confirm what we are currently doing and the importance of local R&D in China.

Q: Since the end of last year, we have seen a completely new look for FAW-Volkswagen. Can you elaborate on this?

Wu Yingkai: Our team has also communicated internally, and I summarized it in one sentence: be pessimistic about the past, but optimistic about the future.

If we take the past as a reference, today, at this moment, is the most difficult time; you might feel very pessimistic.

However, I believe we should still look to the future with optimism. FAW-Volkswagen has confidence; it hasn't lost its soul, and the user-centered philosophy remains intact, which is the soul of the enterprise. FAW-Volkswagen focuses on quality and safety, which are the most fundamental aspects of car manufacturing, and that hasn't been lost. The trust of over 20 million customers in the FAW-Volkswagen brand is the most basic guarantee, and that hasn't been lost either.

Moreover, FAW-Volkswagen has already completed its phased product layout for the future, and we are entering a stage where the aircraft carrier has turned around and is now sailing at full speed. This is a source of confidence for me.

Q: Efficiency is also the focus of this year's overall transformation. What improvements can we expect in decision-making efficiency moving forward?

Wu Yingkai: FAW-Volkswagen has five major breakthroughs internally: marketing, products, costs, efficiency, and shareholder cooperation. This is one of the core strategic tasks for the entire company this year. Therefore, in terms of efficiency, FAW-Volkswagen will consider and enhance all aspects internally. We are making some adjustments to mechanisms and processes, with the core goal of speeding up product development.

This involves some underlying efficiency issues, such as decision-making efficiency, personnel efficiency, communication efficiency, and organizational system efficiency. These efficiencies are obstacles affecting FAW-Volkswagen's future transformation and transition, so we are working internally to break through and continuously adjust and optimize, with the core aim being user-oriented, market-oriented, and results-oriented, pushing the system to improve efficiency around these orientations