Although China's automobile market has cooled down this year, the Volkswagen Group has managed to go against the grain and outperform the market, especially in South China, an area traditionally dominated by Japanese carmakers, but one where the group's sales have grown faster than ever before.

Since 2009 - when Volkswagen introduced its "South China Strategy" - its market share has increased from 12 per cent to the current 15.8 per cent.

In the first 10 months of the year, Volkswagen Group China (VGC) and its two Chinese joint ventures - Shanghai Volkswagen and FAW-Volkswagen - sold almost 1.9 million cars on the Chinese mainland and in Hong Kong, a 14.8-percent increase.

"We're clearly on track to make 2011 the most successful year in company history," said Dr Karl-Thomas Neumann, president and CEO of VGC.

The comment came at the "Volkswagen Group China Evening" gathering on the eve of the Guangzhou auto show, on Nov 20, where Neumann went on to say, "I'm confident that we can take the lead in the South China market in 2011."

Strong performance

By the beginning of October, Audi, a member of the group had already sold as many cars in China as during its record year, 2010.

Skoda, another member of the VW family, in the first 10 months, posted a remarkable 25 percent rise in deliveries, increasing to 190,000 units.

"These results have given us full confidence that the VGC's sales will pass the 2-million sales mark for the first time this year," Neumann said.

Its efforts in the south certainly paid off. For the first time in history, it has surpassed its key competitors, those who traditionally dominate the market, to become No 1 in Hong Kong.

"Over the past two years, our market performance, especially in the south, has improved as a result of an optimized dealership network and management system, and diversified marketing activities", explained Weiming Soh, a board member and executive vice president of VGC.

On a winning track

When VGC started its "South China Strategy", two years ago, in conjunction with its two joint ventures, it was focusing on four areas:

First, in sales and marketing, where it set a target of stronger regional market performance, against the traditional Japanese dominance.

Second, in customers and services, where Volkswagen announced an upgrade of the entire retail network across the South, to improve customer satisfaction there.

Third, in products and technology, where Volkswagen decided to bring out more innovative models with the latest technology to meet customer needs in the region.

And, finally, in contributing regionally, where Volkswagen made a stronger commitment to sustainable development.

Now, two years later, it is clear that Volkswagen is indeed on a winning track in South China.

One of its goals was to more than triple annual sales in South China - from 150,000 units to more than half a million.

And, thanks to the improvements in the dealer network and new models - for Audi, Volkswagen, Skoda, Bentley and Lamborghini - the group is already expecting 400,000 customers for 2011.

The Volkswagen Group's market share in the region has increased from 2008's 12 percent to 15.8 percent today.

Volkswagen began its dealership and service network improvements a few years ago, with the idea of offering the best service to customers and its dealerships across the south have already increased by a third over the past two years.

It plans to double its sales network to about 2,500 dealers across the country in the near future.

Sustainability

Two months ago, Volkswagen took the bold step of committing itself to greater investment in China.

From 2012 to 2016, it will put a record 14 billion euros ($18.9 billion; more than 123 billion yuan) into new Chinese production lines and even more environmentally friendly models for its Chinese customers.

As part of its "Strategy 2018" - the guide for future development -Volkswagen has promised a veritable wave of new models for the China market, every year.

Already, in the past three years, it has introduced more than 30 new products and they have sold very well, especially in South China. These new models have in fact contributed almost 90 percent of total VGC sales.

In the coming years the group will bring out about 50 new models, which is more than it has ever done.

At the "Volkswagen Group China Evening", and the Guangzhou auto show, the company had dozens of new models up on stage, ranging from the imported Sharan and New Beetle to the locally produced New Sagitar and New Cross Polo.

Another highlight of this year's Guangzhou auto show is the arrival of the SEAT for the Chinese market. With the SEAT now available on the Chinese market, Volkswagen will have a very strong portfolio for the world's most important automotive market.

E-mobility

Given the environmental concerns and the ambitious emission reductions targets of the Chinese government, electric cars surely have great development potential here.

And Volkswagen is already on that track, having obtained ministry approval for both Shanghai Volkswagen and FAW-Volkswagen to develop and produce electric cars.

In this, the group has a three-phase strategy for China:

This year, it created an electrical test fleet in Beijing. And, it is now on tour, visiting five Chinese cities - Chengdu, Changsha, Hangzhou, Hong Kong and Shenzhen - through the end of this year.

From 2014 on, Volkswagen will begin its first production of electric cars in China. The plan is to start with two models, with a range of 100 to 200 kilometers.

Then, after 2018, Volkswagen plans to start mass producing electric cars, with the idea of offering affordable, sustainable electric cars for all Chinese customers.

Good corporate citizen

"We can say that, for the past three decades, the group has been the Chinese auto industry's most reliable partner," the company said.

Volkswagen is a company with deep roots in China, one that has grown side-by-side with the market, and its two joint ventures have produced more than 12 million cars in China.

At the same time, Volkswagen is committed to being a good corporate citizen.

In 2007, it started the "Green Future Environmental Education Initiative" across China to teach children about the environment.

And the program has been a great success, by engaging with more than 20,000 teens.

Volkswagen also began a Road Safety TV Program several years ago, and it is still quite popular today. This year, it has focused on children's safety and has attracted thousands of viewers through TV promotions and online video portals.

In 2010, VGC reached one of its most challenging goals of its Powertrain strategy, when its fuel-efficient TSI engines and DSG gear boxes resulted in fuel consumption and emissions of all Volkswagen models manufactured in China being cut by more than 20 percent, compared with 2005.

And, Volkswagen is, - according to a new list of energy-saving vehicles published by the government - clearly the number one manufacturer of fuel-efficient cars in China.

Now, 13 of the group's models, with a less than 1.6-liter engine, are eligible for the new subsidy policy approved by government in October.

This means that people who buy these energy-saving models will get a direct subsidy of 3,000 yuan, which is a great help to consumers.

Of all car models produced in China, only 49 make it onto the new energy saving list. What that really means is that more than a fourth of the total of listed cars produced in China are from the group.

This clearly shows the company's innovative, green contributions to China and shows that Volkswagen takes its responsibility to sustainable development in China's economy and its society very seriously.

In the coming years, Volkswagen will create thousands of new, well-paid, qualified jobs in the south, and the new factory in Foshan, Guangdong province, is but one example.

The Foshan factory will be a milestone on the road to environmentally friendly production lines in China.

"Volkswagen Group China is already setting new ecological standards with regard to vehicles and mobility," Neumann said.

"Our goal is to be the most successful, fascinating automobile manufacturer in the world and the leading light when it comes to sustainability. We aim to be number one by 2018, - both economically and ecologically."

(China Daily 11/21/2011 page6)