Competition between VW’s 2 Chinese partners

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Friend or foe, that’s a difficult question for VW’s two Chinese joint ventures, Shanghai Volkswagen and FAW-Volkswagen. Although VW always claim that they are good partners without frontal competitiveness, everyone can realize that their relationship is uneasy.

Established in Oct 1984, Shanghai Volkswagen only produced Santana B2 and the updated version of the Santana 2000 for 15 years, until Passat B5 LWB was introduced in 1999. In those days, the single product line did not prevent this JV between Shanghai Automotive and Volkswagen to be the most successful carmaker over China. However, Carl Hahn, VW chairman at the time, was not satisfied with this scene. He established FAW-VW between China’s First Auto Works in Nov 1990 to produce Jetta A2. Actually, in May 1988, FAW has begun to assemble Audi 100 under VW’s permission.

In 2000, Passat B5 LWB and Bora A4 were introduced by the 2 JVs to renew the old models. (But Jetta A2 and Santana B2 are still in production even today.) The clearly divided positioning of 2 VWs began to form. Shanghai VW’s products are in A0 segment (Polo) and B segment (Santana and Passat B5), while FAW-VW just focused on A segment (Jetta A2, A4, A5) and C segment (Audi A6). Today, this divided positioning strategy is share by many multinationals which have 2 partners in China, such as Toyota, Honda, Mazda, etc.

Nevertheless, the limited product lines prevented 2 VWs to develop further. They all wanted to have an own complete line. In 2007, Passat B6 with standard wheelbase was introduced by FAW-VW named as Magotan to compete with Shanghai VW’s B5 LWB. Maybe the positioning of B6 and B5 LWB does not fully coincide, but we cannot find any explanation for New Bora and Lavida. The 2 models by FAW-VW and SVW are all based on stretched A4 platform, all designed for Chinese families, share the same engines and transmissions, hit the market in the same year 2008. Henceforth, the competitive relationship between the two VWs is increasingly visible.

Recently, 2 VWs will introduce similar models again. They are Shanghai-VW’s NMS (American New Passat) and FAW-VW’s Passat B7 LWB. With similar wheelbase, their competition must be fiercer than between the B5 LWB and the Magotan.

The internal competition of VW brand may consume themselves, but VW sales in 2010 is still very impressive: VW group sold 1.9 million cars in China. Excluding about 80,000 imported cars, they are all made by Shanghai VW and FAW-VW. As for the 2 VWs, maybe one plus one is less than two, but it is much greater than one.