HAMBURGO, Germany – While major automakers are suffering to attract consumers to showrooms and open their wallets amid considerations about the coronavirus pandemic, Volkswagen has controlled in recent months to expand its leadership as China’s largest car salesman.
The Jetta, a new entry-level VW logo unveiled in China last September, is a must for this breakthrough. The logo, which bears the name of the sedan that in the past was the best-selling style in the country, has been touted as a fairly inexpensive option for public transport for those looking to minimize contact with foreigners.
“We have surveys showing that more Chinese want to own cars in order to reduce exposure to the coronavirus, and Jetta caters well to these first-time buyers by bringing VW quality to them at prices that are 20% to 30% lower than those of VW-branded models sold in China,” Jetta Chief Executive Harald Mueller told the Nikkei Asian Review in a recent interview.
VW and FAW Group Corp., a spouse in the joint public enterprise, sold 67,600 Jetta cars in the first part of 2020. This gave the logo a percentage of only 1% of the Chinese market and surpassed that of Volvo, the Swedish car logo. owned by the Chinese organization Zhejiang Geely Holding.
“The 1% market percentage we’ve achieved shows that our technique is working, and we’re sure to stay above 1%, thanks to our plans for a new style aimed at young families,” Mueller said.
VW, whose brands include Audi, Porsche, Lamborghini and Bentley, delivered a total of 1.59 million cars in China, adding Hong Kong in the early part of the year. This 17% less than in 2019, but surpassed the overall 22.4% drop in the Chinese market, which expanded VW’s overall sales rate from 1.2 percentage points to nearly 20%. However, China’s operating profits fell by a third to 1.4 billion euros ($1.660 million).
“By adding Jetta as an independent subbrand, Volkswagen now strategically covers its product line from low to medium to high,” said Ming Lih Chan, a regional analyst for Frost and Sullivan Council.
Jetta has also been a boon for FAW, which was the only major Chinese automaker to ship more cars in the first half, according to Fitch Ratings which said last month that the FAW-VW joint venture overtook VW’s partnership with SAIC Motor to become the country’s top passenger car producer.
The partners presented Jetta last year with two models, the VA3 sedan and the VS5 SUV, with about 17 million Chinese tuned to the inaugural event, anchored through the pop organization New Pants.
VA3 costs between 65,800 yuan ($9,400) and 92,800 yuan, or only between 70,000 and 85,000 yuan of basic sedans from major national brands such as Great Wall Motor, Chery Automobile, Geely and Chang’an Automobile. Vs5 is between 84,800 and 112,800 yuan.
About 80% of Jetta’s buyers own cars for the first time, which VW says account for accounts for a third of China’s car market. These buyers will buy about five million cars this year, according to IHS Markit.
While Jetta has established its own network of 233 physical distributors, 50 more of which are in process, VW has developed virtual marketing, reinforced by the COVID-19 epidemic.
In March, when most Chinese cities had just come out of the blockade, the logo brought its third model, the VS7 SUV, the popular Douyin video app. A live preview with automotive bloggers testing the vehicle and discussing its functionality attracted about 920,000 views. Approximately 10 million more people heard the occasion of the launch, with features of 3 groups.
Another key detail of VW’s strategy with Jetta has been to minimize production prices at the joint venture plant in the southwest city of Chengdu by reusing platforms and portions designed for models of other brands in the company’s diversity and restricting the diversity of features available.
The company uses only “VW shelf fabrics and therefore gains advantages from a economies of scale,” Mueller said. While a typical VW style in China can come in several hundred other external and internal color combinations and other features, Jetta styles are only available in 25 variants, he said.
“Jetta’s concept of limited variant diversity is unusual for VW, and Jetta could well become a trendsetter for VW as a whole,” said Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany.
In fact, the launch of the logo goes so well for VW that Mueller has informed other interviewers that the company plans to expand it abroad. A spokeswoman showed this to Nikkei, but refused to identify the markets under consideration. In an interview, VW CEO Herbert Diess said the company had “a lot to do in China before thinking about exporting” the Jetta logo.
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