The Road Ahead for Shanghai Volkswagen

The Road Ahead for Shanghai Volkswagen

THE ROAD AHEAD FOR SHANGHAI VOLKSWAGEN
Shanghai Volkswagen is a joint venture between the German Volkswagen AG and a consortium of Chinese
partners. The 25-year agreement signed by the partners in the middle of 1980s provided for 50 per cent VW
AG equity. By 2001, this venture was the most successful automobile venture in China. Other attempts
made by the US AMC Jeep Corporation and other carmakers failed. While other companies were attracted by
the large population of 1.2 billion people (certainly only a very small percentage would be the customers),
VW built the successful venture over the years. By 2001, it had a market share of over 50 per cent due to
introducing “hot” models and assuring reliable service. But a great deal of effort was necessary to build up
this market.
The early years were not without difficulties. For example, VW had to develop suppliers for quality
components, train the work force, work under constraints imposed by the governments, and had to share
its latest engine technology. The Santana model, that proved successful in Brazil, was the primary vehicle
that suited the Chinese market. By 1995, the improved Santana 2000 was introduced. The ultimate aim of
the Chinese, however. Is to design, and eventually develop their cars by themselves. The factory, not far
away from shanghai, has one of the most modern engine plants. Chinese engineers and managers were
sent to the factory in Wolfsburg, Germany for training. Moreover, Chinese managers and technicians
attended German universities to gain engineering expertise. One of the major difficulties was the lack of
suppliers of quality components. Therefore, VW also introduced an incentive system that paid their suppliers
handsomely for quality car products. At the same time, the company worked hard to build relationships not
only with the suppliers, but also with the community.
The Chinese government on the other hand provided tax incentives and protected the car market for
VW...

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