Since the Sino-German joint venture – established in 1985 – Shanghai Volkswagen (SVW) held the premier position in China’s automotive sector. As a pioneer in the country’s passenger car industry, SVW was able to enjoy profit margins unparalleled to its other global markets. However, as the decades passed, the changing global environment caused a radical shift in both SVW’s competitive advantage and the Chinese automotive sector as a whole. No longer was the German automaker a dominant factor, but now a mere player among fierce competition.

While Volkswagen’s decision to be the first to implement itself within the Chinese region may have seemed all but negative, yet its pioneer positioning did in fact come with pros and cons. To begin, one must analyze the firm’s “first mover advantages”. By being the first automobile company to take on the China automotive ‘risk’, VW was able to establish a strong alliance with Shanghai Automobile Industry Corporation (SAIC). SAIC – one of the major domestic auto producers – had extensive local and government connections, which resulted in strong policy support for SVW. This support was converted into high sales volumes when “car demand was largely driven by governmental institutions, public organization and state-owned taxi companies” (6; par. 1).

German automakers have always been synonymous with excellence and quality, producing brands such as BMW, Mercedes-Benz, and Audi.

Thus, when Shangai Automobile Industry Corporation (SAIC) claimed they desired “technical knowledge [and] modernization of equipment” (5; par. 3), to improve their ill-equipped and simple sedans, Volkswagen took full