Volkswagen is one of the most successful automotive brands in China, dominating a large part of the market for many years. Volkswagen was the top-selling foreign automaker in China in 2022 with over 3.18 million vehicles delivered, or close to 14% of the market. They are prominent not least for the variety of models that are on offer, ranging from economy cars such as the Lavida all the way up to luxury numbers along the lines of Volkswagen's Phideon, catering to multiple consumer segments.
Among other key reasons for the high popularity in China of Volkswagen, which has joint ventures with two of largest Chinese state-owned automotive enterprises — FAW and SAIC. Those partnerships make it possible for Volkswagen to build and sell vehicles at competitive prices. One of Volkswagen's best-selling models in China is the Lavida, which can be had for just $15,000 or so, putting it within reach of many middle class consumers. Local production, for VAG has increased cost efficiency as well keeping the company up to speed in a cut throat market segment.
Another key reason for the popularity of Volkswagen cars is their EVs commitment. With China's market demanding more and more “green” cars, Volkswagen began producing their ID. series, with the ID. 4 and ID. 6 and gaining significant traction. Volkswagen pushed over 143,000 electric vehicles in China in 2022, up around 26% compared with the previous year. The ID. The MG ZS is another example from a Chinese automaker that has been winning over buyers looking for an affordable and efficient EV (it starts at approximately $30,000) with a range of over 550 kilometers.
This is aided by the brand's strong reputation for safety and reliability. Volkswagen has also received high safety scores in the New Car Assessment Program for some of its models, something that is important if you have a family. The Chinese market demands increased safety, and the advanced driver assistance systems in models like the Tiguan and Passat enhance their China-specific attractiveness.
Volkswagen has marketed its models aggressively toward China's rapidly expanding urban middle class over the past decade. So the brand has really almost carved itself out as affordable premium built on German engineering. That positioning suits the long-term, durability-oriented leanings of many Chinese consumers. The former CEO of Volkswagen Group, Herbert Diess, already knows it: “China is not only world’s largest car market, but also one of the most innovative ones and we will further invest in China.
Being able to acclimatise to the eccentricities of the consumer market in China has been a crucial lift for Volkswagen. Localized models have also been launched by the brands, such as the Volkswagen Tharu that goes on sale only in China and is a locally-developed SUV platform. By designing vehicles for regional tastes and driving conditions, Volkswagen has managed to keep one step ahead of the competition.
Volkswagen may face competition at home from electric vehicle startups like NIO and XPeng, but the automaker's long-established presence and wide range of products should help give it an edge. According to one 2021 J.D. Power survey, Volkswagen is ranked as the top five customer satisfaction brand in China because it offers a excellent balance between money and performance (and good perception of brand).
So all in all, volkswagen china is still in a great position thanks to very profitable JVs and strong market preference for their brand as well as clear local knowledge and EV dedication. However, its ability to switch with changing winds and an edge over low cost/ affordable but quality products could help the brand sustain relevance in one of the world's largest automotive market.