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Actuality examine for VW in China after the sluggish begin of the electrical automobile sequence

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Β© Reuters. FILE PHOTO: People walk past an ID. Store X showroom of SAIC Volkswagen in Chengdu, Sichuan Province, China January 10, 2021. REUTERS / Yilei Sun

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By Yilei Sun and Tony Munroe

SHANGHAI (Reuters) – Volkswagen AG's (OTC πŸ™‚ ID series – the backbone of its electric vehicle ambitions – is off to a worryingly slow start in China, as even corporate sources call it.

In May, two electric SUV models ID.4, which had only hit the market two months earlier, together sold only 1,213. And that was around 200 less than in April, according to the LMC car consultancy.

Sales are well below initial hopes, said four people with expertise and what several other automakers have accomplished with early sales of flagship EV offerings in the world's largest auto market.

The Volkswagen (DE πŸ™‚ company with the state-owned SAIC engine, which makes the slightly larger ID.4 X model, had targeted sales of 50,000 to 60,000 vehicles this year, according to comments from Yang Siyao, a marketing director for the company . in Chinese media in March.

A separate company between the world's # 2 automaker and FAW, which makes the ID.4 CROZZ, had similar goals, one of the sources said. These goals now seem unrealistic.

In addition, according to three people, the EV plants of both companies run below 10% of production capacity.

The sources made the less than promising debut due to a lack of smart tech features, fierce competition, a late time to market compared to Tesla (NASDAQ πŸ™‚ Inc and the Chinese electric vehicle makers, and problems with its new electric vehicle distribution network.

β€œThe previous sales are below our previous expectations. We had to keep scaling down the production plans for the ID.4, ”said one person who, like the other sources, was not authorized to speak to the media and not allow himself to be identified.

"It's not healthy, but customers aren't coming to buy them right now."

In another sign of sales stress, SAIC-Volkswagen has suggested its employees buy ID.4s, according to an internal memo from Reuters.

For comparison: Tesla sold 6,612 copies of its Model Y in China in the first two months after its market launch. The sales performance of the ID.4 in China is also in stark contrast to Europe, where, according to JATO Dynamics, with 12,101 electric cars sold in the first two months after market launch, it is the best-selling electric car.

Volkswagen said in a statement to Reuters that ID. Sales in China were in line with expectations as it built up manufacturing and a new distribution network. In addition, Tesla's Model Y does not see it as a direct competitor for the ID.4, which occupies a different vehicle segment.

It also said it was confident that the two ID.4 models would see sales growth, noting that three more ID models are slated to launch in China this year.

NOT SMART ENOUGH?

More than any other country, China has aggressively pushed for the introduction of electric cars and introduced sales quotas to reduce pollution, fuel the growth of its auto industry and lessen its reliance on oil.

Volkswagen, the country's largest overseas automaker with 3.85 million vehicles sold – mostly gasoline – last year, has more success converting its customers to electric vehicles than the average automaker. It has also stated its intention to surpass Tesla as the world's leading electric vehicle manufacturer by 2025 to ensure that China becomes a crucial battlefield.

But getting customers on board is a completely different matter.

At a mall in western Shanghai, David Qian, a 50-year-old engineer, was looking for an electric car for his wife last week but found the ID.4X, which was priced at just under 200,000 yuan ($ 31,000).

β€œThe car looks good, but I know it's not intelligent enough,” says Qian, who owns a Tesla Model 3 and raves about its assisted driving technology.

Unlike Tesla models and a growing number of vehicles from Chinese electric car manufacturers such as Xpeng Inc and Nio (NYSE πŸ™‚ Inc, the ID.4 cannot self-park and does not offer advanced self-driving or advanced voice-activated functions.

"Chinese consumers value the sense of technology and science fiction of electric vehicles, and brand loyalty has always been low, which is completely different from the European market," said Yale Zhang, director of Shanghai-based consultancy AutoForesight.

And in contrast to Europe, the competition with electric cars is already grueling in China, where a multitude of manufacturers compete against each other and the best-selling Wuling Hong Guang MINI EV, an entry-level sedan from a joint venture of General Motors (NYSE πŸ™‚ only 28,800. costs yuan ($ 4,450).

In the shopping center where Qian tested the ID.4, the SAIC Volkswagen showroom is right next to a store operated by Xpeng and close to competing stores of the electric car startups Neta and Huawei, which are in collaboration with the automaker Selling an electric car Seres. A shop for the Chinese electric car manufacturer Aiways is also due to open nearby.

"Compared to Europe, this car has too much competition and they are all new models with a strong technical feel," said Zhang.

In its statement, Volkswagen announced that it would offer new software feature updates in the future and with newer models.

TOOTH PROBLEMS

Volkswagen has been faster than some other overseas automakers in China in developing electric vehicles, such as: Toyota Motor (NYSE πŸ™‚ Corp and Ford Motor (NYSE πŸ™‚ Co, but sources say it should ideally have been faster.

The EV plants of the joint ventures, which can each build 300,000 vehicles per year, will be ready for series production in early 2020, but the development of the vehicles in Germany meant that the new ID.4 was not officially approved until July, they added.

At the sales level, Volkswagen is struggling to introduce new sales strategies that are popular with pure EV competitors.

Instead of relying primarily on its existing 2,000-odd dealer network, it is shifting to an agency sales model for electric vehicles, where showrooms are typically located in shopping malls, prices are fixed and there is no inventory for showroom operators.

However, the shortage of inventory has resulted in employees who are used to the pressure of inventory being less financially motivated to sell products, said people familiar with the matter.

In its statement, Volkswagen announced that production in its EV plants was going according to plan and that the internal feedback on its new agency model was very positive.

It had 12 ID. Stores in China from the end of May and plans to have more than 100 stores by the end of this year. It also increases the number of ID. from currently 825 to more than 1,000 sales employees by the end of the year.

($ 1 = 6.4625)

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