The journey of SAIC Volkswagen (Shanghai Automotive Industry Corporation Volkswagen) over the past 40 years has been nothing short of transformativeFrom the very first Santana model that rolled off the assembly line four decades ago to contemporary concepts reflecting a future of electric and intelligent vehicles, the company vividly illustrates the evolution of the Chinese automotive industry.
The recent 40th anniversary celebration marked a significant milestone, with SAIC Volkswagen revealing two innovative concept cars: the ID.Code and the Audi EThese vehicles epitomize the company's commitment to embracing electrification and advancing smart technologies, signifying the beginning of a new era in automobile manufacturing and design.
In his speech at the anniversary, Volkswagen CEO Oliver Blume expressed his sentiments towards China, referring to it as the company's "second home." This acknowledgment underscores Volkswagen's strategic objectives—leveraging China's innovative capacity to further the group's transformation
Indeed, the collaboration between SAIC and Volkswagen is a testament to how partnerships can fuel growth and adaptation in a rapidly changing market.
Despite the celebratory tone, the automotive landscape in China has faced challenges this yearMultinational automakers have seen sales decline, and Volkswagen is no exception, reporting a drop of 10.2% in deliveries—amounting to 2.057 million vehicles in the first three quartersLikewise, SAIC's overall vehicle sales plummeted by 37%, prompting the company to reassess its strategies and leadership amidst this competitive landscape.
In a bid to solidify their partnership, SAIC and Volkswagen recently extended their joint venture agreement until 2040. This marks their second premature renewal, highlighting the intent to enhance cooperative efforts in both electrification and smarter automotive technologiesSAIC Chairman Wang Xiaoqiu emphasized that the partnership aims to pioneer a "second entrepreneurship," signifying a commitment to evolution in their joint venture.
The commitment to innovation is prevalent as SAIC Volkswagen plans to launch Audi’s inaugural luxury electric model in 2025. Furthermore, company executives have promised that forthcoming models will feature advanced safety systems, as well as integrated AI capabilities, aligning with modern consumer expectations for connectivity and automation in vehicles.
Reflecting on history, SAIC Volkswagen was one of China’s first automobile joint ventures and has grown alongside the country's automotive industry
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The collaboration originally began with the Santana model, which was launched in 1983. This initiative served as a pivotal step in establishing the framework for domestic car production, as SAIC harnessed foreign technology to cultivate a burgeoning automotive sector in China.
Volkswagen recognized the potential of China’s burgeoning market early onAfter lengthy negotiations, the joint venture agreement solidified in 1984, marking the start of the Shanghai Volkswagen Automotive CompanyThe Santana became a symbol of success, clinching the title of best-selling car in China for an impressive 22 consecutive years.
As the market evolved, SAIC Volkswagen continued to ride the wave of growth, renewing its joint venture contract in 2002 for another 20 years, recognizing the expansion of China’s automotive demandThe years following witnessed an explosive growth, with the market's annual sales surging from 5.1 million units in 2002 to approximately 26.86 million expected in 2024—more than a fivefold increase.
However, with the rise of independent brands from 2020 onwards, SAIC Volkswagen began to falter
The brand recorded a sharp decline in sales, which led to a challenging market environmentIn 2020, they sold approximately 1.5 million vehicles—down 24.79% compared to the previous yearThe downward trend persisted with sales slipping further in subsequent years, showcasing the intense pressure the company faced from local competitors.
Despite these struggles, SAIC Volkswagen's total sales still outpace several emerging brand competitorsFor reference, Li Auto achieved an impressive annual sales figure of 376,000 vehicles in 2023, marking a staggering 182% year-on-year growth.
To counteract the declining sales, SAIC Volkswagen has recognized that innovation and a shift towards electric vehicles are imperativePlans set in motion in 2017 saw the complete transformation of SAIC Volkswagen's Anting Plant to accommodate the production of new energy vehiclesAs of 2020, the original Anting plant was repurposed as a dedicated MEB factory focused specifically on manufacturing electric vehicles.
The industry-wide move toward electrification presents itself as an undeniable truth
However, the perception remains that Volkswagen has been slower than its competitors in adopting new technologies in the electric vehicle segmentThus far in 2023, the company delivered 148,000 pure electric vehicles in China—a modest 26.5% year-on-year growth that paled in comparison to domestic brands such as Li Auto, which sold 341,800 units during the same period.
In recognizing SAIC Volkswagen as a key partner, Volkswagen is poised to leverage this collaboration to accelerate technological advancementsThe agreement extension until 2040 serves to bolster SAIC Volkswagen’s capacity for research and development in emerging technologiesAccording to DrMarkus Duesmann, CEO of Audi AG, this partnership is vital for their aim to capture more share in a rapidly evolving Chinese market.
The second renewal of the joint venture has heralded a change in focus—from simply importing technology to jointly developing it
Wang Xiaoqiu elaborated on how this partnership would harness the ongoing global shifts towards electrification and intelligence in automotive design, culminating in innovative solutions that blend the strengths of both companies.
As they pivot to what they term "JV 2.0," 2023 has seen SAIC Volkswagen deliberate on a comprehensive approach encompassing traditional fuel vehicles while establishing a stable base for electric vehiclesThe latest agreement further emphasizes the collaboration with Audi, highlighting their strategy to jointly develop several high-end electric vehicles on the newly established Advanced Digitized Platform.
The ID series is at the forefront of SAIC Volkswagen's new energy vehicles, with the ID.4 initially launching in 2020. In 2023, ID series vehicles have seen a remarkable uptick in orders with a 148% increase, reflecting a renewed public interest in electric alternatives
The strategy of competitive pricing has also played a pivotal role, leading to substantial discounts on the ID.3 model that have managed to revitalize sales despite tough competition from various brands.
Intense competition has emerged in the A0 segment, with competitors like the Geely geometry and XPeng's MONA, placing formidable pressure on the ID.3. After 65 days on the market, the Geely geometry exceeded 40,000 units in delivery, while BYD’s Dolphin model has reached over 700,000 sales since its launch in 2021, underscoring the growing stakes in the electric vehicle market.
As the automotive industry transitions towards advanced smart vehicles, SAIC Volkswagen has recognized that reclaiming its previous sales zenith will require innovation and speedThe introduction of a new AUDI brand by leveraging updated platforms symbolizes SAIC Volkswagen's commitment to not only navigating but thriving in this competitive landscape.
On the significant occasion of its 40th anniversary, executives reiterated the strategic plans in place, with the AUDI brand set to launch its first model in 2025. Production of this new brand will be exclusive to the Anting Plant, a dedicated facility designed for this purpose.
Furthermore, by 2026, SAIC Volkswagen plans to introduce two electric vehicles based on the CMP platform and several plug-in hybrid and extended-range models, with expectations of 18 new launches by 2030—approximately 15 of these aimed specifically at the rapidly evolving Chinese market