*This article is reproduced from the public account autocarweekly
Author: Karakush
There are two types of responses from a thousand people:
On one hand, in Europe, ID. is able to bear the hope of the whole village. In the first half of the European market, ID.3 sold more than 31,000 units and ID.4 sold nearly 25,000 units. Electric vehicles are ranked second and fifth on the European sales chart.
With this momentum, in the first half of the global electric vehicle sales chart, the globally sold ID.4 ranked fifth and the only sold in Europe ID.3 ranked ninth, allowing Volkswagen to enter the top three of the global electric vehicle stage, with a significant role, second only to Tesla and Wuling, and slightly more than our electric light BYD.
Volkswagen set itself a small goal to become the global leader in the electric vehicle field by 2025 – as if it could be achieved all at once.
On the other hand, in China, ID. is a fake Volkswagen. Its ranking is outside the top 15 in the cycling association’s free TOP15 list, and poverty prevents me from seeing its location clearly. Not to mention the star products such as Tesla and XPeng, ID. is even lagging behind NETA V. Volkswagen also needs a chance to start afresh, fearing that NETA might suddenly offer an opportunity.
Currently, ID. introduced ID.4 and ID.6 in China and twins four models under the strategy of the north and south dual car.
Among them, ID.4 was officially delivered at the end of March and sold about 7,000 units in the first half of the year – not good enough. Although the official sales cycle is only four months, pre-sales started in November last year, with half a year of order reserves. The sales volume in the north and south regions remained at the level of hundreds of units, and the growth was not stable until the sales of new energy vehicles rose to four digits in June.
In contrast, ID.6 X, which was launched in June, has more potential with more than 500 units delivered in less than two weeks. Volkswagen expects that with the launch of ID.6 CROZZ and the recovery of ID.4, the sales of the ID. series in China will double from 3,000 units in June to 6,000 units in July.
However, this is far from the initial earnest expectations. SAIC Volkswagen set a sales target for ID.4 X at 50,000 to 60,000 units per year; FAW-Volkswagen also has similar ambitions for ID.4 CROZZ. Overall, Volkswagen dreams of selling 80,000 to 100,000 units of the ID. series in China by the end of the year, but the current performance, which is less than 10% of the goal, makes it seem difficult to become a hot seller.
Different views give different explanations.
Some say that it is because of the shortage of chips, especially in the second quarter, and the production capacity limit order digestion. This is like attributing constipation to a lack of toilet paper. The chip has dragged down the entire industry, and Volkswagen’s size has indeed been more affected. However, its fuel business still holds onto its share and position, indicating that everyone is affected by losses, and the electric vehicle business is still subordinate and needs to find reasons from oneself.One reason for the slow sales is that new cars usually have a climbing period of 3 to 6 months. This is like an enemy sneaking in and setting the rhythm. Model Y, for example, sold over 6,600 units in its first two months in China, while ID.4 sold over 12,100 units in its first two months in Europe. Whether or not they can climb successfully ultimately depends on their capabilities.
Admittedly, Volkswagen has missed out on the big electric wave. The Volkswagen Group, including Volkswagen, Audi, Porsche, and others, achieved a doubling of electric vehicle sales in China in the first half of this year, however, sales of just 18,300 units accounted for only 10.7% of its global electric vehicle sales, even less than the United States. In contrast, it sold over 128,000 units in Europe, accounting for 26% of the total.
It is not clear that China is the world’s largest electric vehicle market or Volkswagen’s largest market globally.
Herbert Diess, Volkswagen’s electric vehicle fighter, said Volkswagen must change its approach to selling electric cars in China to address poor sales. “In the Chinese market, products and sales strategies need to be tailored to local consumers, and Volkswagen must make changes to meet local demand in a timely manner.”
Incorrect Opening Method
Looking back from this solution, Diess seems to believe that the main obstacle to the development of Volkswagen’s electric cars in China lies in the terminal. He pointed out that as the consumers buying electric cars are younger than the earlier consumers buying traditional cars, their demand is also different from before, so Volkswagen needs to focus on improving its sales model.
Being old-fashioned is not a unique disadvantage of the electric car business, it runs through the entire Volkswagen Group, has long existed, and exploded. And because of its old-fashionedness, especially in the Skoda brand, it has “lost market share and development momentum” in China.
Electric cars can still be saved.
ID. is sold in China through an agency system, which, like many new forces, provides transparent and uniform prices, without comparison or bargaining, and allows you to order online and pick up in-store, with no gray areas in between; but it is not directly operated, but selects excellent agents from the original dealer network and signs a new agency contract.
According to the official statement, the agency system is a model between the traditional 4S and direct sales. The agent is responsible for the display, invitation, test drive, delivery, and after-sales service of ID.; Volkswagen controls pricing, invoicing, and car adjustments, and pays commissions to agents based on service quality and quantity.
For agents, there is no need for inventory or new store construction; for Volkswagen, there is no need to turn against old friends or bear channel costs themselves. Currently, there are 568 ID. agents, with the rapid expansion of this number reflecting Volkswagen’s deep roots in China, and its innate advantage in having an extensive sales network – but efficiency needs to be improved.In most dealerships, ID. electric vehicles are sold alongside gasoline vehicles. Volkswagen may believe that the benefits of the new model are clearly distributed and there is seamless online and offline connection, and no one can resist the temptation of pure revenue growth.
However, in the actual sales process, the enthusiasm of salespeople plays a decisive role. Many friends who visit the store for consultation will find that salespeople are more passionate about promoting gasoline vehicles and are even indifferent or lack knowledge about electric vehicles. The status of electric vehicles and gasoline vehicles is not parallel.
The two have different profit points: the traditional model earns variable costs while the new model earns commissions. It is difficult for salespeople to give up their habits and cooperate with the new logic of earning money. First, the car manufacturers have a fixed price, and salespeople cannot use simple operations such as discounts to promote sales. Second, the same effort may result in earning less, because the commission also depends on the service rating.
If you have visited Volkswagen’s traditional dealership, you may understand that “service” is an excessive requirement. The people are nice, but there is always a feeling of being stuck in the past, much like the feeling of a state-run grocery store in the early 2000s. Especially when gasoline vehicles can be easily sold, salespeople will not take the risk of promoting ID. to customers without a strong desire to buy.
The improvement that Diess has in mind does not necessarily overturn the partnership between car manufacturers and dealers. Direct sales are impossible, and traditional gasoline vehicle inventory is still rolling every day. However, the focus of dealers can be improved.
For example, increase the layout of ID. city exhibition halls. It is more similar to the format of modern electric vehicle stores, located in CBD shopping centers with a more fashionable appearance and more approachable touchpoints, and even attempting to have some social attributes. Importantly, it only sells the ID. series.
Currently, there are not many city exhibition halls. Taking Shanghai as an example, the mini-app shows that there are only 5 city exhibition halls among the 30 branches in the entire city. Its operator is also selected from ID. dealers, for example, SAIC Volkswagen reportedly only has the highest level of 4S stores equipped with exhibition halls.
For Volkswagen, this agency model based on digital means is an innovation and breakthrough in new retail, allowing ID. to enter the mainstream competition of electric vehicles and to a certain extent, solving old problems such as chaotic terminal prices and information asymmetry of supply and demand. Of course, it is not thorough or revolutionary. Volkswagen and all traditional car manufacturers pursue a “bloodless” transformation.
In the eyes of many electric vehicle observers, direct sales are the foundation of everything, and there is no further discussion if it is not direct sales. But what else can be done? It is not possible to dispose of all advantageous assets as silent costs. Volkswagen and other companies must explore their own rhythm and solutions.## Pricey for Nothing
ID. is a decent electric car.
Speaking of its decency, we mention that its battery energy density reaches 175Wh/kg, and it has a range of more than 500km, with reliable German quality and safety. There is nothing else, just like describing a man as “honest,” which is just a polite way of saying “I don’t know his strengths, but he’s a person.”
However, the shortcomings are evident — not smart enough. In terms of intelligence, ID. has only marketed some 2015 buzzwords, such as head-up displays and L2 level assisted driving (traffic jam assist, steering wheel detachment detection, ACC adaptive cruise control, etc.). Using these to support the core selling point in 2021, it seems like Wolfsburg is still behind the times.
Although it is a brand new model based on the MEB architecture, the finished product still looks like an electric Golf (Volkswagen still only has one car model), which is a “substitute” for a gasoline car.
Electric substitutes are acceptable in the European market and even sought after, as electric environmental protection is politically correct and becoming a mainstream ideology. In the Chinese market, environmental protection is only the enlightenment consciousness of a minority of left-wing young people, and the banner is very empty. Electrification itself is just an admission ticket, and no amount of MEB hype can make it flourish.
Faced with the Chinese market, ID. has invested heavily but was not adequately prepared, or did not have a clear understanding of the current situation in the Chinese electric vehicle market:
First, this wave of electric vehicle consumers are still early adopters and do not have loyalty to traditional brands. They have their own standards for electric cars, which form a completely different logic from gasoline car purchases. They value diversity in aspects such as intelligence, design, and service, and bugs are not a problem. Being too slow or not new enough is unforgivable.
Second, there are many electric vehicle competitors on the market, with decent choices at the same or even lower price points. In contrast, ID. looks expensive and mediocre when compared to its peers.
In fact, we are not overly impressed with the intelligence of cars. The Wuling Hongguang MINI EV is an excellent negative example with no intelligence features, but cheap enough to overwhelm everything and achieve mass popularity, giving people a difficult-to-refuse reason.
ID.’s embarrassment is that the brand accumulation cannot be leveraged, and the product advantages cannot hit the mark.As a translator in the automotive industry, my responsibilities include English translation, spelling checking, and wording modification. As such, I have made some corrections and improvements to the following text to ensure its meaning is conveyed in a more elegant and refined manner, while preserving the HTML tags present in the original Markdown document:
Volkswagen (VW) has been further handicapped by its lackluster marketing, exacerbating the challenge that traditional automakers face in raising brand awareness for their electric vehicles (EVs). One major hurdle is the low recognition of their brands as EV makers, with Tesla being the first company that comes to mind when people think of EVs, followed by BYD, new startups, and then other domestic automakers.
Most people are not aware of VW’s identity – the company has not launched any impressive EV campaigns or marketing efforts. How many people know that they hired Liu Yifei as their spokesperson? How many people can appreciate their EV technological advancements?
Here’s how the cycle works: when you consider an EV purchase, VW doesn’t come to mind; if it does, you have to go to the right offline dealership to experience it; if you do, there’s a good chance you’ll buy a more intelligent competitor’s product. According to analysis by Bernstein analysts cited by Financial Times, the VW ID.4 achieved only a few thousand conversions out of over seventy thousand test drives in China.
VW’s Time Has Yet to Come
Despite numerous setbacks, VW still has a chance to succeed.
There is still a vast untapped segment of conservative consumers with traditional consumption habits and preferences, including brand and technology conservatism, as well as conservative overall spending habits. These individuals are likely to have a longer period of observation and evaluation for new brands and products. Therefore, VW needs to seize the window of time and revamp its EV brand identity before the mainstream population has completed its EV education. The industry generally anticipates 2025 as a pivotal year.
It is not an unachievable goal, especially considering ongoing efforts.
VW is at the forefront of electrification among all traditional giants, hence there are no other examples to use for comparison. In terms of the TOP15 sales ranking of new energy vehicles mentioned earlier, not only is VW absent, but there is not a single model from mainstream joint-venture brands.
In the first half of 2021, China’s penetration rate of new energy vehicles reached 10%, and by June it had risen to 14%. Among them, the self-owned brand penetration rate is 28%, the luxury brand is 14%, whereas mainstream JV brands account for only 2%. VW takes 47% of the market share for new energy vehicles among mainstream JV brands, which is a significant improvement.
VW’s progress in transforming China is much faster than in other parts of the world and it has developed and promoted EVs much more quickly than other mainstream foreign automakers. However, people are expecting VW to take faster action or receive better market feedback. A large investment also requires accountability, and it’s too despairing to spend money without getting the desired results.
In the business world, there is a saying that “strategy is for the long term, products for the medium term, and marketing for the short term.”In the long run, Volkswagen’s direction is good. A small group of people think that the temporary failure of ID. verifies the impetuousness of pure electric strategy, and Volkswagen should start with PHEV for transitional transformation. It is pure nonsense to come up with their own ideas, which will only lead to a dead end.
In the medium term, there is a lot of room for improvement in products, especially in software. Volkswagen mentioned in the NEW AUTO 2030 plan that the current software platform E³1.1 can achieve OTA for MEB platform products, and a new electronic architecture and operating system will be launched by 2025, with pre-installed L4 level autonomous driving technology. It may be slow and Volkswagen does not have any specific examples or endorsements, but we can only wait and see.
In the short term, we can reflect immediately. Even if the current generation of products is unsatisfactory, brand marketing can be more clever. North America launched a campaign this year when ID.4 was launched, announcing on April Fool’s Day that Volkswagen would change its name to Voltswagen, which was a lively case.
Reshape awareness and create powerful brand handles. At the worst, like Evergrande, keep shouting and let everyone know that you are making electric cars. The effect is immediate.
This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.