“\”We didn’t do anything wrong, but somehow, we lost.\” These were the sad and frustrated words spoken by Olli-Pekka Kallasvuo, then CEO of Nokia, at a press conference in 2014 when the company’s mobile phone business was acquired by Microsoft. Along with dozens of Nokia executives present at the press conference, they were beside themselves with grief.
Years later, the heads of the automotive industry would do everything in their power to avoid facing the same situation.
If many more traditional automakers view Tesla, the industry’s barbarian, with deep disdain, then Herbert Diess could be called the exception because he has mentioned Tesla repeatedly to arouse enough crisis awareness within the company, and has even invited Musk to speak to 200 executives.
For a long time, Diess has been playing the role of “waking up sleeping people”. He himself has said that mentioning Tesla frequently has even annoyed him.
After enduring the period of electric vehicle strategy trials, having survived the 2020 phase where the Volkswagen Supervisory Board doubted the company’s ability to reform, Diess, who is about to turn 63 years old in 2021, had to tear open a new era for the 84-year-old Volkswagen, in the face of union resistance.
This “foreigner” from Wolfsburg received support from two major families after the ID series performed well in the European market. “Porsche and Piëch family still support Diess”, on the condition that the effectiveness of the reform must be demonstrated in the Chinese market.
“Second home” malfunctioning?
“In March, Diess said: “50% reduction in battery costs, annual sales of 2 million vehicles, and becoming a global leader in electric vehicles in 4 years.” The most fundamental meaning is that the Volkswagen Group is committed to pushing the results of electrification from quantitative change to qualitative change.
Four years is not a long time for Diess, who is taking the helm. As a result, the performance of the largest single market in China has become particularly important.
In the past, Volkswagen was able to bear the title of “always being followed but never surpassed” in the Chinese market, but now, this title must be modified with the qualifier “on the internal combustion engine track”.
As a newcomer to the new energy race, Volkswagen has become an outsider. Whether this newcomer can find the key to the new era, not only represents the glory and shame of the Volkswagen brand itself, but even represents whether traditional joint-venture automakers can break away from the “Nokia” curse in people’s hearts in the new energy market. “Can Volkswagen succeed in entering the new energy vehicle market? If Volkswagen succeeds, does it mean that other joint venture brands can also succeed? If Volkswagen fails, will other joint venture brands be doomed as well? Therefore, not only do we bear a great responsibility, but our “All in” attitude also has a huge impact on the entire automotive industry. Fu Qiang, Senior Director of Volkswagen Brand ID. Marketing at SAIC Volkswagen Automotive Co., Ltd., asked a series of questions that undoubtedly questioned himself.
When ID.4 was just launched, Stephan Woellenstein, CEO of Volkswagen Group China, made a solemn promise that “MEB is better than all competitors’ pure electric platforms, and with the delivery of ID. series models, Volkswagen’s decline in the Chinese market will be swept away.” Taking SAIC Volkswagen ID.4 X as an example, the annual target is 50,000-60,000 units, an average of 4,000-5,000 units per month.
Good news did not come, but the news of Stephan Woellenstein’s imminent departure did. Recently, German media reported that due to the performance of the ID. series electric vehicles in the Chinese market falling short of expectations, Volkswagen Group will replace the person in charge of the China region, and Stephan Woellenstein will officially leave in February next year.
Diess, Stephan Woellenstein’s direct superior, is the highest manager of Volkswagen China. Originally, he was full of confidence in the changes in the Chinese market, and even set a target of selling 80,000 ID. series vehicles in China in 2021, but reality gave Diess a resounding slap and also made him impatient with the Chinese team led by Stephan Woellenstein.
If Volkswagen Group announced at the 2020 earnings call that the outstanding performance of the Chinese team directly contributed to the company’s “regaining the global sales crown” in 2019, then this was the first candy for Stephan Woellenstein after he took office as CEO in 2019, and also the only one.
In 2020, Volkswagen Group sold more than 3.85 million vehicles in China, with a market share of 19.3%, a decrease of 9.1% from 2019. By the end of July this year, the ID. series had a bad debut, with a total sales of only more than 6,000 units for FAW-Volkswagen ID.4 CROZZ and SAIC Volkswagen ID.4 X combined in the first half of the year.Soon, Feng Sihan faced the fact that the ID.3 was leading the European market while the Chinese market, which could have provided the strongest support, remained untapped. Volkswagen’s affectionate “second home” failed in the new energy market. From January to September, the ID. series sold 208,800 vehicles in Europe, while only 47,200 vehicles were sold in China during the same period.
Objectively speaking, the ID. series faces different competitive environments in the two markets. In Europe, the competitors include Renault ZOE, Nissan Leaf, Fiat 500e, Peugeot e-208, and imported models such as the Model 3. However, in China, the competition is not only from Tesla, but also from new car brands rapidly advancing in smart technology, as well as strong rivals from traditional car manufacturers such as BYD and GAC E-An. The market competition environment is clearly challenging.
At the same time, due to different levels of government subsidies, there is a certain gap in the prices between China and Europe, making it difficult to activate the mainstream market still in its infancy.
The development of any industry follows the same law: import period, climbing period, rapid growth period, maturity period, and decline period. The import period is characterized by a group of geeks with advanced ideas who are eager to try things out.
However, once the fast growth period is entered and the general public begins to consume, there will be differences from the geek-type consumer group. This gap is one that all companies have to cross. For Volkswagen, which produces cars for the mainstream, it is necessary to find ways to cross this gap and respond to consumers’ real needs.
How slow are the actions of joint venture brands in the field of electrification? From the perspective of market penetration rate, the replacement effect of the new energy market will be more pronounced. The data from the China Passenger Car Association shows that the penetration rate of new energy reached 13% in the first 10 months of this year, a significant increase from the 5.8% penetration rate in 2020.
Among them, the penetration rate of new energy vehicles in domestic brands is 36%, while that of luxury cars is 12%. The penetration rate of mainstream joint venture brands is only 3.4%, showing significant differentiation characteristics. In the sales of new energy vehicles of joint venture brands with a penetration rate of only 3.4%, the ID. series of Volkswagen’s new energy vehicles accounted for 72% of the market share.
Volkswagen can only go hard and take on the role of educating the “mainstream” to save the ID. series.# Translation
Dis has publicly criticized the Chinese team led by Feng Sihan, stating that “Volkswagen must change its way of selling electric vehicles in China to address the problem of poor sales of electric vehicles in the world’s largest automotive market.”
Whether it’s objective market feedback or leadership pressure, it’s enough to make Feng Sihan move quickly, so he began to do everything possible to save the ID. Series.
Since the second half of the year, the Volkswagen Group’s resources in China have begun to heavily favor the ID. Series. The number of Volkswagen brand dealers with ID. series agency rights has skyrocketed; the commission for selling ID. series models has skyrocketed; and even during the chip shortage, production capacity priority is still given to ID. series.
The most important measure is that Volkswagen has planned a direct sales model for the ID. series.
The essence of the direct sales model is the direct contact between the manufacturer and the consumer. After the consumer makes a purchase on the super APP of the internet platform, the ID. partner will immediately track every sales consultant to ensure the best service is provided.
“Our pivot to direct-to-consumer is a big step,” said Tang Xujing, senior director of Volkswagen brand marketing at SAIC Volkswagen. “The customer-centric C-B-D model is a model we are strongly promoting internally, and many automakers are now talking about direct-to-consumer models.”
On the contrary, SAIC Volkswagen will use and strengthen the advantage of its 1000 dealership network. “So we will empower our dealerships with platforms and tools, support them with data, and of course, manage them with data, to better serve customers.”
“At the beginning, all 4S stores should be included in the direct sales model. We should offer them opportunities in the first phase, tell them specific KPI assessment conditions, and eliminate them in the later stage. We should not give up the advantages of over 1,000 4S stores. Our plan is to completely open up,” Fu Qiang came to the same conclusion.
Currently, SAIC Volkswagen has two networks: 4S dealers and supermarkets. Although there are only 46 supermarkets currently, their sales account for about 25% of the total, and 80% of the top 10 sales come from supermarkets, indicating that supermarkets play a very important role in helping Volkswagen brand break through and accelerate on the new track.Meanwhile, both modes are expanding in the 4S dealership, and it will take dealers some time to adapt to and digest the new service mode. “The mindset needs to change from bargaining to focusing on services. Transitioning from a trader to a service provider, the profit will come from the quality of service amidst the context of unified pricing.”
In the future, SAIC Volkswagen will learn from Apple through network channels.
Apple’s channel strategy has a proprietary term called “Hybrid Multiple Channel,” which is a mixed form of multiple sales modes.
As we all know, Apple products can be purchased through official websites, experience stores, franchises, contract phones, e-commerce channels, large user devices, student-exclusive channels, etc. It mixes six or seven modes into a super hybrid, achieving the greatest coverage for users while providing different service experiences for different consumers.
Next, SAIC Volkswagen will also explore sales models that combine multiple channels.
“There are now 4S dealerships and supermarkets, and new forms will be discussed one after another. For example, why can’t ID series products enter IKEA? The agency model provides a great space for imagination. It is direct sales by businesses, giving them control and management of prices, and ultimately being responsible for their own sales results.”
Under many efforts, SAIC Volkswagen finally achieved a market response of ID series sales breaking 10,000 during the “Golden September and Silver October” period. However, this number is too small for Volkswagen. It is far from the target goal of 100,000 vehicles set by Feng Sihan at the beginning of 2021 and the expectations from the group and the outside world.
Whether the agency marketing model created by Volkswagen is a stroke of genius is still too early to judge, and the pressing matter now is to solve the current problem. SAIC Volkswagen’s ID series sales target for the next year is 130,000 to 150,000 vehicles. Time is running out!
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.