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Volkswagen Launches Its First All-New Independent Subsidiary Brand – To Be Produced in China and Sold Globally

Insightful into Consumer Trends, Volkswagen Plans Subsidiary Brand Ahead of Time

As the most successful automotive brand in the Chinese market, Volkswagen has kept a close eye on the shifting preferences of Chinese consumers at every major stage. The Jetta and Santana in the 1980s and 1990s, followed by the Bora, Magotan, Lavida, Passat and others after 2000, all reflect Volkswagen’s precise grasp of consumption trends in China’s auto market. The same applies to its all-new subsidiary brand.

“Consumers from different eras have different demands for automobiles. Just as the Jetta sedan met family car needs over the past two decades, the new subsidiary brand attracts young, new-generation users with more avant-garde styling and richer technological features.”

Volkswagen began preparing the new subsidiary brand much earlier. In 2016, Prof. Jochem Heizmann, then President of Volkswagen China, stated publicly that Volkswagen would launch a new subsidiary brand in the future, to be produced and sold by FAW-Volkswagen — the very brand set to be unveiled tomorrow.

In 2018, China’s passenger vehicle market saw its first decline on record, accompanied by a lengthy period of structural adjustment. Globally, once car ownership in a country or region reaches 200 vehicles per 1,000 people, it enters a prolonged low-growth phase. Last year, China’s figure stood at 175 per 1,000 people.

Since then, the view that “the market shifts from incremental growth to stock competition” has gained increasing acceptance, and zero industry growth in 2019 has become highly likely. Under such circumstances, catering to current consumer demand to strengthen product competitiveness, continuously exploring segments, and expanding product coverage have become the most important ways for automakers to maintain market vitality.

Launching in 2019: Seizing Youth Demographic and Competing in New Price Segments

By introducing the brand to the market in 2019, Volkswagen, backed by the competitiveness of the Volkswagen brand and the FAW-Volkswagen system, will continue to capitalize on the market dividend from Generation Z consumers who grew up in the internet era, thereby boosting market share. On the other hand, it will challenge mainstream Chinese independent brands through “downmarket positioning” and seize a new price range.

Annual Capacity of 400,000 Units, with Future Exports to Global Markets

In terms of brand positioning, the new subsidiary brand sits below the core Volkswagen brand. However, a lower position does not mean cheap products. Dr. Stephan Wöllenstein prefers to describe the new brand as a highly cost-effective “New Entry Brand”.

“The design and R&D of the new brand will be led by the German side, integrating Volkswagen’s global resources to guarantee German quality from the very source. Every model of the new brand produced at the FAW-Volkswagen Chengdu Plant adheres to Volkswagen’s global consistent quality assurance standards, bringing consumers high-quality vehicles with authentic German heritage.”

This is according to Mr. Harald Mueller, General Manager of the German side at FAW-Volkswagen Chengdu Branch, who oversees manufacturing for the new subsidiary brand.

Previous capacity plans for the FAW-Volkswagen Chengdu Plant show that the new brand will launch three models: an A-class sedan/hatchback, an A-class SUV, and an A+-class SUV, with an annual capacity of up to 400,000 units. These products will feature the Volkswagen Group’s latest vehicle platforms and powertrain technologies, including the MQB modular architecture, EA211 series 1.4T turbocharged engine, and DSG dual-clutch transmission.

Notably, in addition to satisfying domestic market demand, the new brand’s models will also be exported to overseas markets in the future.