Volkswagen in China’s Trap: The Future of the Auto Industry

The Beijing auto show will be the showcase of the auto industry. China is the center of change and the home of tomorrow’s car.

For ten days, Beijing will be a showcase: Starting Thursday, automakers in the People’s Republic will show where the industry is headed. For many companies, “Beijing Auto Show” is now the most important trade fair. “The car of tomorrow is here China his country,” said Ferdinand Dudenhöffer from the Center for Automotive Research (CAR) in Bochum to FR. Not for sale in any other country Volkswagen, BMW and Mercedes many cars like in China. “The German automobile industry cannot be imagined without China. At the same time, China is at the center of the evolution of the automotive industry,” said Dudenhöffer.

Up to 150 exhibitors are expected in Beijing – including traditional names, but also those almost unknown in this country such as Great Wall and Geely. Many of these manufacturers will present new models. The car of the future should be electric and intelligent. Chinese car manufacturers in particular are now much closer to doing this better than their competitors from the West.

Volkswagen is under pressure in China

One example is Volkswagen: The second largest car manufacturer in the world is “in the China trap,” that was the headline in “Spiegel” last week. On the one hand, the Wolfsburg-based company is heavily criticized for its involvement in northwest China. There, in Xinjiang, Volkswagen operates a test facility with Chinese partners. VW therefore has to ask itself uncomfortable questions – for example, whether Uyghur forced labor was used to build or run the test series. The people of Wolfsburg state that there is no evidence of human rights violations so far.

On the other hand, Volkswagen earns less and less in the People’s Republic, although the company is very dependent on business in China: every third VW car is sold there. But profits are falling: VW has been bringing in an average of 4.2 billion euros every year since 2014. This year profits should be only 1.5 to 2 billion euros.

One reason for this: the combustion engine business is becoming increasingly important. Soon 40 percent of all cars sold could be electric. But when it comes to electric cars, VW is lagging behind the Chinese competition. “The price is going down and down, the competition is getting tougher,” VW China boss Ralf Brandstätter told the German News Agency. This is also why, as “Spiegel” reports, VW is sending all its board members to the trade fair in Beijing.