New plant and SEAT save FWA-Volkswagen?

　　This is another game about balance, as well as a game to support the weak!

　　After Volkswagen Group announced Southern strategy, FAW-Volkswagen has speeded up its pace to construct the new plant in South China. Recent news came that the new plant of FAW-Volkswagen will be located in Foshan in Guangdong Nanhai. In order to enter the South China market, and enhance national competitiveness of FAW-Volkswagen, Volkswagen has decided to introduce SEAT brand to FAW-Volkswagen.

　　For outsiders, this investment is well worth seeing both inside and outside. Externally, by this chance Volkswagen Group can increase the competitiveness in South China and realize large-scale expansion from the northern and central to southern China; internally, this will be a competition between the FAW-Volkswagen and Shanghai Volkswagen. The capacity expansion this time will help FAW-Volkswagen overtake Shanghai Volkswagen and Shanghai GM to be the sales champion in the future.

　　However, since the gap between these two companies is not small, can this really come true?

　　First let’s talk about the sales. Related data from China Automotive Industry Association show that in the year of 2009, with domestic sales of 708,100 units, Shanghai Volkswagen ranked the first while FAW-Volkswagen was listed in the third place with sales of 682,000. The Capacity of a factory in South China will be no more than 200, 000 units. Moreover, it will cost at least a year and a half from construction to commissioning started. Who can guarantee that Shanghai Volkswagen will not expand its production? Previously, Volkswagen (China) President and CEO Vahland has publicly said that VW are planning a one-off project to build two factories in the same area of Guangdong, each of which has a capacity of 200,000 and will be put into use after 2013. Although this program has been adjusted slightly, there is not indication that Shanghai Volkswagen will not expand its production capacity. As I have learned, SAIC and Volkswagen Group are still considering the best site. Only this time it may not be limited to Guangdong.

　　Second, the soft competitiveness besides production or core competencies does really matter. Building factories need financial strength rather than wisdom. There is no guarantee that the 200,000 capacity can not be all sold out. Compared to Shanghai Volkswagen, what FAW Volkswagen really lacks is independent innovation ability. Of course, the company is an excellent foundry partner. (This is Volkswagen automobile really demand in China, especially under the condition that local R & D capacity of Shanghai Volkswagen) however, this is not a necessary condition for success, which has already been proved by the failure of FAW-Volkswagen new Bora, and success of Shanghai Volkswagen Skoda.

　　Perhaps on one hand German Volkswagen has obtained huge benefits through Skoda given to Shanghai Volkswagen, on the other hand, it also anxiety about this Chinese pupil surpasses the master. Because of this, taking into account that FAW-Volkswagen lacks small car products, German Volkswagen gives SEAT to FAW-Volkswagen.

　　SEAT is a small car. And currently small cars are energy saving products being promoted in China. Although everything looks right, can Seat be comparable to Skoda? A0-level Ibiza, A-Class Leon, B-Class EXEO and urban SUV, the average consumer rarely has heard of SEAT while Skoda is a century-old Czech brand anyhow.

　　In addition, does FAW-Volkswagen have low-cost competitive advantages in producing small cars? Compared to related products of self-owned brands Geely Automobile, Chery Automobile, how many competitive advantages does this model own? Especially when Geely localizes Volvo, the pressure of FAW-Volkswagen may be growing.

　　Can SEAT succeed in China? What about the new plant of FAW-Volkswagen in southern China? All favorable climatic, geographical and human conditions are in great need. If SEAT will still be an OEM product rather than be improved localizablely, then the probability of failure is far greater than success. I Hope FAW-Volkswagen can get some changes by the chance of the new plant. The adjustments should be started from the R & D rather than to stress Europe’s natural flavor!

　　Attachment: the new plant in Southern China is more important for SEAT than for FAW- Volkswagen. In 2009, SEAT is one of three Volkswagen brands that got losses, and the only small car brand. SEAT would be very hard to survive If was not introduced to China. As to FAW-Volkswagen, despite a lot of criticism, it is at least the top three domestic auto companies.

　　(Translator: Yalong/Jessie)

　　See original Chinese report Please click:

　　http://oliviawush.blog.sohu.com/151239510.html