Volkswagen has announced that it is extending its long-running joint venture with Shanghai Automotive Industrial Corporation (SAIC) until 2040. This move is part of Volkswagen's efforts to make a comeback in the Chinese market.
40 years in China
Of all the European car brands, VW has been in China longer than most and has been working with SAIC — better known in this part of the world as the company behind the MG brand — for the past forty years, having set up one of the first Sino-European car making joint ventures.
Now, that cooperation with SAIC will run till at least 2040, as Volkswagen wants to mount a major new push for sales in the Chinese market, following some recent disappointing sales figures, something acknowledged by VW when it refers to “a very dynamic development phase of the Chinese automotive market.” Originally, the VW-SAIC deal had been due to expire in 2030.
28 million customers
“Volkswagen and SAIC are pioneers of individual mobility in China. Together, we established one of the first international joint ventures in the region 40 years ago. Since its establishment, SAIC Volkswagen has earned the trust of more than 28 million customers. With the long-term contract extension, we underline the importance of this collaboration and the significance of the Chinese market for the Volkswagen Group. We are accelerating the transformation of SAIC Volkswagen in line with our 'In China, for China' strategy on all levels, bringing a new generation of electrified vehicles onto the road by 2026. This ensures that our partnership is economically and technologically future proof," said Ralf Brandstätter, Member of the Board of Management of Volkswagen AG for China. “China is a driver of innovation for autonomous driving and electric mobility. With the new agreement, we are intensifying our integration into the Chinese ecosystem and consistently leveraging local innovation strength. This also creates a strategic competitive advantage for the Volkswagen Group worldwide.”
Wang Xiaoqiu, Chairman of SAIC Motor, said: “Electrification and the transformation of the car into an intelligent vehicle are the defining trends in the automotive industry. In view of the highly dynamic market, SAIC Motors, the first Chinese carmaker to sell more than one million vehicles in the electric segment and in overseas markets, is deepening and expanding its cooperation with Volkswagen. The focus for SAIC Volkswagen is on the development of new, intelligent electric vehicles in order to maintain an industry-leading position in the field of smart technologies. The decisive factors here are consistent customer orientation, quality management and the use of our own innovative strength. We will break new ground with ‘China Speed’. The aim of the joint venture is to achieve sustainable and steady sales growth and a leading market position. In this way, we are contributing to the further positive development of the Chinese and global automotive industry.”
18 new models
Together, Volkswagen and SAIC plan to develop and launch 18 new models — 15 of which will be exclusive to the Chinese market — by 2030, and the majority of those will be all-electric vehicles, thanks to the joint venture’s ‘accelerated electrification’ initiative. Across the wider VW Group, 40 new models will be brought to the Chinese market, half of which will be electrified. By 2030, the Group will offer more than 30 electric models in China.
To underpin those new EVs, the first two of which are due on sale as soon as 2026, VW and SAIC will develop a new “Compact Main Platform” (CMP), which will be specific to these Chinese market models.
As well as those new EVs, there will be an expanded range of plug-in hybrid models and, for the first time in the VW-SAIC portfolio, range-extender cars, where the petrol engine exists only to keep the batteries topped up on longer journeys.
Cost savings
While all of this is going on, VW-SAIC will be working on cutting back its combustion engine production, and reworking its factories in China to seek cost reductions and savings. One factory, in Urumqi, has already been sold off, as have test tracks in Turpan and Anting.
The plan also calls for decarbonisation of vehicle production in China, and VW-SAIC has aims of cutting its carbon output by 25 per cent (compared to 2018 levels) by 2030, on a path to complete carbon neutrality by 2050.
VW and SAIC have enjoyed quite the success in the Chinese market in the past, including making the ID.3 the best-selling electric hatchback, introducing Skoda models to China, and creating multi-million-selling China-only models such as the Lavida. The new 2040 agreement will see a ramping up in the areas of electric mobility, autonomous driving, and digital technology. To help with all that, there’s a new development and innovation center in Hefei, with 3,000 staff, working on connected and intelligent vehicle tech. The goal is that the work being done in Hefei will cut new vehicle development time by 30 per cent.