[Auto Probe] layout in China 40 years ago, Volkswagen aiming at Japanese automakers?
Hahn said, “as we all know, the explosive growth of the entire Chinese automotive industry came much later, but the infrastructure that Volkswagen built early on laid a good foundation for the boom followed.”
In the second half of 1970s, Volkswagen Group’ s thought of building the second mainstay in Asia gradually matured.
Carl Horst Hahn, the former Chairman of the Volkswagen Group
In the automotive industry, whenever it comes to the reform and opening-up, technology acquisition, joint venture and cooperation, and localization... The Volkswagen pops up spontaneously. Therefore, as a reporter, I am also troubled by a “mysterious” question: as early as 40 years ago, when almost all multinational companies said "NO" to the Chinese automotive industry, why Volkswagen came all the way to China? Was Volkswagen the Bethune of the age? Of course not, but why?
In the year of 2018, as marking the 40th anniversary of the reform and opening-up, I become more persistent in solving this mystery. In one afternoon of mid-December, I, a reporter of Economic Daily-China Economic Net, took the chance to verify my confusions to Carl Horst Hahn, the former Chairman of the Volkswagen Group, in a teahouse in Beijing.
My question: during Dr. Hahn's tenure as the Chairman of Volkswagen from the year 1982 to 1992, there were two completely different opinions about Volkswagen’s entering the Chinese market:
One theory is that forced by the international situation at that time, such as the sanctions imposed by European and American countries against South Africa, the adjustments within the group and other considerations, Volkswagen had to make the choice of investing in Asia. Besides the failed negotiation with South Korea, the project was finally placed in China.
Another theory is that in the age of Japanese cars, Volkswagen Group and Dr. Hahn had the same thoughts with European and American automotive companies -- boycotting and hedging Japanese auto enterprises, so as to move the front line to Asia (Original idea is investing in South Korea) and to China. Then what's the truth on earth?
Dr. Hahn laughed and said, “I am glad to tell you both theories are wrong!” Then he laughed again.
Of course, in the interview with Dr. Hahn, the questions raised by reporter are not subjective assumptions. The first theory: forced by the external circumstances, “having no other choice but investing in Asia” is coming from a Japanese auto industry personnel, not originated from entire slander or other malice. As the reporter of Economic Daily-China Economic Net gave the sauce of the statement, the scene burst into laughter. The second theory: "boycotting and hedging Japanese auto enterprises, so as to move the front line to Asia (Original idea is investing in South Korea) and to China” is "proved" by Hahn and his colleagues.
Speaking of the policies of the US government at that time, Volkswagen Group maintained a proper distance and reasonable relationship with the US government, and there was no issue between us, nor was it a factor we considered. As the only multinational auto company willing to China, we were lucky. Most westerners believed it was impossible to succeed under Chinese social system and status of the time, and China also lacked the necessary knowledge and technology to develop automotive industry.
Hahn said, when we started cooperation with our joint venture partners, neither side had a way out, and with no back-up, we both took enormous risks.
We are different from Japan, Hahn argued. When no one entering the market, we came first. 5000 cars were sold in the first year, accounting for 27% of the total market share. At that time, some people disagreed with my approach, saying such market had no development prospect and growth potential; however, I still decided to stick to it. Chinese are quick learners. In collaboration with Chinese side, we acquired knowledge simultaneously. Moreover, there is another significant factor. Chinese government leaders are not just daydreamers or sticking to the past. Most of them have science and engineering backgrounds and are eager to learn advanced experiences and best practices from the world. (Notes: based on the information the reporter of Economic Daily-China Economic Net found in Automobile Industry Planning Reference 1996: from the year 1985 to 1987, Shanghai Volkswagen produced 1733, 8031, and 11000 vehicles, respectively. During the same period, the domestic production of passenger cars was 5270, 12297, and 20865, in which the Shanghai Volkswagen proportion accounting for 33.28%, 65.31% and 52.72%, respectively. Despite the lack of sales data of the time, the production and sales volume in the first year was apparently not as large as 5000. And the “proportion” in the domestic production is far higher than what Dr. Hahn said-27% of the market.)
Hahn stressed that Volkswagen started with small scale and moved forward slowly step by step in China. However, we attached great importance to laying a solid infrastructure for the future development. By the time I retired 25 years ago, Volkswagen’s output in China was only 100000.
As we all know, the explosive growth of the entire Chinese automotive industry came much later, but the infrastructure that Volkswagen built early on laid a good foundation for the boom followed. At the present, the production of China’s automotive industry has reached 30 million, while Volkswagen achieved 4.2 million. (Notes: in 1992, when Dr. Hahn retired, Shanghai Volkswagen produced 65000 Santana cars, and it was not until 1993 that the production reached 100001. Ibid) (文:经济日报-中国经济网记者 张宇星 译:张懿)