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"We Need to Get the Young Chinese Middle Class Excited"

In this interview: CEO Herbert Diess on the importance of the Chinese market for the Group.

Herbert Diess, Group CEO, Volkswagen AG

Mr. Diess, you have been in charge of the Group Executive Board Division China since mid-January. What do you see as the greatest challenges?
There is no other market in the world where the technological transformation towards electrification, digitalization, networking, and automated driving is progressing as rapidly as in China. In addition, the Chinese government has a clear development plan that extends to 2025 – and that includes the automotive industry. This is being rigorously implemented, which means Volkswagen has to change at the right speed too. We are the market leader. We must remain at the forefront of development. That’s what our Chinese customers expect of us.

"We are the market leader. We must remain at the forefront of development"

How is Volkswagen currently positioned in China? What do we have to do and what are the next steps?
Our Chinese joint venture companies are leaders within the Volkswagen Group in terms of productivity, quality – particularly product starts – efficiency, and profitability. That’s the benchmark. Our partners, such as the FAW Group and SAIC, are now on a par with us. If we don’t want to miss the boat, we must work closely with our long-standing partners. New collaborations are just as important, because in China – as in the US – there are internet giants that set standards. Likewise, the emerging start-ups within the digital sector and the many mobility service providers are extremely agile and innovative. This potential must also be exploited for developments that are useful not only for the Chinese market, but worldwide.

What can we learn from China? How must we adapt our strategy?
It’s the speed and efficiency with which Chinese companies implement technological innovations – that’s what we can learn from them. China has now become an important automotive powerhouse. That is where we need to aim our strategy. That is why I have personally assumed responsibility for China on the Group Executive Board. Stephan Wöllenstein, with his wealth of experience of China, manages the operative business. We can no longer produce and sell cars in China that were designed in Europe for Europe. We must develop and produce in China, for China.

What other strategic steps present themselves?
It is my goal to intensify the existing collaborations. We have a lot to offer – and together we can be the strongest alliance in the industry. This is a great opportunity for us and we need to take advantage of it. At the same time, however, we also have to open up as a group and in the brands to more Chinese executives. We can benefit from their expertise, diligence, and entrepreneurial spirit. Professional and intercultural exchange is of great value to all of us and to our business. We must be open to this if we want to enjoy continued success in China in the future.

With the new JETTA brand, Volkswagen is now systematically pursuing this path. How did the idea for the new brand come about?
In China, Jetta is a symbol for attainable, individual mobility. This is the model with which we put China on four wheels in the 1990s. With more than 300,000 vehicles sold per year, it is one of our successful models in the world’s largest market. And this market is developing rapidly, especially in the numerous megacities beyond the metropolitan regions such as Shanghai or Beijing, where vehicle density is very low. In these areas, it is primarily young customers and the large number of first-time buyers who have a significant need for mobility. We are answering that need without having to reposition the Volkswagen brand. With the launch of the JETTA brand, whose model portfolio includes a sedan and two SUVs, we are combining tradition and quality with attractive design and modern technology. JETTA therefore has the potential to grow from a successful model into a successful brand, especially among the young Chinese middle class: We need to get them excited about Volkswagen.
By establishing the new brand, we have taken an important step in this direction. My thanks go to the entire JETTA team who have successfully realized this project, putting in a lot of energy and commitment. That was a very impressive achievement, congratulations.