Volkswagen's Focus Shifts to Local Suppliers in China for Cost Savings
Volkswagen, based in Wolfsburg, aims to cut costs significantly by increasing its reliance on Chinese suppliers within China. Ralf Brandstätter, VW Group Board Member for China, stated this during a visit to Hefei, an eastern Chinese city.
Marcus Hafkemeyer, responsible for VW's research and development, explained the change: "Long-distance cooperation wasn't effective with only a six-hour time overlap," he said, suggesting previous practices of developing platforms (vehicle substructures) in Germany for China and then transporting them resulted in extra costs and development time. Now, they plan to develop these platforms in Hefei to save costs and time.
Brandstätter acknowledged challenges from political sanctions impacting international manufacturers in China and economic crises like those in Ukraine or the Middle East. To counter such dependencies, Volkswagen is aiming for a self-sustaining and autonomous value chain in China.
Consequently, Volkswagen intends to produce more vehicles in China using locally sourced parts, enhancing efficiency and reducing dependence on international imports and exports.
Insights from Enrichment Data
Volkswagen's strategies for cost reduction and efficiency in China include:
- Sourcing standard off-the-shelf components from Chinese suppliers to decrease costs and shorten delivery times.
- Converting existing internal combustion engine vehicle (ICE) plants to electric vehicle (EV) production. Underutilized plants may be sold off.
- Optimizing and improving the efficiency of manufacturing sites by transforming facilities to support EV production and streamlining development processes.
- Collaborating with local partners and technology companies to standardize digital architecture, like the "China Electric Architecture (CEA)," reducing electric vehicle design and development costs.
- Developing locally-optimized models for the Chinese market, with 18 such models anticipated by 2030, including EVs and plug-in hybrid vehicles.
- Modernizing the R&D center in Hefei, China, which houses approximately 3,000 engineers in electric vehicle and smart technology development, leading to a 30% reduction in product development cycle.
These tactics aim to strengthen Volkswagen's competitive position in the Chinese market by leveraging local innovations, reducing costs, and improving production efficiency.
