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No more price cuts, Volkswagen China says

A model stands beside a Ssangyong all-terrain vehicle made by the Chinese automaker Shanghai Automotive Industries Corp at the Shanghai Auto Show on Thursday. With global manufacturers increasingly interested in the potential of the Chinese auto market, the exhibition has become one of the largest of its kind in Aisa. PHOTO: EPA

Volkswagen Group China president Brend Leissner said yesterday that the German carmaker will no longer slash prices on its models to boost sales, instead it will seek to cut costs by streamlining operations.

Customers have complained about the prices of their cars being cut after purchase and many had demanded their money back, Leissner said at the opening of the week-long auto show in Shanghai.

Such prices undermine the value of Volkswagen products, he said.

"How am I supposed to explain to a customer that I'm selling a car today for 112,000 yuan and tomorrow for 97,000? What you should do is give the car more features and advantages ... but not bring the price of the car down," Leissner said.

Most auto companies in China are battling slowing sales growth and many of them have been forced to slash prices and cut back production, leading to reduced profitability.

Volkswagen said its main focus in China this year would instead be to reduce costs by increasing cooperation between its two auto-producing joint ventures.

Large savings could be gained by streamlining and combining logistics and procurement procedures, he said.

Leissner, however, rejected talk of merging its two China joint ventures as in practical terms "there is no way that we could bring them together."

Volkswagen's main operations in China are separate joint ventures with Shanghai Automotive Industrial Corp (SAIC) and First Automotive Works (FAW) Group Corp.

Leissner said that Volkswagen's market share was better than industry figures indicated as Volkswagen China had switched from reporting sales to dealers and was now only reporting sales to end-customers.

Others were still reporting sales to dealerships as actual sales and that was distorting the view of the overall market, making it impossible to get a clear view of actual overcapacity in the industry, he said.

He said the company's market share in China was 18.9 percent instead of the roughly 11 percent recorded for the first quarter.
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