00:00China CEO. Robert, thanks so much for joining us.
00:03Thanks for having me on the channel.
00:04So I've been covering China and lived in China for some 36 years and I've known that Volkswagen
00:09has been over the years at the top of the leaderboard year to year. Obviously it's been
00:15tougher times of late. You're sort of doubling if not tripling down on in China for China.
00:24Are you open to more and deeper partnerships with your current partners now?
00:29We are continuously exploring further opportunities. First of all, I should say that we are very
00:33thankful that we have these very strong local partnerships. You mentioned already in Xiaopang,
00:38we have Horizon Robotics, we have ThunderSoft. Now we are really in China for China's strategy
00:45deeply embedded into the Chinese innovation ecosystem. That is also the prerequisite to
00:49bring innovations to the market a lot faster than we have been able to do.
00:52So what's at the core of sort of the relaunch into China? Because there's been a few years
00:57of thinking about how do we do this. We can't necessarily rely on the legacy success. And
01:04you do have legacy partners like SAIC, Shanghai Automotive, First Auto Works as well. Those
01:10have been around since 1984 and 1990. So you leverage off that I assume. But then what is the secret
01:16sauce? What back home is the secret sauce to redoing China?
01:21The secret sauce is three years ago, we understood, okay, if we want to participate successfully,
01:27we need to further deepen our localization here in China. That extends not only from manufacturing,
01:32but really into R&D, which is why we established our biggest R&D center outside of Germany, the
01:37Volkswagen China technology company. And also leveraged the Chinese innovation ecosystem with
01:43strong partnerships that helped us to accelerate our development cycles by more than 30%. And
01:49only now two and a half years later, you can see the results here at the auto show here in
01:55Beijing,
01:55with the biggest product offensive in our history. So 13 new NEV models only this year,
02:01and this number will grow to 30 until 2029.
02:06We had just heard from Xiao Peng about they're open to expanding their partnership. You guys have
02:11about a 5% stake in that car maker. And you're going to be working together on the new cars
02:17that came
02:18out. I think you're launching a second car that you engineered together, right? So what is it about the
02:24technology that has come so fast in this country, like XPeng's VLA 2.0?
02:30Exactly. So you already mentioned that our partnership is based on the two jointly developed
02:35models, the IDUNIX 08 and also now the upcoming IDUNIX 09. And on top of that, we have jointly developed
02:42our specifically designed for China electronic architecture, the CEA. And this is going to be the
02:49foundation of all our future NEV products here in China, even extending to our ICE-based vehicles.
02:56Right. How critical is this year for Volkswagen now that you're really kind of executing the
03:03plans to relaunch here? Is this the most critical year perhaps? I would say it's a very decisive year
03:09for us because now we are really switching into delivery mode, launching all these new models. And of
03:14course, the current market environment is quite tough. And also competition is not drawing back.
03:20So it's going to be a challenge, but we are up for the challenge. How do you compete on price?
03:25Because
03:25we know that there's been a price war, no doubt. And I think a lot of the Europeans have been
03:29scratching
03:30their heads. The German car makers are scratching. How do we compete at that price point? It's been a
03:34destructive price point to sort of weed out the weaker players domestically. But how do you compete on
03:40price? I mean, first thing is that we had to lower our cost base significantly. So we reached more than
03:4540 percent cost reduction in our material costs. And of course, we continue to further improve on our
03:50cost efficiency. But also, we have a very solid and robust ICE business still here in China that allows
03:58us to draw the funds that we need to invest into the future of our money. And we also see
04:03that the
04:03market is changing from first time buyers to replacement buyers. So two thirds of customers in China
04:10are replacement buyers. And a lot of them are Volkswagen customers.
04:14How important is it as well that China has a much quicker product cycle from design to showroom floor?
04:21And I think in this plan, you've cut that turnaround of new brands by 30 percent?
04:2730 percent. So we're talking about the new architecture was developed in only 18 months
04:31without any compromises on our Volkswagen standards. And a typical vehicle cycle is now down to 24,
04:38sometimes even lower. How do you see the uncertainties abroad? Namely, the war in Iran
04:44is really kind of complicating supply chains, inflationary pressures. I just talked to Hyundai
04:50Motor. They're diverting their ships and deliveries around Africa, not going anywhere near the Gulf.
04:57What direct impact are you seeing for the supply chain as you try to shift into this country?
05:03I mean, it's a very sad situation that we see in the Middle East. And I hope for all people
05:08there
05:08that this situation is going to be resolved rather soon. For us here in China, we are not directly
05:14affected or our exposure to this risk is rather limited due to our very high localization. But of
05:20course, when we talk about chips and semiconductors, we need to manage that supply chain quite carefully.
05:26What's this year look like for the China market? Obviously, it's a key market for you as you
05:30relaunch this strategy of being local. I mean, the outlook for the token market here in China is
05:37cloudy at best. So we see that the first quarter has already been tough. We are expecting further
05:45resilience in the upcoming quarters. But there is a lot of wait and see mentality amongst all Chinese
05:52customers. Yeah. So I guess partnering is key. I mean, somebody said it today to me that it's almost
05:58like from the heady days in the early part of this century, when essentially foreigners were coming
06:04here and the Chinese were gleaning the technology from the foreigners. Do you see the roles have been
06:09reversed a bit? The legacy car makers in Europe and the United States are really sort of leaning on the
06:15cutting edge technology that these cars in China, the domestic makers, are offering?
06:21Yes. I mean, we have to admit that the innovation speed is set or the pace of innovation is set
06:26by
06:27China. That is also driven, first of all, by a very consistent and supportive
06:33regulative regime by the Chinese government, certainly also by the openness of Chinese customers
06:39to adopt new technologies. Chinese customers are a lot younger than typically back in Europe or in the
06:44US and also then the level of competition that drives the need for innovation to differentiate.
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