Volkswagen’s China Problem
Published July 30, 2012
Want to know why car (and other product) cloning is so popular in China? Because its cheap. Most of the R&D work done in car development comes from sourcing the parts that actually go into the final product, but if you take over an existing car the supply chain is easier to master and can be put together in weeks and months rather than years.
According to reports in The Wall Street Journal that cite the German Daily Business Newspaper Handelsblatt, FAW has been quietly copying and producing transmissions and other parts which it later sold on as its own. According to our own VW insiders, FAW were reportedly planning to produce a copy of VWs EA111 1.4TSI engine which is regarded as one of VWs flagship engines in the Chinese market due to its widespread use across the companys vast range of compact sedans and of course Golf model. FAW were (or are) planning to develop a rival to the Shanghai-VW produced Skoda Octavia and use the 1.4TSI along with VWs MQ200 transmission which the WSJ states FAW attempted to pass off as their own.
Our insiders went on to say it was unusual that FAW would attempt to clone a VW product as they could buy it from VW directly (as they did with the transmission for the Besturn B50, which came from the VW Polo), FAWs biggest problem is that they are inefficient at parts building with their scrap rates eating into their cost advantage, furthermore our insiders say that FAW-VW accounts for 50% of group sales and 95% of the profit.
So what can VW do about it? Of course they can complain and make a worldwide issue out of it but VW are still gung-ho about becoming the Worlds No 1 volume leader by 2018, Audis growth rate is far too fast for VW to rock the boat with FAW-VW, so it seems the issue will be quietly swept under the carpet for the time being.