Beijing-In late December 2019, the management Volkswagen The Wolfsburg headquarters realized they might have a serious problem China, The company’s largest market and the ticket to its electric future.

its Flagship Passat Poor performance in unofficial security tests Insurance An industry organization that simulates a frontal driver’s side impact. This test has been widely used in the United States for about ten years.

The car was crashed. The crash test video went viral on the Internet, attracted millions of views, and caused a social media sensation in China. The success of the German car king is based on his reputation for excellent quality and engineering technology.

Volkswagen is not obligated to do anything– Passat It has passed the frontal crash test of the Chinese regulatory agency, which is the same as the test used in most parts of Europe, and automakers and many industry experts believe that the test better reflects the driving conditions in China.

Nevertheless, according to two people with direct knowledge of the matter, Wolfsburg took swift action. They said that a few days after the test results were announced, it formed a team of dozens of engineers and managers to cooperate with SAIC Volkswagen, a 50/50 joint venture that produces Passat in China.

In early 2020, the team decided to add reinforced metal parts to the front of all new Passats and various other models produced by the Shanghai-based joint venture, at a cost of approximately 400 yuan ($62) per vehicle. source.

According to sources, the details of this structural transformation have not been previously reported and will cost tens of millions of dollars for the hundreds of thousands of vehicles that will be affected in the joint venture each year. This is a huge cost for a company that has stated that it is working to reduce manufacturing costs in China and globally.

Intervention in the face of online consumer activism highlights the importance of China electric car And fulfill the promise of transcendence Tesla By 2025, Inc will become the global leader in electric vehicles.

At a time when global automakers are paying high prices for abandoning oil, they can no longer count on the dominance that they have enjoyed in China over the past few decades, and they feel that local gasoline and electric car manufacturers are challenging them in technology and design.

A Volkswagen spokesperson said that it has developed products specifically for the Chinese market. Passat failed to simulate a frontal collision between two cars. The company said that this situation is less likely to happen in China than in the United States. .

“In China, there are central obstacles on highways,” Volkswagen added. “In China, there are usually not so many truck Either Pickup trucks Compared with the traffic situation in the United States. “

When asked about the 400 yuan modification, the spokesperson said that Volkswagen is constantly improving its products based on customer feedback to make products safer.

“Vital to public health”

It is difficult to compare Passat’s designs in the Volkswagen market because they are usually fundamentally different vehicles based on different production platforms.

According to sources, the new Passat is the first model to undergo this structural modification when it is launched in mid-2020. It passed the insurance industry test that its predecessor failed.

But the facts have proved that Volkswagen’s reputation and financial losses are more lasting. Volkswagen has always been the best-selling foreign automaker in China and has achieved basically stable profits in the past 30 years, which is the longest lasting time among all overseas companies. of.

Bernstein analysts said that Volkswagen’s profit per vehicle in the country has fallen from 1,400-1,500 Euros around 2015 to around 1,000 Euros, and even close to 800 Euros in recent quarters. They describe China as “to China”. Vital”. Public Financial health”.

Passat’s sales, and more broadly, the decline in sales of its joint venture with SAIC—Volkswagen attributed this mainly to a backlash against failure Crash test, And product lineup issues and Global chip shortage.

As a sign of the industry’s financial pressure, an internal memo seen by Reuters showed that SAIC Volkswagen’s finance team ordered managers to cut workshop costs by 30% in 2019, while China’s car sales fell in the previous year since the 1990s. For the first time since.

Volkswagen declined to comment on Bernstein’s earnings figures or internal memos.

SAIC Volkswagen’s revenue last year fell 26% from 2019 to 174.5 billion yuan, and its profit fell 23% to 31 billion yuan. According to data from the consulting company LMC Automotive, the Passat was once one of the best-selling cars in the pre-test by insurance agencies, and its sales fell by 32% to 145,805 vehicles.

According to data from the China Passenger Car Association, although the COVID-19 pandemic clearly played an important role, the joint venture’s decline was much larger than the overall decline in China’s passenger car sales of 6.8% during the same period.

In addition, sales of Volkswagen’s other major joint venture in the country, local automaker FAW (whose products were not involved in the crash test dispute) increased by 1.5%, although Volkswagen officials stated that the company gained through the launch of SUVs and premium sedans. Power Audi The model is introduced to the market.

These two joint ventures make up the majority of Volkswagen’s business in China and account for all of its local production. Although FAW has taken the lead in recent years, their car sales have always been close.

SAIC Volkswagen has no chance of respite in 2022, and sales in the first six months have fallen by 7.8% compared to a year before the pandemic was raging. FAW-Volkswagen’s sales increased by 23%, while the overall sales of passenger cars in China increased by approximately 29%.

“A-pillar” broken in crash test

The C-IASI test that Passat initially failed in 2019 was developed by the Chinese insurance industry organization CIRI Automotive Technology Research Institute, which was not satisfied with the standard C-NCAP test conducted by the government-backed vehicle testing agency CATARC.

It stated that many insurance companies believe that C-NCAP has failed to differentiate vehicles in sufficient detail in terms of collision safety, and began to release test results in 2018.

Most foreign auto brands have achieved positive results in the C-IASI test, although those underperforming brands have not received an online backlash against Passat.

The C-IASI test exposed 25% of the front of the car to a frontal impact. It broke the front roof bracket (called A-pillar) on the driver’s side of the Passat.

The standard C-NCAP test hits 40% of the front of the car, which can better absorb shocks.

CIRI and CATARC did not respond to requests for comment.

In the United States, 25% of frontal crash tests are used Highway Safety Insurance Association (International Institute of Health and Safety), a non-profit organization funded by Car insurance companyThe IIHS tests are widely publicized, and automakers design vehicles to pass them as well as federal crash tests.

Stephan Woellenstein, president of Volkswagen China, admitted in January that the failed crash test and the subsequent online rebound caused a decline in sales of the Passat and SAIC joint venture.

However, last month, he said that Volkswagen has solved the problems revealed by the test, the turbulence of the incident has subsided, and the Chinese business of the automaker is recovering.

“Once again we clearly have one of the safest cars in this segment,” Woellenstein told reporters in July. “We will serve as Passat’s old leader again.”

However, there is still considerable room to be regained in the field of large family cars.

In the first six months of this year, the total sales of Passat in China were 47,480 vehicles, which is far behind 91,110 vehicles. Toyota Camry And 89,157 Honda Accord, According to LMC.

Data for the same period in 2019 (before the pandemic) shows how much of Volkswagen’s recent sales decline: Passat sales were 91,400 units, while Passat sales were 111,968 units protocol And 85,396 Camrys.

(Reporting by Yilei Sun and Tony Munroe; additional reporting by Jan Schwartz and Christoph Steitz; editing by Joe White and Pravin Char)

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