FAW-VW Automotive abandons direct selling

Joint-venture carmaker FAW-Volkswagen Automotive Co., Ltd. (FAW-VW) on Jan. 15 closed down its brand experience center located in the southern Chinese city of Guangzhou, Guangdong Province, waving a farewell to the direct selling model. 

Most insiders estimated that Guangdong Auto Market Co., Ltd. (GDAM) would take over this center.

Inaugurated in December 2006, the FAW-VW Brand Experience Center is able to contribute about 3,000 units to FAW-VW's annual vehicle sales, but it brings about much negative influence on other distributors of the FAW-VW-branded cars.

Although FAW-VW pays more attention to the automobile market in south China, it has not found the most suitable expansion method, said a veteran auto expert Xiang Hansong.

South China, as one of the country's major vehicle consumption markets, has become an important battlefield for carmakers. For instance, more than 30% of the total sales of Tianjin FAW Toyota Motor Co. Ltd. comes from this market.

However, the Toyota-branded vehicles of FAW-VW just accounted for around 4% of the southern Chinese automobile market, said people with the direct knowledge of the matter.

With an initial registered capital of CNY 3.712 billion, FAW-VW was jointly established by Volkswagen, China FAW Group Corporation (CFA), Audi Automobilwerke GmbH, and Volkswagen (China) Investment Co., Ltd. on February 6, 1991.

By now, this JV has hired 10,493 regular employees, and its daily complete car production capacity has hit 2,000 units. In particular, total capital base and assets of FAW-VW have separately footed up to CNY 7.812 billion and CNY 32.3 billion.

In 2009, FAW-VW will form a close partnership with its sibling Shanghai Volkswagen Automotive Co., Ltd. (SVW) to rival with two Sino-Japanese carmakers, Guangzhou Honda Automobile Co., Ltd. and Guangzhou Toyota Motor Co., Ltd. (GTMC), as before.

SVW, co-founded by Shanghai Automotive Industry Corporation (Group) (SAIC) and Germany's automobile giant Volkswagen, is capable of turning out 600,000 vehicles per year. Last year, SVW had an 8.6% car ownership in the domestic retail market, and this figure increased up to 9.2% from January to November 2008.

On April 18, 2008, its fourth complete car production base started operation in the eastern Chinese city of Nanjing, Jiangsu Province, covering a total area of 635,000 square meters, and its preliminary production capacity is designed to be 600,000 units.

SVW intends to continue its dual brand strategy in 2009, in an attempt to further enlarge its car ownership in south China.