Summary: FAW-VW’s market performance in December

Among the active manufacturers competing in the Chinese automotive industry in 2016, FAW Volkswagen was among the most successful. Despite an increasing number of Chinese cities introducing legislation aimed at controlling traffic congestion and limiting new car sales, a new slew of legislations giving subsidies and benefits to sales of certain types of vehicles, primarily environmentally-friendly vehicles, has helped keep consumer demand in the automobile market strong. On New Year’s Day, FAW-VW officially announced that it had sold a total of 139,526 automobiles in the month of December, a new record monthly high for the JV that also represents year-on-year growth of 47.9%. With the final month in 2016 accounted for, FAW-VW confirmed it had sold a total of 1.315 million VW vehicles over the course of the year, up 17.3% year-on-year and completing the JV’s preliminary annual sales target of 1.3 million units.

Essentially all of FAW-VW’s 1.3 million-plus sales came from just seven sedan models. While this is something highly unusual in the Chinese automotive industry and something FAW-VW should be proud of, it also is one of many warning signs to the JV that they should work on diversifying their business, especially as the SUV and MPV segments in China continue to increase in popularity. Lack of presence in these increasingly lucrative segments hampers FAW-VW from reaching its total potential.

FAW-VW has taken note of this trend too and has responded by beginning to introduce new models in 2016. In addition to updates to the Bora, Magotan and Sagitar, the JV has also launched the Golf Sportsvan MPV and C-Trek crossover.

December sales of the VW Sagitar totaled 33,978 units (up 36.2% year-on-year), marking the highest sales month for the car to date. Sales of the Sagitar for the whole year totaled 335,000 units, representing year-on-year growth of 21%. Despite having been on the market for several years now, these sales figures show that the Sagitar is still a force to be reckoned with, despite fierce competition from the likes of the Skoda Octavia, Buick Verano and Ford Focus. 

Sales of the Bora in December totaled 33,978 units, marking the first time since March that sales of the vehicle surpassed the 30,000 unit mark and also setting a new record monthly sales volume.

Meanwhile, December sales of the newly-released C-Trek, which is built on the same platform as the Bora, totaled 4,770 sales. This figure far surpassed many expectations for the vehicle’s second month on market and are raising expectations that the vehicle can eventually bring in 8,000 sales per month, which would encourage the introduction of similar models targeted at the A-class MPV market.

The Golf family was initially having some difficulties competing with other hatchback models. The introduction of the Golf Sportsvan this year has proven to be a major boon for FAW-VW. December sales of the Golf family totaled 19,413 units, while total annual sales were 211,679 units, with over 30,000 of those sales coming from the Golf Sportsvan, which has been on the market for eight months now. Sales of the Golf GTI and Golf R-Line have remained stable, giving the Golf family a substantial amount of variety that will prove essential for future success.

Expectations remain high for the Jetta, which has recently gone a major redesign. The redesigned Jetta will use a 1.5 L engine that has never been used on the model line before. Albeit a liter smaller than the previous 1.6 L engine, the new engine boasts more powerful output and, if positively received by the market, may be used on other vehicles.

In the B-class market, the Magotan and CC both continued to post strong sales performances. December sales of the newly-redesigned Magotan totaled 18,368 units, up 64.7% year-on-year, while annual sales totaled 166,000 units, up 9.1% year-on-year. For its part, the CC has been maintaining average monthly sales of over 2,000 units, which considering the tough state of the market is very commendable. 2016 is the first year in which total annual sales of the CC exceeded the 30,000 unit mark. It is worth mentioning that since FAW-VW lacks any SUV models, the B-class Magotan and CC are its most profitable models per individual unit sale, and as such are highly valuable to the JV’s overall financial performance.

It is worth remembering that while key VW models are a major part of FAW-VW’s total business, they don’t make up the whole of the JV’s business. FAW-VW set a relatively conservative sales target of 1.82 million units for all its vehicles sold in the country in 2016, which it did indeed fulfill. However there are a number of new challenges the JV will have to face in 2017. The sedan market is predicted to become even more competitive, while new vehicle tax policies are scheduled to be implemented. FAW-VW has taken note of these by offering subsidy polices in response. That said, FAW-VW also has a number of reasons to be confidant for 2017, with its new SUV vehicles to be produced at the Qingdao factory scheduled to hit the Chinese market in 2018.