Gear change

Wheeled in: Keanu Reeves

The Shanghai Auto Show is always packed with models, normally of the female variety, and occasionally with unlikely names like Little Beast (see WiC54).

But this year was different as visitors eagerly snapped photos of a North American man waving from one of the pricier vehicles on display.

That man was none other than Keanu Reeves, the star of The Matrix films. He was standing by a Bugatti Veyron 16.4 Grand Sport Vitesse, which made its debut in Shanghai this week. The supercar is one of only eight built, and the rumour is that a 29 year-old Chinese has bought it. Car and Driver magazine put the international price tag at $2.6 million, which means the Bugatti would have cost almost $4 million after factoring in China’s luxury tax.

That was good news for Volkswagen, which owns Bugatti. But this year’s show would have been less enjoyable for the German car giant than past ones. That’s because its China CEO Jochem Heizmann had to make an apology, after VW was forced to recall 380,000 cars last month after problems emerged with its double-clutch gearbox.

National Business Daily said it was the first time that Volkswagen had issued an apology to Chinese buyers. “I deeply apologise for the inconvenience this matter caused consumers,” said Heizmann, who confirmed that the problem had been solved. He added that new gearboxes – which VW makes in Dalian – wouldn’t have the same fault.

“The double-clutch gearbox is very state-of-the-art technology,” Heizmann insisted. “Volkswagen Group will continue to use it, as it will play a significant role in reducing fuel consumption.”

Volkswagen sales in China last year reached 2.81 million vehicles, making it the company’s single largest market (and accounting for 30% of global sales). Heizmann says Volkswagen plans to invest €9.8 billion ($12.8 billion) in China by 2015 to “achieve sustainable development” and reckons on producing 4 million cars in the country annually by 2018.

VW’s China boss was joined at the show by Martin Winterkorn, chairman of Volkswagen’s management board, who also stressed the importance of the China market for the carmaker, even adding that “Volkswagen is becoming a typical Chinese enterprise”.

But National Business Daily points out that the gearbox recalls have seen the German manufacturer “suffer unprecedented market pressures”, with some consumers “still sceptical of whether the recall can solve the problem”. The newspaper wondered if the crisis might become a “watershed event” in Volkswagen’s 30-year history in China (for more on which, see our Focus Issue, The Magnificent Seven).

As to the Shanghai Auto Show itself, a record 152,000 tickets were sold this year – a statistic again underpinning the vibrant Chinese market. Although sales growth in the industry has slowed a little on recent years, the long term prospects still look promising. The Economist reports that annual sales in China are expected to rise from 19 million cars last year to 31 million in 2020.

Leading foreign firms like Volkswagen have also tended to dominate the higher-end of the market, selling international brands in joint ventures with Chinese partners. In large part that has been due to a reputation for superior style and quality. Domestic brands have been keen to close the perception gap on their foreign competitors, something that VW’s gearbox recall may assist.

Japan’s Nikkei newspaper believes some of the local carmakers could start to take market share from foreigners too. “In the past, Chinese automakers tended to display vehicles that appeared to be knock-offs of foreign models. However, at the Shanghai show this year, they are exhibiting cars that are stylish and original,” it noted. “For example, Great Wall Motor, a Hebei province carmaker that has grown rapidly on the strong sales of sport utility vehicles, is showcasing 23 models in the booth for its internationally known Haval brand.”

But ahead of the recall, VW was still doing better than most in China: in the first quarter its sales were up 21.3% to 769,200 units.

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