FAW-Volkswagen Appoints New CEO

As the automotive industry around the globe evolves, companies must constantly adapt to survive and thriveThis reality is vividly illustrated by recent developments in two leading Chinese automotive giants: SAIC Motor Corporation Limited and FAW GroupFollowing significant management changes at SAIC, FAW Group has launched its own series of strategic leadership adjustments aimed at revitalizing its performance, particularly in the cooperative venture that is FAW-Volkswagen.

On December 25th, FAW-Volkswagen, often referred to as the "cash cow" of FAW Group, experienced a notable shake-up in its management teamThe most striking aspect of this reshuffle is the appointment of Chen Bin as the Vice President tasked with overseeing this joint ventureObservers are keenly noting that this move directly correlates with the persistent decline in sales for FAW-Volkswagen, prompting the group to signal its intention to regain lost market share.

Unprecedented Sales Challenges

Historically, FAW-Volkswagen has held a prestigious position within the FAW Group, once celebrated as China’s largest joint automotive manufacturer

The company peaked in 2019, achieving a remarkable total sales figure of 2.12 million vehicles, solidifying its dominance in the Chinese automotive landscapeIn 2020, it maintained this leadership with 2.16 million units sold, becoming the only player to surpass the critical threshold of 2 million vehicles in both production and sales.

However, by 2021, while it did manage to clinch the top spot for a third consecutive year, sales began to retract, declining by 14.07% to 1.86 million vehiclesThe downward trend persisted in 2022, with total sales dipping again to 1.82 million, making way for BYD—a company that had declared a full transition to electric vehicles—to seize the sales championshipA slight recovery was observed in 2023 with sales rising to 1.91 million, but this was not sufficient to quell the growing concerns regarding FAW-Volkswagen’s long-term viability.

As the year's sales figures unfold, FAW-Volkswagen is grappling with increasingly alarming numbers

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According to data from the China Passenger Car Association, the first eleven months of 2023 saw FAW-Volkswagen's sales plummet to just 1.43 million unitsThis breakdown reveals a worrying trend among its three main brands—Volkswagen, Audi, and Jetta—with declines of 12.09%, 11.61%, and a staggering 28.11%, respectivelyAt this pace, not only does the group stand to fall short of its sales goal of 1.9 to 2 million for the year, but it risks witnessing a dramatic drop in annual sales.

In November alone, FAW-Volkswagen sold just 147,000 vehicles, positioning it fourth in retail sales among passenger vehicles, a stark contrast to its historical standingsAhead of it in the ranking were the fiercely competitive brands BYD, Chery, and Geely, with FAW-Volkswagen previously renowned for fighting closely for a top spot among these contendersSuch performance puts Chen Bin and his team under immense pressure as they strive to reverse the tide.

Given its long history exceeding three decades, this once-dominant joint venture finds itself undergoing unprecedented sales trials

With Chen Bin stepping into a leadership role, there is widespread curiosity regarding how the youngest Vice President in FAW Group's history will navigate the troubled waters of FAW-Volkswagen.

Chen’s prior experience paints him as a capable leader, having previously served to ‘rescue’ Shenlong Automobile when it faced a similarly dire situationIn 2020, Shenlong's monthly sales plummeted to a mere 5,000 units, but under Chen's leadership, the company managed to rebound above the 10,000 mark through a series of transformative initiatives.

This background likely influenced the decision to select Chen Bin for this pivotal role, as the group hopes he will lead FAW-Volkswagen towards a resurgence.

Navigating an Adversarial Competitive Landscape

In addition to battling declining sales, Chen Bin faces a host of pressing challenges

Foremost among them is the pressing need for a successful transition to electric vehiclesRecent reports indicate a troubling trend among FAW Audi dealerships, with many operating under severe financial strains choosing to withdraw in favor of exclusively selling electric vehicle brands.

The explosive growth of electric vehicles in recent years has profoundly disrupted the conventional internal combustion engine vehicle marketJoint ventures like FAW-Volkswagen, which depend heavily on traditional fuel vehicle sales, are finding it increasingly difficult to competeAs new automotive startups emerge forcefully onto the scene, the market dynamics are shifting rapidlyFAW-Volkswagen's tentative moves into the electric vehicle segment further complicate their situation.

For instance, in November, the sales numbers for FAW-Volkswagen's electric models were dismal, with the ID.4 CROZZ managing a mere 2,878 units sold, while the ID.7 VIZZION and ID.6 CROZZ sold just 189 and 133 units, respectively

Such figures signify that these electric models are hardly scratching the surface when compared to mainstream electric models from competitors.

Beyond the internal challenges of producing viable electric vehicles, FAW-Volkswagen is also contending with pressures from within its peer groupIn the past, FAW Audi’s market share was significantly superior to that of SAIC Audi, with the former traditionally dominating the Audi segment in ChinaHowever, 2023 has seen SAIC Audi ramping up its efforts in the electric vehicle domain, introduced new branding, and launched the AUDI concept car as a collaborative venture with SAICWith such initiatives, the market perception and competitive landscape may undergo significant changes.

Moreover, this year has seen the automobile market embroiled in relentless price wars, leading to FAW-Volkswagen struggling in its fuel vehicle sector as well