Volkswagen sees recovery in sales in China after seeing drop in early 2020

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Volkswagen observes demand rebounding in China, due to new buyers switching from public transport and sales of premium vehicles, but cautioned that the business would not recover from the coronavirus crisis as fast in other countries.

Sales of passenger cars in the country were above year-earlier levels in the last week of April, Volkswagen executive Juergen Stackmann stated.

Stackmann is responsible for passenger car sales and marketing at the Volkswagen brand.

“It is clear to see that China will go through a V shape (recovery),” Stackmann said. “We are not counting on a V shape recovery for Europe.”

In April, sales in Germany dropped 60% on the year, with the rest of Europe declined 85% as some major markets such as Italy and Spain ground to a halt, Stackmann said. Sales in North America dropped 50%, and dropped 81% in South America, he added.

Among the most active buying groups in China are individuals who do not already own a car, Stackmann stated.

“There might be a trend toward individual mobility since people want to avoid public transport these days,” he stated, noting that VW’s Chinese budget brand Jetta had picked up market share after the relaxation of coronavirus lockdown rules.

“Jetta in the first month of reopening has been a very, very strong month,” Stackmann said, adding that unlike Europe, China has lots of first time car buyers.

Volkswagen’s China executive Stephan Woellenstein, in a Linkedin post stated that first-time buyers now represented for 60% of customers in China.

Wealthy consumers have also returned to the market, leading Volkswagen’s upmarket Bentley, Audi and Porsche brands to record year-on-year increase in the first quarter in China, regardless of the lockdown aimed at controlling the virus, Woellenstein said.

“Should the current trend continue, we at Volkswagen Group China can be cautiously optimistic and forecast a yearly result that is not far away from our original plan,” he added, referring to targets set prior to the pandemic that hit demand.

Outside China, factories and showrooms are only slowly re-opening, resulting in an uneven recovery in demand, Stackmann stated.

“We will see a two-speed Europe. Southern Europe was hit really badly. Italy, Spain and to some extent France. We expect recovery to take much longer, it will be bathtub shaped,” he stated.

Northern European countries, such as Norway, Sweden, Denmark and Germany had a better experience. In Germany, sales to fleet customers remained almost at normal levels in April compared with a year ago, he stated.

Pre-booking for Volkswagen’s ID 3 electric car stands at 37,000 vehicles, with demand coming from throughout Europe and strongest in Germany, Stackmann said.

Apart from seeking government stimulus measures, the automaker is adapting its financing and leasing offers to make down payments more pleasant.

Some financing offers will be increased to 72 months, instead of 36, and Volkswagen will provide unemployment insurance, which permits new car buyers to suspend payments if they lose their job.

“Financing will become the main instrument for the industry in the months to come,” Stackmann added.

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