As new energy vehicles gradually become the new trend in the industry, traditional automakers have been severely impacted, with many well-known brands experiencing declining sales.

According to the latest data released by the China Passenger Car Association (CPCA) for May, among the top ten automakers in retail sales, BYD sold 268,000 vehicles in May, accounting for 15.7% of the market, once again securing the top position. FAW-Volkswagen ranked second with 124,000 vehicles, but its market share fell to 7.3%.

In fact, in the first five months of this year, FAW-Volkswagen's sales have declined for four consecutive months. Specifically, in February, March, April, and May, FAW-Volkswagen's retail sales declined by 16.2%, 4.2%, 15.6%, and 17.5%, respectively. Although FAW-Volkswagen still ranks second in sales, its position is precarious.

Who would have thought that as a once-dominant force in the automotive industry, FAW-Volkswagen would now find itself in such a predicament.

According to Jiemian News, Volkswagen is also internally anxious and has sent an internal push notification titled "Breakthrough Action." It states, "FAW-Volkswagen is in the final and only window of transformation. There is no other way out but to fight a desperate battle, and only by uniting as one can we survive."

Although FAW-Volkswagen officially denied this news, its sense of crisis towards the current situation is evident.

So, why is FAW-Volkswagen in such a situation? Where should FAW-Volkswagen go in the future?

1. Continuous decline in sales and closure of 4S stores in multiple locations

In the automotive industry, apart from Toyota, Volkswagen Group is the second-largest automaker in terms of sales.

However, unlike Toyota, Volkswagen is more dependent on the Chinese market. For example, in 2023, Volkswagen Group sold a cumulative 9.24 million vehicles globally, of which 3.24 million were delivered in the Chinese market, accounting for over 35%. Among all multinational automakers in China, Volkswagen Group ranks first in terms of market share. In contrast, Toyota Group's market share in China is less than 20%. Therefore, if Volkswagen loses the Chinese market, it may struggle to maintain its current position as the second-largest automaker globally.

What worries FAW-Volkswagen even more is that in recent months, news of the closure of 4S stores in multiple locations has frequently emerged.

According to Dawan News, on May 9, several car owners posted videos on social media claiming that a FAW-Volkswagen 4S store in Hebi, Henan, suddenly closed, and the repayment deposit paid by car owners was not refunded.

Mr. Li, a car owner, said that in 2022, his family purchased a Volkswagen brand vehicle from a FAW-Volkswagen 4S store and paid a 4,000 yuan repayment deposit, promising that it would be refunded upon repayment completion. However, now that the Volkswagen 4S store has suddenly closed and withdrawn from the network, the responsible person cannot be contacted, and it is unclear how to resolve the deposit issue.

FAW-Volkswagen's customer service responded that its 4S store had withdrawn from the network on May 6 but had not previously announced this information externally. As early as March this year, there were reports that the Hebi FAW-Volkswagen 4S store had dozens of cars that could not obtain certificates of conformity. Local government officials also confirmed that they had received complaints about one of the 4S stores not paying vehicle purchase tax, indicating that the store was already experiencing operational difficulties.

Similarly, previous media reports also mentioned cases of multiple FAW-Volkswagen 4S stores in Suqian, Pizhou, Xinyi, and other locations closing down and absconding with funds. As a result, many vehicle green books were mortgaged in banks and could not be redeemed, leading to multiple car owners being unable to register their new cars and becoming direct victims.

In fact, in recent years, due to the overall market environment, news of sudden closures and absconding of 4S stores has become common.

On the surface, most 4S stores are struggling; however, in reality, it reflects that large automakers are facing a "life-or-death" test.

After all, the continuous problems of 4S stores are not only due to poor internal management but also caused by external pressures from automakers. Typically, manufacturers impose heavy sales targets, resulting in excess inventory, slow capital flow, and a vicious cycle that eventually leads to collapse.

As 4S stores continue to experience problems and sales decline, it seems increasingly difficult for FAW-Volkswagen to maintain its second-place position.

2. FAW-Volkswagen is struggling with transformation

As an early automotive joint venture brand in China, the cooperation between German Volkswagen Group and FAW Group is undoubtedly a win-win model.

For over 30 years, relying on excellent product quality and strong brand appeal, FAW-Volkswagen has repeatedly won the championship in production and sales in the Chinese market during the era of fuel vehicles, establishing an unshakeable dominant position.

However, in recent years, joint venture brands have been struggling.

According to data from the CPCA, mainstream joint venture brands sold about 450,000 vehicles in April this year, a year-on-year decline of 26%. In May, the automotive retail market continued to show a trend of rising domestic brands and declining joint venture brands. Over the past 20 years, every two cars sold in the Chinese automotive market has been a product of a joint venture brand.

This also means that the competitive landscape in the domestic automotive market has undergone a disruptive change. Domestic brands are becoming the mainstream in the automotive market by continuously improving product quality, strengthening technological innovation, and upgrading services. However, the overall performance of the joint venture car market is relatively bleak.

In fact, FAW-Volkswagen is one of the earlier automakers among multinational giants to undergo electrification and intelligent transformation. However, it has been difficult for the company to achieve significant technical and market results.

In the era of fuel vehicles, FAW-Volkswagen had both affordable Santana models and high-end Audi models that dominated the market. However, in the era of new energy vehicles, FAW-Volkswagen has not yet produced any best-selling models. Even after introducing the Volkswagen ID family of models, they are still not comparable to domestic new energy vehicles.

According to the National Business Daily, the best-performing model in the FAW-Volkswagen ID series, the ID.4 CROZZ, only sold 11,976 vehicles in the first four months of the year. The ID.7 VIZZION, which was launched at the end of last year, sold only 300+ vehicles for three consecutive months. These sales figures are indeed unimpressive.

Although FAW-Volkswagen aims to break through the siege by independently developing new energy models, the resistance it faces is not small.

Jiemian News reported that on the one hand, both controlling parties in the joint venture company only regard the Chinese market as an existing market, and neither the employees nor senior management of the joint venture company have real decision-making power, which may lead to higher costs.

Gui Lingfeng, a director at A.T. Kearney Consulting, said, "New models introduced by joint venture companies are less cost-competitive than local brands. The suppliers for these models are long-term partners of the group. Even if they find alternatives with better cost and efficiency at the procurement level, it is difficult to replace and optimize."

On the other hand, due to FAW-Volkswagen's location in Northeast China, affected by the climate, local consumers' willingness to switch to new energy vehicles is not strong. Compared to southern cities, green license plates are rarely seen.

According to data from the Ministry of Public Security, in 2023, 7.43 million new energy vehicles were registered nationwide, but the total number in the three northeastern provinces was less than 300,000, accounting for only 4%.

With internal and external troubles, it is not easy for FAW-Volkswagen to undergo transformation.

3. Frequent quality issues, difficult to maintain years of accumulated reputation

What worries FAW-Volkswagen even more is that its proud German quality is gradually being eroded.

Once upon a time, FAW-Volkswagen, with its "pure" German heritage, was deeply favored by countless families. However, nowadays, several best-selling models under FAW-Volkswagen are frequently complained about due to quality issues.

According to the third-party complaint platform Heimao Complaints, FAW-Volkswagen currently ranks third on the "Automotive Blacklist." The main complaints are related to quality issues, including transmission failures, door seal strips falling off, and critical engine component fractures.

Due to frequent quality issues with FAW-Volkswagen vehicles, there have also been many reports of car owners rushing to defend their rights.

In March, Jiemian News reported that a Volkswagen Teramont owner in Changchun, Jilin, protested at an auto show, claiming that his car had been repaired at multiple 4S stores for nearly half a year but the fault had not been resolved. According to the owner's call records with the 4S store and the manufacturer's customer service, the vehicle had multiple issues such as a faulty width light indicator and a faulty distance monitoring system. An authoritative inspection report from a court-approved inspection agency also proved that the vehicle had quality issues.

In fact, this is not the first time that concerns have been raised about quality issues with new Volkswagen Teramont vehicles. As early as last November, a Zhuhai netizen posted that their newly purchased Volkswagen Teramont developed an engine fault within two weeks of purchase, with a driving distance of less than 300 kilometers.

What worries consumers even more is that FAW-Volkswagen's after-sales attitude is also average, and problems are often not resolved in a timely manner.

In addition, due to severe quality issues, FAW-Volkswagen has also recalled its problematic vehicles multiple times.

On June 14, Caixin reported that FAW-Volkswagen Automobile Co., Ltd. plans to recall 251 imported Audi e-tron GT and RS e-tron GT electric vehicles produced between July 26, 2022, and June 28, 2023, starting from June 15, 2024. The reason for the recall is that the high-voltage battery modules of these vehicles may experience internal short circuits, which, in extreme cases, could lead to thermal runaway of the battery modules and pose a risk of fire.

With frequent quality issues and an average after-sales attitude from FAW-Volkswagen, consumers are naturally discouraged, and declining sales have become inevitable.

FAW-Volkswagen's current predicament is merely a microcosm of the transformation and upgrading process in the entire automotive industry. It faces not only declining sales but also the need to find new growth points in the new market competition.

To this end, relevant responsible persons from the State-owned Assets Supervision and Administration Commission have repeatedly made it clear that they will implement separate assessments for the new energy vehicle businesses of the three central automotive enterprises, FAW, Dongfeng, and Changan, in the hope of encouraging them to break free from traditional profit assessment constraints and truly achieve transformation in new energy vehicles.

The past glory cannot be retained. If FAW-Volkswagen wants to regain its peak, perhaps it can only go all out and make bold reforms, maintaining its quality while adapting to the new market environment.

However, FAW is also continuously increasing its investment in electrification.

In 2019, Volkswagen Group China and FAW-Volkswagen jointly established CAMS, a charging company. As of June 2023, CAMS has established 1,250 public charging stations with 10,950 charging terminals, covering over 180 cities.

According to Tianyancha data, CAMS was jointly established by JAC Motor, Volkswagen China Investment, FAW Group, and Wanbang New Energy. In January this year, FAW-Volkswagen Automobile Co., Ltd. was added as a shareholder, and the registered capital increased from 812 million yuan to approximately 1.616 billion yuan, representing an increase of approximately 98.96%.