Yes, that headline is correct, and it comes from Mr. Klaus Schadewald, Chief Operating Adviser for Volkswagen Philippines
Volkswagen Philippines, through Ayala-owned distributor Automobile Central Enterprise, Inc. (ACEI), recently announced a major shift in their market strategy, and that they will be discontinuing models such as the such as the Golf GTS, Polo, and Jetta for the local market. Instead, VW will source 5 new models from their Chinese manufacturing facilities with the Santana, Santana GTS, Lavida, Lamando, and the previous generation but long wheelbase Tiguan.
The common concern after the announcement of VW's 5-model model salvo is a legitimate one: will there be issues with quality from these Chinese-made Volkswagens?
“Our Volkswagen models from China are built to the standards of Volkswagen,” said Mr. Schadewald over a phone interview. “The workforce is Chinese, yes, but management and quality control are handled by German executives from Volkswagen.”
Mr. Schadewald futher elaborated that the models that come out of Chinese Volkswagen factories could be better than German units. The reasoning is sound: the Chinese factories are equipped with newer and more advanced equipment on the assembly line; all of which are German-made.
The timing of Volkswagen's shift is not coincidental. A free trade agreement exists with China that has been incrementally dropping tariffs on China made cars. Since 2012, tariffs on Chinese cars were at 20%. This year, that tariff dropped to 5%, opening the doors for exports from China to ASEAN for Volkswagen. And the economies of scale of their Chinese production facilities
It's easy to see why Volkswagen wants a bigger share of the ASEAN market pie. The Southeast Asian region has been growing very quickly, while other markets around the world have just sustained their volume or worse, slowed down. The Philippines leads the charge in ASEAN in terms of growth; with almost 474,000 units sold in 2017, the 16.77% year-on-year growth of the country's auto industry outpaces even Thailand.
The Santana GTS, Lamando, and Lavida will be interesting to watch in the market, but many are also keen on the Tiguan LWB which will be sold alongside the new generation Tiguan from Europe. At just over PhP 1.6-million, Volkswagen PH expects the Chinese Tiguan to perform well especially since the European version is almost a million more.
Judging by the starting price of the Santana, things are looking up for Volkswagen's prospects in the Philippine market. At PhP 686,000, the base Santana could become a very popular car for the brand, enabling them to compete directly against subcompacts like the Toyota Vios and Honda City.