Audi Board Member in China
China elevates future topics to a new level
Copying is a thing of the past. Intellectual property made in China is the new zeitgeist. Make, create, design – creative energy is everywhere, especially here in Shenzhen, the Palo Alto of China. This energy is what has made companies like Tencent, BYD and Huawei major players. We travel there with Audi CFO Alexander Seitz. Since September 2018, he has been responsible for strategic development of the Chinese business.
Vision alone is not enough; the Chinese are doers. They get things done, and in a networking metropolis like Shenzhen, their ideas can be made tangible. According to media reports, Chinese start-ups for the first time raised more venture capital than newly founded US firms in the second quarter of 2018. The country is elevating future topics to a new level. Completely new business models are emerging in the area of the digital lifecycle. It goes without saying that electric mobility is a key issue here.
One of the places this is happening is the Makerspace HAX. Alexander Seitz is there for a visit. In the open workspaces, he walks past unsorted cables and yet-to-be-installed sensors, prototypes of unfamiliar cell phones and industrial robots. In between there are screws, drills and welding equipment for continuous optimization of product ideas.
Seitz knows China well. He was First Vice President and Commercial Executive Vice President of SAIC Volkswagen in Shanghai for almost five years before joining Audi. He is accustomed to, and appreciates, the restlessness of the Chinese – but you can never know everything about this country, especially not at this fast-paced moment in time. “The thing that always fascinated me about China is the determination and discipline with which things are implemented,” he says. “And the economic power behind the uncompromising focus on solutions of the Chinese is especially apparent here in Shenzhen.” The agenda here is simply to get things done. Try, fail, grow from that and ultimately achieve success.
Communication within the Group
Also visiting HAX is Dr. Jochem Heizmann, VW Board Member for the China division. He has been working closely with the Chinese since he became the first VW Group Board Member for China in 2012. The special way of working, along with a desire to share ideas and experience a completely different environment are what led him here today to this pulsating Makerspace. The two top managers talk to Chinese inventors who are in the fast lane and are using idea highways like those of HAX to pick up additional speed. What’s important for the developers: networking here with the up to 40 international start-ups from all over the world. Supporting others who, like them, are working on the future. The progress made here in one month equals that made in a year in the rest of the world.
From the start-up incubator it’s on to meetings with those who have already grown large. “Today was not the first meeting we’ve had with Tencent with an intensive exchange of approaches, visions and negotiation interests,” Seitz explains later. Visits to Huawei and BYD with other Board colleagues followed. It was a day full of interesting, inspiring contacts. The openness to partnerships is greater than ever before. There are also political reasons for this, including the government’s new strategy. According to the media, the People’s Republic wants to become the leading "industrial superpower.” The objective: “Intellectual property made in China” will no longer stand for cheap, mass-produced goods but instead for innovation, quality and efficiency. Despite this aggressive new stance, new business opportunities are opening up for German companies – after all, efficient innovation leadership also means not doing everything yourself. As if in a time-lapse film, international companies from the western and eastern worlds are intertwining. From traditional companies to digitalization newcomers, Shenzhen is a hub for this business network.
Growth on solid ground
In addition to the tech companies, meetings with FAW-Volkswagen in Changchun are naturally also on Seitz’s itinerary for this trip. Audi has been successfully producing and selling cars in China with the joint venture for 30 years now. Almost 600,000 cars, including imported vehicles, were sold there in 2017. The number of Audi models sold in China is expected to exceed one million in the next few years. In addition to expanding to the two-partner strategy, Audi also performed the associated restructuring and further development of the all-encompassing local management. “We want to advance the Chinese business more quickly, but also bring the product even closer to the needs of customers there,” Seitz says. The Audi premium dealer network in China, which has been built up over the past 30 years, will also be crucial to continued success.
Audi is therefore intent on strengthening its Technical Development locally: With about 650 employees, the headcount here will double in the next five years. This makes Audi China R&D the brand’s largest technical development center outside Europe, developing solutions on-site in all fields of technology – in Beijing and, starting in 2019, also in the Chinese city Wuxi. Why here? “What customers in China want today is often far ahead of other market requirements,” Seitz explains. If you incorporate these trends, then you are prepared for integration in the very early phase of product development. Audi also utilizes synergies within the VW Group in its R&D Center – for example, to optimize its adaptation of resources and expertise to the realignmen
“We want to advance the Chinese business more quickly, but also bring the product even closer to the needs of the customers there.”
According to the World Intellectual Property Organization, China was the strongest driver behind the 8.3 percent worldwide increase in patent applications in 2017. Most of these were in the areas of digitalization, artificial intelligence and machine learning. Audi is therefore performing farsighted development work locally, entirely in keeping with the company’s current strategy: close to the customer. The increasingly intense competition with local players is driving innovation in the largest single market. “We want to develop the Audi product portfolio to be attractive for the Chinese market – especially given the currently booming development culture of the Chinese and the growing products and services from local players,” Seitz says. This means Audi is expanding: more models in a long version especially for China, a larger range of SUVs at over 50 percent, electrification, digital services and new business models. One thing is certain: Seitz knows the Chinese and knows what they want to own. And he knows where it is worth using negotiation skills to grow in the lifeline of innovative ideas from Chinese inventors. Two opportunities for continued growth that Audi has recognized for itself, and that Seitz is incorporating into the business with China. For a successful Audi China 2025 strategy – including Audi property and experience.
China sets the pace for the automotive industry
- Leadership of the premium segment is decided in China. This is where established OEMs duel it out with new, local players. This results in innovative ideas on future technologies such as electric drive systems, autonomous driving and digitalization.
- China is the most important market for Audi. The local portfolio will more than double in the next five years. From long versions and the expansion of the SUV model range to an NEV initiative or new design – everything is quickly implemented to increase the attractiveness of Audi for Chinese customers. For example, the brand is launching ten new SUV variants in the market, of which six are produced locally. At the same time, Audi has announced that it will be offering around ten electrified models in China by 2022, half of which will be produced locally. The Audi e-tron, the first fully electric Audi vehicle, will reach the Chinese market in 2019.
- Almost 600,000 Audi models were sold in China in 2017, including imports. This year, the delivery total had already reached 483,001 by September, an increase of 15.5 percent. That number is expected to exceed one million Audi models sold in China in the next few years. Audi is therefore building on its long-standing success story with the joint venture FAW-Volkswagen and, as part of a two-partner strategy, is adding another joint venture partnership with the SAIC Group.