BERLIN -- New car prices in China are likely to fall by 20 percent from today's levels by 2020, said Volkswagen AG's former China CEO Winfried Vahland.
Intense competition, low disposable income, and relatively low production costs are the most important factors causing a continuing price deterioration in the Chinese market, Vahland said.
Western automakers currently are justified in selling their cars for higher prices in China than Chinese competitors because their quality is higher, but Chinese brands are catching up, Vahland said.
"Unfortunately, they can be expected to continue to sell their cars at low prices. That means the price pressure won't lessen, " Vahland said at the Automobilwoche industry conference in Berlin on Nov. 2. Automobilwoche is a sister publication of Automotive News China.
Vahland said the cheapest cars in China cost about 3,000 euros, and the average price is nearly 10,000 euros, compared with an average price of 16,000 euros in Europe.
Vahland became CEO of Volkswagen's Skoda brand on Sept. 1 after five years as head of VW's China operations. Industry watchers say VW's board was pleased with Vahland's success in reversing VW's losses and slumping market share in China. The Skoda appointment means the 53-year-old German native is regarded internally as a potential successor to VW CEO Martin Winterkorn, insiders say.
Steps for China success
At the Automobilwoche conference, Vahland sketched out five crucial challenges and success factors for automaker executives working in China.
Besides offering market-specific products, companies need to establish and cultivate a strong brand, he said. Based on his experience, a dense dealer network is also indispensable.
Vahland aid also important were localization as well as cooperation on site with business partners, institutions and suppliers.
Despite the increasingly tough competitive environment, Vahland considers the VW brand and Skoda itself to be well positioned in China.
He said Skoda aims to have more than 600 dealers in China from 250 today.
Vahland said Skoda plans to double its new-car sales to "at least" 1.5 million in 2020, driven by growth in China, India and Russia.
As part of a 10-year international growth plan, Skoda sales outside Europe will increase to make up half of the brand's volume from 30 percent today, Vahland said.