The Volkswagen Group was China's largest automaker in 2013 and 2014, but last year, General Motors regained top billing.
Volkswagen's China sales dropped 3.4 percent to 3.55 million vehicles, while GM's rose 5.2 percent to 3.61 million.
How did VW lose bragging rights as China's No. 1 automaker?
Unlike GM, Volkswagen didn't trust its China executives. The German automotive giant's brain trust did not localize its engineering or product design. Instead, key decisions were made in Wolfsburg.
That's a mistake in such a huge and diverse market. In China, foreign automakers typically focus their initial marketing efforts on its prosperous coastal region and major cities. But China also has vast interiors.
GM understood this. In 2010, it launched the locally built Chevrolet New Sail, a subcompact sedan with a low starting price of 60,000 yuan ($9,100). That year, GM unveiled the Baojun brand for China's rural market.
Meanwhile, VW endlessly debated the need to replace its ancient Santana budget sedan, a staple of Chinese taxi fleets. Volkswagen has yet to introduce any new models in this segment.
Volkswagen also was slow to respond to changing consumer tastes. To meet surging demand in China for compact crossovers, GM launched four new crossovers in the past two years under the Buick, Chevrolet and Baojun marques.
In that period, Volkswagen did not introduce any new SUVs or crossovers. It has only two compact crossovers in its lineup.
To respond quickly to China's evolving market, GM was one of the first foreign automakers to establish a local r&d center. In 1997, GM opened the Pan Asia Technical Automotive Center in Shanghai.
The Pan Asia center also runs a satellite center in the southwest city of Liuzhou. By contrast, all Volkswagens sold in China were developed in Germany. The company has no r&d capacity to speak of in China.
With its array of crossovers, its entry-level Baojun brand and local r&d, GM was nicely positioned to exploit China's market shifts last year.