VW may miss 2020 China fuel-use target, exec says

Volkswagen Group China may miss its 2020 fuel consumption targets in the world's largest market, forcing it to purchase emissions credits from other automakers, a senior executive said Friday.

Stephan Woellenstein, the manufacturer’s operations chief for the country, said that even though the automaker expects to more than double sales of so-called New Energy Vehicles (NEVs) such as plug-in hybrids, it cannot guarantee it will meet its mandated requirements.

“We are still in our fine-tuning at present to see whether we will be self-compliant this year in terms of our fuel consumption targets or need to compensate with the help of partners given our reduced volumes in the first quarter,” he said in a call with reporters.

Woellenstein, however, is confident VW Group will comply with China's fuel-use targets next year, which is when the company will debut its family of full-electric vehicles underpinned by its MEB architecture. The SAIC Volkswagen joint venture will make EVs in Anting while the FAW-VW partnership will make them in Foshan.

Much like Europe, China has an ambitious weight-based fleet target for 2020 that corresponds to an average fuel consumption target of 5 liters of gasoline per 100 kilometers based on the New European Driving Cycle (NEDC). The target drops to 4 liters per 100 km in 2025.

In addition, automakers in China need to reach an NEV quota based on points awarded for the electric range of a vehicle. For example, Volkswagen Group China sold 4.23 million vehicles in 2019 and needed to achieve 423,000 credits to fulfill that year’s 10 percent point quota, either by a minimum of 212,500 plug-in hybrids that are awarded two points each or 85,000 long-range EVs that qualify for five or some mixture in between.

Failure to meet either target means credits have to be transferred, either through affiliated companies or by paying to achieve compliance with the help of other companies that have a surplus of credits.

Originally Volkswagen Group China aimed to sell more than 400,000 NEVs in China this year.

“In Europe we are fighting to get the [ID3 compact hatchback and ID4 crossover] on the street without any glitches, and, to a degree, we [VW Group China] are affected by this, but we are on schedule when it comes to ramping up our factories in Anting and Foshan,” he said.

When asked about the status of the Chinese market, Woellenstein said he expects the country's vehicle sales decline to be 15 percent to 20 percent in April and return to last year’s level potentially by June.

This is an improvement over the 80 percent decrease in China sales in February and last month's 40 percent drop.

VW Group outperformed the market in the first quarter with sales down 35 percent to 613,900 vehicles compared with an overall decline of more than 40 percent during the three-month period.

“We are seeing a strong return from customers,” he said. “There’s pent up demand in many cases from first-time car buyers looking to avoid the use of public transit.”

Additional impetus in the second half could come from an economic stimulus program expected to be announced during the National People’s Congress that could take place in mid-May.

Also on Friday, China reported that first-quarter economic output fell 6.8 percent, the first contraction since quarterly GDP records starting being kept in 1992. It is believed to be the worst decline since the country introduced market-style reforms under Deng Xioping in the late 1970s.

Despite the overall market's woes, Woellenstein said 32 of the automaker’s 33 assembly sites were running again at a utilization rate of 70 percent to 80 percent. Some plants are even back to a three-shift operation, he added.

The executive also shared good news regarding the overall health of the automaker's workforce. “Over the past four to five weeks during our journey back toward normality we have not seen one positive case of Covid-19 among our 103,000 employees,” he said.