Volkswagen adopts new sales model in Mainland

Volkswagen AG is launching another sales model in China that will see the automaker open showrooms in city centres for electric vehicles (EV) and offer fixed prices.

The move marks a departure from the conventional sales system used by the wider industry in China.

Last week, Volkswagen’s joint venture with SAIC Motor opened its first showroom under this system in the eastern city of Hangzhou, according to a social media post. The store, named “ID. Store X”, sells its ID. range of family cars.

The German automaker said customers can order vehicles at a fixed price directly through the company website, phone app or from authorized dealers. The stores are invested and operated by selected dealers, not the automaker.

The dealers get a commission from vehicle sales and do not need to maintain the car inventory, Volkswagen said.

Traditionally automakers including Volkswagen, GM and Toyota set the official price, but dealers are expected to keep an inventory of vehicles and often allowed to offer discounts or price them higher depending on the demand for the models.

The German automaker’s new attempt still differs from Tesla’s direct sales model that bypasses dealers entirely. Tesla’s model allows the US carmaker to manage the process from production to pricing to sales to delivery while adding operational costs of running the wholly-owned stores.

Showroom strength is becoming an important differentiator for EV makers in the world’s biggest auto market, as they line up model launches. Tesla currently has over 150 showrooms and service centres in China while Nio has 189 stores. Xpeng had 116 and Li Auto has 45 showrooms, as of the end of September.

SAIC-Volkswagen said it would open 40 ID. Store X stores in 29 Chinese cities in the next 18 months. Volkswagen’s other venture with FAW Group has yet to announce a detailed sales plan for EVs.

Volkswagen said last month that it will launch eight ID. family models in China by 2023 with its local partners SAIC and FAW.

Sales of electric, plug-in hybrid and hydrogen-powered vehicles in China are forecast to rise to 20 percent of new car sales by 2025 from just 5 percent now, the State Council said last month.