People visit the Volkswagen booth during a media day for the Auto Shanghai show in Shanghai, China April 19, 2021. REUTERS/Aly Song/File Photo BEIJING, Aug 9 ( Reuters ) – In late December 2019, managers at Volkswagen ( VOWG_p.DE ) headquarter in Wolfsburg realised they might have a serious trouble in China, the company ‘s biggest market and ticket to its electric future. Its flagship Passat sedan had fared badly in an unofficial safety test carried out by an indemnity industry torso which simulated a front-on driver ‘s side collision, a screen that ‘s been widely used in the United States for around a decade. The cable car was mangled. The crash-test video went viral, attracting millions of views and triggering a social media furor across China, where the german car king ‘s achiever is built on its reputation for superscript choice and engineering.

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Volkswagen was not obliged to do anything – the Passat had passed the Chinese governor ‘s frontal collision test, the like quiz that ‘s used in much of Europe, and one that the car manufacturer and many industry experts believe better reflects drive conditions in China. however, Wolfsburg acted swiftly, according to two people with direct cognition of the matter. Days after the test results were announced, it assembled a team of dozens of engineers and managers to work with SAIC-Volkswagen, the 50/50 joint venture that makes Passats in China, they said. In early 2020, that team decided that strengthening metallic components should be added to the front of all newly Passats and a variety of other models made at the Shanghai-based venture, at a cost of approximately 400 yuan ( $ 62 ) per vehicle, according to the sources. That geomorphologic change, details of which have not been previously reported, would amount to tens of millions of dollars for the hundreds of thousands of vehicles that would be affected at the speculation a year, the sources said. It was a significant cost for a company that had said it was trying to trim manufacture costs in China and globally. The intervention in the face of on-line consumer activism underlines the importance of China, the world ‘s biggest car market, and one which Volkswagen is relying on to fund its 35-billion-euro ( $ 42 billion ) transition to electric vehicles and make good on its pledge to overtake Tesla Inc ( TSLA.O ) to become ball-shaped EV leader by 2025. global automakers ‘ expensive renunciation of oil comes at a time when they can no longer count on the dominance they have enjoyed in decades gone by in China, where they ‘re feeling the estrus from local gasoline and electric players challenging them on technology and design. A Volkswagen spokesperson said it developed products specifically for the chinese market and that the test failed by the Passat had simulated a head-on collision between two cars, a scenario it said was less probably in China than the United States. “ In China there are central barriers on the highways, ” Volkswagen added. “ In China there are n’t normally as many trucks or pickup trucks compared to U.S. traffic scenarios. ” Asked about the 400-yuan modification, the spokesperson said Volkswagen was constantly improving its products according to customer feedback, and to make them safer. ‘UTMOST IMPORTANCE FOR VW ‘S HEALTH ‘ It ‘s difficult to compare designs of Passats across Volkswagen ‘s markets as they are frequently basically unlike vehicles built on unlike output platforms. The newly Passat in China was the first gear model to have such a geomorphologic alteration when it was rolled out in mid-2020, according to the sources. It passed the policy industry examination that its harbinger had failed. But the reputational and fiscal damage has proved more persistent for Volkswagen, which has been the top-selling foreign car manufacturer in China and has made largely healthy profits during its over three decades there, the longest of any overseas actor. Volkswagen ‘s profit per vehicle in the nation has fallen from levels of 1,400-1,500 euros around 2015 to around 1,000 euros and even closer to 800 euros in most holocene quarters, according to Bernstein analysts who described China as “ of utmost importance for VW ‘s fiscal health ”. Sales of the Passat, and more broadly at the speculation with SAIC Motor ( 600104.SS ), have slumped – something Volkswagen has attributed chiefly to the recoil over the fail crash screen, deoxyadenosine monophosphate well as merchandise batting order issues and a global chip deficit. In a bless of the fiscal pressures facing the diligence, one inner memo, seen by Reuters, showed SAIC-Volkswagen ‘s finance team ordered managers to cut costs at workshops by 30 % in 2019, versus the year ahead, when China ‘s car sales dropped for the beginning time since 1990s. Volkswagen declined to comment on the Bernstein profitableness figures or the internal memo. SAIC-Volkswagen ‘s gross dropped 26 % to 174.5 billion yuan last year versus 2019, while net income fell 23 % to 31 billion yuan. Sales of the Passat, once one of the best-sellers in its sedan class before the insurance torso ‘s quiz, fell 32 % to 145,805 vehicles, according to consultancy LMC Automotive. While the COVID-19 pandemic intelligibly played a big function, the refuse at the venture was army for the liberation of rwanda steeper than the overall 6.8 % fall in taiwanese passenger fomite sales in the same period, according to data from the China Passenger Car Association.

furthermore Volkswagen ‘s early main guess in the country, with local car manufacturer FAW – whose products were not involved in the crash screen controversy – visualize sales rise 1.5 %, though VW officials say it gained momentum by introducing SUVs and premium Audi models to the market. The two joint ventures make up the bulk of Volkswagen ‘s taiwanese business, accounting for all its local production. They have historically been close in numbers of vehicles sold, though FAW has taken the star in recent years. There ‘s been no respite for SAIC-Volkswagen in 2021, with sales falling 7.8 % in the first six months compared with a year earlier when the pandemic raged. FAW-Volkswagen saw sales grow 23 % while overall Chinese passenger car sales jumped about 29 %. CRASH TEST FRACTURED ‘A-PILLAR ‘ The C-IASI test that the Passat initially failed in 2019 was developed by a chinese policy diligence body, the CIRI Auto Technology Institute, which was unsatisfied with the standard C-NCAP test conducted by CATARC, a government-backed fomite testing agency. It said many insurers felt that C-NCAP failed to distinguish in adequate detail between vehicles in terms of collision safety, and started publishing test results in 2018. Most foreign car brands received positive results in the C-IASI test, though even those that fared ill did not receive the on-line backlash that was aimed at the Passat. The C-IASI examination subjects 25 % of the car ‘s front to a head-on impact. It fractured the Passat driver ‘s side battlefront ceiling support, known as the A-pillar. The standard C-NCAP test hits 40 % of the car movement, which allows the impact to be better absorbed. The CIRI and CATARC did not respond to requests for remark. In the United States, a 25 % frontal impingement test is used by the Insurance Institute for Highway Safety ( IIHS ), a nonprofit organization group funded by car insurers. IIHS tests are widely publicized, and automakers design vehicles to pass them angstrom well as federal crash tests. Volkswagen ‘s China foreman Stephan Woellenstein acknowledged in January that the fail crash test and subsequent on-line recoil had triggered the decline in Passat and SAIC venture sales. last month, though, he said Volkswagen had fixed the problems revealed by the test, that the ructions of the sequence had subsided and the car manufacturer ‘s taiwanese business was recovering. “ We have once again clearly one of the safest cars on the market in this segment, ” Woellenstein told reporters in July. “ We will once again take up the old leadership of the Passat. ” But there is quite some ground to regain in the boastfully family car section. A sum of 47,480 Passats were sold in the first six months of this class in China, some way behind the 91,110 Toyota Camrys ( 7203.T ) and 89,157 Honda Accords ( 7267.T ), according to LMC. The figures from the same period of 2019, before the pandemic smitten, show how steeply the Volkswagen exemplar has fallen away of belated : 91,400 Passats were sold versus 111,968 Accords and 85,396 Camrys. ( $ 1 = 6.4610 Chinese yuan renminbi ; $ 1 = 0.8423 euro )

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Reporting by Yilei Sun and Tony Munroe; Additional reporting by Jan Schwartz and Christoph Steitz; Editing by Joe White and Pravin Char

Our Standards : The Thomson Reuters Trust Principles .

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