Volkswagen PH pivots sourcing to China

Volkswagen Philippines, one of the motor vehicle units of the Ayala Group, strongly pivots this year to the distribution of more affordable but of same quality vehicles from China or other markets with less “friction cost” rather than from their products’ source of origin, Germany.

Felipe Estrella III, Volkswagen Philippines president, emphasized at a media roundtable that they are bringing in more value products to customers in this sourcing strategy from countries such as China because the country’s  less “friction cost” would enable them to offer more affordable vehicles to Filipinos. Friction cost is associated with additional cost when importing certain goods and services from certain markets.

“We are not short changing our customers by bringing in products from China. On the contrary, we are giving them more value,” said Estrella as he tried to explain that there is no difference in the VW products that are built from the source of origin and the VW products built in Germany.

Estrella said that they are trying to lessen the high “cost friction” from the traditional source which could be 30 percent as against 10 percent when imported from China. The giant German automaker has several manufacturing plants in Asia including China and India.

“I hope everyone realizes that this friction cost has no impact whatsoever in the type of products you brought in,” Estrella stressed.

He further stressed, “In the VW world, regardless of the source, the product is the same.” He said that all VW products are built with same standards and same quality wherever they may be produced.

“Why would you pay more for the same product that you can get at a lower price?  I would feel mad if I have to take extra to pay P500,000 more for the same product that I could have taken at P500,000 less,” he pointed out.

“There is so much more value that could be derived from the product we are offering now relative to the products we were offering before,” he said reiterating that the “friction cost” does not even impact on the type of material used, not even engineering, not even technology.

According to Estrella, this pivot was a result of the company’s discussion before of shared mobility, inclusiveness and sustainability. He also cited the phenomenon among millennials, who do not see the need for personal cars as they are postponing getting married and having a family to a later period in life. But, with the pandemic, there could be demand for mobility to ensure personal safety.

All things considered, this emboldened VW Philippines to bring more vehicles from certain markets that could provide less “friction cost” to ensure they could offer more affordable vehicles at same quality and safety standards.  

Boosting to its growing roster of vehicles from China is the introduction of their next model Global T Cross (T Cross) to be made available to customers by the latter part of the second quarter this year. T Cross, a VW sports utility vehicle, is expected to have a price range of P1.1 million-P1.3 million.

The T-Cross is Volkswagen’s first subcompact SUV and is produced in three key facilities worldwide–Brazil, China, and Germany.

Aside from the Volkswagen T-Cross, VW Philippines would be introducing up to two more models within the year.

The German auto giant has also forayed into the electric vehicle category. Family– its offering of fully EVs -- is well on its way to introducing six more EVs in the next three years.

In this regard, the possibility of introducing Volkswagen EVs into the local market now seems closer to reality. VW Philippines is also looking forward to introducing their EV model locally in the future that could also be most likely sourced from China.