Volkswagen has said it can produce an electric vehicle entirely made in China for half the cost of doing so elsewhere, and following a series of investments in the country, it could for the first time develop cars outside Germany. VW is also in discussions about increasing exports of Chinese-made cars as well as applying China breakthroughs throughout its global operations.
VW has long been a pillar of the German economy, but in recent years its influence and economic impact in the country has waned due to dropping sales and the growth of Chinese competition.
In China, the company now seems very much in the throes of a sunk-cost fallacy, in that it sees the only way to get out of the situation it is in is to plough more money into the market. At the same time, there is no doubt that it is cheaper to produce in China, but with the growing localization of foreign businesses in the country, it will further distance itself from its German roots and the jobs it provides at home.
These sorts of decisions also need to be looked at in terms of Europe’s dealings with China as a whole, both from am economic and also from a security point of view. Can a stronger European stance be considered protectionism? Absolutely. But this is also what China has been doing for years, and the 49/51 split joint venture that VW, and all the other European auto manufacturers, signed to enter the China market in the 1990s, and the position those companies are in today, are a perfect example of what can happen without thinking ahead.