Modular Platforms from VW will create cost reduction opportunities for the whole value chain, including After Sales Distributors.

Adopting platform strategy to increase economies of scale is no secret for the industry. Specific to VW China, volume platforms include PQ 34, on which Lavita and Bora are built on, and PQ35, on which Octovia, Sagita, and Golf are built on. Other than cost advantage, platform strategy also reduces ‘time-to-market” during development period, increasing productivity dramatically.

Now, VW China is planning and executing an even more aggressive move to push platform strategy even further through a universal Modular Platform, MQB. This new platform adopts modular assembly and would bear success models for VW and Skoda’s C- and D-segment cars, which are current built on PQ35 and PQ46 platforms, such as Passat, Octavia, and Golf.


What is the implication? MQB platform will increase the synergy and economies of scale by sharing more common components. This is good news for the entire value chain. The increased commonality will reduce product lines distributor carries, therefore reducing the current inventory level and cost.

The new platform will start in 2010. Please refer to VW website for details (http://www.vw.com.cn/)

The long prosperity of Toyota Corolla in China and Hidden opportunity for aftermarket entrepreneurs

In China, the C-segment (compact car segment) is the fastest growing segment and has large potential from the family car buyers group. The entry and mid-level C-segment is dominated by Korean background models such as the Hyundai Elantra and Buick Excelle.

With the launch of the new 1.8L Corolla (platform 238L) in May, 2007, Toyota China slashed the price of the old 1.6L Corolla (platform 316) to 127K RMB to make it a competitive new player in the entry and mid level C-segment car market. It will be a direct rival to the Buick Excelle and Hyundai Elantra. The new Corolla represents a characterless position that will expand its customer’s base significantly. In 2008, Corolla production reached 178,000 units, making it the No. 2 volume car in the C-segment in China, following the VW Jetta.

Looking into the future, about next 5 years, Toyota hopes that the old Corolla can sell around 65K units per year. Besides the Camry, the new Corolla is the second-highest volume car and could substantially help Toyota raise its market share in the future. These two Corollas will create major growth for Toyota China.

While Corolla sells well during the years, the Car-par will generate business opportunities for aftermarket players. Especially, the platform change from old 316 to 238, in 2012 from 238 to 140X, will re-structure the supply route for spare parts.

VW Jetta's life cycle will be longer than expected

China is a vast country. Jetta is one of the most popular cars from VW's jointventure, FAW-VW. Jetta's easy maintenance and reliability assure a customer base of private clients, taxi fleets(almost 25% demand), and some government orders. FAW-VW launched its Chengdu plant for production of the Jetta. Chengdu is expected to guarantee more supply of the Jetta for western China wehre budget cars are popular.



Now it is getting clear that demand from small and mid-size cities is growing steadly. This trend will help Jetta's sales in the long term. The taxi demand for replacement will also benefit its sales.



With all the factors considered, Jetta's lifecycle will be longer than VW expected. And this trend will help after-sales market generate more sales on spare parts.

More serious about China's passenger car market? please go to www.kpmg.com.cn. Read "Momentum: driving forces in China's car maket" in Virtual library section.