(Bloomberg) — Volkswagen AG is sticking to its annual sales target in China despite a dramatic drop off in deliveries in the first half, according to a briefing held by the German automaker in Beijing on Friday.
Covid restrictions that idled two major production bases in Changchun and Shanghai, along with supply chain bottlenecks and the ongoing semiconductor shortage, saw VW deliver just 1.47 million cars in the six months through June, down 20% on the first half of 2021.
That was only about 38% of the 3.85 million cars the automaker indicated it hoped to sell in China in 2022 when it pledged in January to return to 2020 levels.
“The top priority now must be to restore consumer confidence and ensure stable production and supply chains,” Stephan Wollenstein, Volkswagen Group China CEO, said, adding that with deliveries improving since May, the carmaker’s catch-up plan has “fully kicked into gear.”
Overall car sales in the world’s biggest auto market plunged earlier this year as Covid lockdowns shuttered factories and showrooms and kept people isolated at home. Not a single car was sold in Shanghai in April. While some automakers like Tesla Inc. and VW managed to keep production lines running using so-called closed loop systems, getting components into factories was a challenge.
With the virus easing, car sales have picked up again, helped by the government cutting the purchase tax on gasoline cars and encouraging people to buy electric vehicles. VW delivered around 340,300 vehicles in June, an increase of about 27% versus June 2021. Electric ID. series sales also reached a record since the models’ launch in 2021, with over 17,600 vehicles handed to customers.
“The semiconductor supply started to ease in June and if the Covid situation also continues to stabilize, we will be able to make up for our production delays in the coming month,” Wollenstein said.
There are still snarls however with VW in China beholden to chip availability across the group. That’s causing shortages in some areas, including one particular car camera, Wollenstein said.
VW is also facing mounting pressure to address allegations that ethnic Uyghurs in China are suffering from coercive labor practices in the region. Chief Executive Herbert Diess last month vowed to visit carmaker’s Xinjiang plant as soon as Covid conditions allow and to keep investing heavily in China as its biggest market.
Wollenstein on Friday said that all the carmaker’s staff in Xinjiang are employed under direct labor contracts.
“We haven’t established the Xinjiang plant to please anybody,” Wollenstein said, noting it started about 10 years ago when “everybody believed in the strong ‘Go West’ trend in China.”
“We also got government subsidies to build the plant, but this is nothing different as if you would do it in Qingdao, or Tianjin, or now in Hefei or Changchun,” he said.
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