Volkswagen, like General Motors’ Buick division, entered the Chinese market early and took off with a boom as that country’s automobile volumes exploded. The Jetta sedan was a key cog in the success, and enjoys high levels of brand recognition and perception. Now VW is hoping to cushion a leveling off of vehicle sales in China by spinning off Jetta into its own separate brand there, targeting young consumers living outside massive metro markets like Shanghai and Beijing.
“With Jetta, we are closing the gap between the established Volkswagen lead brand in the top-volume segment and entry-level mobility, which accounts for about one third of the Chinese market and is served mainly by local brands,” said Jurgen Stackmann, member of the VW brand board of management, in a prepared statement.
The VW brand sold 3.11 million vehicles in China in 2018, down 2.1 percent, but better off than the overall market’s decline of 4.6 percent. The world’s largest automotive market since it passed the U.S. early in the decade, Chinese car factories now suffer from 25 percent unused capacity, according to an Institute on Taxation and Economic Policy chart published today in The New York Times. By comparison, unused capacity in at 4 percent in North America, 9 percent in Europe, and 2 percent in Japan.
Younger buyers entering the middle class in China outside the biggest cities are buying fewer new cars, opting instead for ride-sharing services or used vehicles, according to The Times article, and when they buy new cars, they favor regional Chinese brands.
Vehicle ownership levels in such markets are “very low, in some cases less than 100 per 1,000 inhabitants,” VW says in its press release announcing the Jetta brand. With the new Jetta, “VW especially intends to target these young Chinese customers,” the automaker says. In its more than 30 years selling vehicles in China, VW has often sold several generations of Jettas at a time. Like North American consumers and unlike those in Europe, Chinese consumers generally prefer “three-box” sedans to “two-box” hatchbacks like VW’s Golf.
The new Jetta brand, which intends to begin sales in China around the third quarter of 2019, will include about 200 dedicated dealerships set to open before the end of the year. The brand will launch with one sedan and two crossover SUVs. They will be built with one of VW’s longtime Chinese partners, FAW, in Chengdu province. VW says the Jetta buying experience will include digital showrooms, shopping mall boutiques, and mobile sales trucks.