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Chinese state agency puts brake on Seat electric car

Volkswagen refused permission to sell electric vehicles using Spanish marque

YESTERDAY by: Charles Clover and Sherry Fei Ju in Beijing
A Chinese government agency is preventing Volkswagen from using an overseas brand name for planned locally made electric vehicles, a move seen by some as limiting foreign manufacturers’ ability to compete in the world’s largest car market.

Two people familiar with the matter said Volkswagen had recently sought to use the brand name of its Spanish subsidiary, Seat, on a new joint venture with Chinese carmaker JAC to produce electric vehicles in China. They said this request had been rejected by the National Development and Reform Commission, a powerful government regulator.

However, the decision could yet change, according to one person familiar with the matter. “The first step is for a local brand name,” he said.

At stake is the ability of global carmakers to use their brand power in China, where they accounted for 60 per cent of the 23.6m cars sold last year. Domination by foreign brands has long grated on Chinese industry and the country plans to lead the world in manufacturing electric cars and hybrids by 2025 with a 7m NEV [new-energy vehicles] sales target.

Some are interpreting the NDRC’s decision as a “thin end of the wedge” aimed at ultimately hamstringing foreign carmakers’ ability to market locally produced electric vehicles and hybrids in China, where their brand recognition could provide an edge over local Chinese brands.

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“No foreign brands for new branded NEVs” was the way one person familiar with the situation put it. The NDRC did not respond to questions about the matter sent by fax.

VW sold 3.9m vehicles in China last year out of 9.6m globally. The Seat marque is sold in China, but will not be allowed on NEVs.

The NDRC’s decision applies only to the new joint venture between VW and JAC, and does not appear to limit carmakers’ ability to use their foreign marques on existing joint ventures in the country.

All foreign carmakers producing locally in China are required to create joint ventures with local companies. BMW and Audi, for example, are already producing own branded NEV’s in China with their joint venture partners. Other manufacturers have chosen not to use their own brand names for locally produced NEVs, such as GM’s Baojun E100, a small NEV with an estimated sale price of just 5,000 dollars. GM said the choice of the name was its own decision.

Any move to ban foreign brands would be yet another pothole for foreign carmakers, which have become increasingly dependent on the Chinese market in recent years. From 2018, for example, all carmakers must produce a quotas of NEVs or buy carbon credits. Also, new rules on local production may require foreign companies to transfer technology to local partners, which they fear might be stolen.

VW’s tie-up with JAC received permission in May, and is the third joint venture it operates in China. It is aimed at producing NEVs to satisfy Chinese government quotas. VW’s office in China declined to comment.

In April, Jochem Heizmann, VW’s China chief executive, was asked at a press round table if his company would create a new brand for the new car. “What I can say is that it will not be Volkswagen branded,” he responded, without elaborating.