One of the largest Chinese car manufacturers, Dongfeng, started offering passenger cars, including electric cars, in the Czech Republic. Aren’t you worried that cheap, yet advanced Chinese electric cars are a threat to traditional European automakers?
Not all Chinese carmakers will go to Europe, but of course we have signals that they are coming here and some are already working. The European market will be a tough nut for them. In terms of quality and added value, it is the most demanding in the world. Any entity, whether from China or elsewhere, has to deal with this challenge.
The experience of the Chinese is great – much greater than the European – in terms of the number of cars sold. The local market is represented by 1.5 million electric cars. However, the needs and experiences of Chinese and European customers are significantly different.
In what, for example?
There is a very educated market in Europe. In China, on the other hand, a large proportion of customers are still buying their first car. The view of the product differs significantly. If the price of cars is comparable, the main competitive advantage may be an established sales network. This is a key that the Chinese do not have. Building a network that we have been working on in Europe for thirty years or more will be difficult.
Price is not the only measure, nor is it just about the quality of the product, but also about its accessibility and service network. Although the electric car is significantly easier to maintain than the internal combustion engine, it also needs care.
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Electromobility: What are the plans of the EU and the world? • VIDEO Videohub
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China wants to be the number one in the production and sale of electric cars in the world.
Whether they will sell in bulk in China, South America or Europe is a question. Europe is specific. From Western markets, all Chinese carmakers originally chose the US for their initial expansion. Because the American market is the easiest to accept external products. The Chinese government thwarted this plan for them. They reconsidered where to direct their capacities. That is why Europe is in the viewfinder. But there is caution from the steps so far. So far, they are probing the terrain.
The Chinese are expanding into Europe at a time when the American Tesla gigafactory is being set up near Berlin, which is also building a service network. Will the competition be all the more difficult?
Elon Musk poses a threat even to Chinese carmakers on their home field. Tesla has a historical advantage in working with electromobility, which it will certainly use in the future. Local production can only help. I believe that the childhood diseases that accompanied Tesla are over. He will continue to be a strong global player.
So, as an investor, would you rather buy Tesla shares than some Chinese carmakers?
I don’t invest in cars, so I’d rather refrain from answering. Tesla is one, there are many Chinese cars.
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How do the turbulent situation in the automotive industry affect you as an importer?
Very burdensome. Of course, the shortage of goods is reflected in all areas of our business – although this year we sell a fifth more cars than last year, more than thirteen thousand. So we are at a similar level as in 2019.
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Uncertainty in the auto industry is growing. The situation with us and all other manufacturers is very similar. We don’t have chips. Car deliveries will thus decrease in the coming weeks and months. It primarily hurts subcontractors. The carmaker as such does not really need a chip. Bosch has heard that the chip famine will end in the first quarter of next year, perhaps in the first half of the year. Other sources say similarly. However, a major supplier of chips in Malaysia is facing the worst phase of a pandemic, and thus a reduction in production. The hunger for chips is all the greater, and not just from the ranks of cars.
Can domestic subcontractors absorb such frequent outages in car production as Škoda Auto or Toyota and others?
Many of them are certainly balancing on the edge and outages can flood them unpleasantly. Only Volkswagen will suffer a reduction in deliveries – ie a reduction in production volume – in the order of tens of percent in the coming months. The worst will be September, October. It will apply to the complete model line, all cars.
We suffer, competition, the whole market is in spasm. Nevertheless, the situation in the domestic top five importers is stable, by which I mean, in addition to Volkswagen, also Škoda, Mercedes, Hyundai and Toyota. The trend of operational leasing as a form of car financing also applies. Three quarters of our customers are entrepreneurs and companies.
Didn’t carmakers underestimate the importance of chips by not concluding contracts in the past that would put them at the forefront of chip waiters today?
Maybe so, but the car is not a refrigerator and consists of far more components and also involves far more subcontractors. Car manufacturers are all the more complicated in the situation. Chips are now also bought on the open market. The traditional chain in terms of capacity and demand is, of course, completely different from before the pandemic. It shuffled the cards.
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As well as the crisis in logistics.
It’s not just about making the chip, but also getting it into European plants. Here, the pandemic is significant and freight transport is several times more expensive. Waiting times and car prices are thus rising significantly. However, the pandemic also generated a demand for individual mobility. We must be able to satisfy her.
How has the situation on the market of used cars, with which you also trade, changed?
Our sales network trades with them within the Das WeltAuto program. After the last lockdown, the demand for cars increased significantly. The moment new cars, which are in short supply, cannot satisfy her, they enter the scene of a second-hand car. Demand is for everything that has bikes: young, old, cheap and expensive. After all.
Even second-hand cars are getting more expensive than the market was used to. Where is the rise in prices and when will it slow down?
Hard to say. We did not avoid the price increase either, it is a percentage unit. Carmakers don’t get more expensive just because they want to. These are the prices of inputs – raw materials and transport. If inputs continue to rise in price, carmakers will continue to raise prices.
Looking at the developments so far, further increases in prices are very likely. We usually copy inflation, which is twice as high as before the pandemic. In other fields, the current rise in prices is hundreds of percent. This will not happen to cars, but the big question is what will happen next. The demand is not only in our country, but huge worldwide. We see it in waiting times, people in our country have been waiting for a car for four to six months. We assume that the deadlines will be slightly extended.
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Automakers justify the rise in car prices with the onset of electromobility and high investments. Surely your plans also count on their expansion?
Definitely yes. Electromobility is coming. For Volkswagen, this is the number one topic. We want to be a major player in this field. The key is the supply of electric cars, which is growing significantly and thus generates demand. The new cars come with a unique technology, offering better range and charging time. The user is no longer so limited. The transition to electro will be all the easier. We perceive it in our cars ID.3 and ID.4, both arouse interest.
How many have you sold so far?
At the moment, about four hundred on the Czech market.
Are you satisfied with that?
It’s more than we expected. But it’s still not thousands. The role of the state, which does not work in the Czech Republic, is important – by that I mean direct support for the sale of electric cars. Unlike other countries – and not just Western ones – support for electromobility is lacking here, except for a few small projects.
But it is not just about the state, but also about the environmental behavior of companies. The topic of electromobility is beginning to resonate in large companies and demand is generated more by the internal needs of companies. The pressure comes from banks and large multinational companies, whose policy is co-created by electromobility.
The government would say that, for example, it is investing in the construction of charging stations at a rate commensurate with the demand for electric cars. And it is not very massive in the Czech Republic.
The government is taking some steps to create the infrastructure. Respectively, there is already one, so that it can improve. I do not put a dog’s head on the government, it is visibly working on the development of the network and legislation.
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I see promises of other specific subsidies for the construction of the network for individual and public users. Today, no one will tell you that they have to wait in line at the charging station. The existing network is sufficient, but the pressure on it will increase in the future. Therefore, the number of stations must be added. On behalf of Volkswagen, I can say that we want green mobility, it represents a clear direction and it makes clear sense.
In a relatively short time, you will have to deal with the onset of electromobility and at the same time with the possible termination of production of new cars with internal combustion engines. How to absorb this wound?
Volkswagen operates worldwide. The needs of individual markets vary. In the Czech Republic, they depend on emission standards. The moment we switch to the Euro 7 standard, we will have to significantly adjust the offer of cars. We cannot ignore government decisions. With a clean internal combustion engine, you can hardly meet the standards. Plug-in hybrids that reduce the carbon footprint will also play a more important role.
Volkswagen could build a factory for batteries for electric cars – gigafactory. How do you perceive the debate?
For me as a resident of the republic, it would be very pleasant if the gigafactory VW was established in the Czech Republic. It would be a gesture of the concern towards the Czech market. It would confirm the importance of Czech partners. The amount of support is definitely up to the governments of individual countries. It is clear that gigafactories will arise. Countries that win them will gain a great competitive advantage. There are no assembly plants.
Thin branch networks?
Not ours. The showroom will still be the primary sales tool, despite various attempts at change. Online sales do not work at all. Customers are always looking for consultation, advice, personal contact. Customer readiness is changing. Familiars with the situation will come to the salons.
Previously, you were also responsible for sales in the UK market. Can you retrospectively evaluate what Brexit did to the local business?
The chain is relatively intact. The goal of the British government will be to keep the car industry in Britain, the current post -rexite trends were rather the opposite. As far as car sales are concerned, the situation is affected more by a pandemic than by Brexit.
Patrik Fejtek (48) |
| He has held high positions within the group for two decades Volkswagen. |
| Passenger Cars Division in VW since October 2020. The previous six years he worked in China in the position of Sales Director of the Škoda brand within Saic Volkswagen. |
| During his career, he also led the sales and commercial vehicle sales program. He was also in charge of Škoda sales in Great Britain. |
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