Volkswagen's Case

After first connection with China in 1978, Volkswagen has a leading position in China car industry with 16 subsidiaries . And China is Volkswagen’s largest market. After expanding in first tier citiesand southern China, the company moved its focus to rural and western regions. According to Karl-Thomas Neumann, president and CEO of Volkswagen Group, they saw a great potential for an expansion in China's rural areas where millions of people will benefit from better mobility( Hays, 2012).

In April, Volkswagen signed an agreement with China's SAIC Motor Corp. with total investment of about €170 million ($224 million). It said the plant in Urumqi, the capital of the Xinjiang region, will produce up to 50,000 vehicles a year starting in 2015 (“Volkswagen to build new factory in China”, 2012).

Byexpanding its market in China to the western region where Europe's largest car maker could pro strengthen its dominance in the world's biggest auto market.

China is the biggest car market of Volkswagen, and this German car company relies on Chinese auto market while demand in Europe decreased because of economic issues. As a result, Volkswagen is in risky situation if there is change in Chinese economy, especially after the company offered huge investments toward this market in attempts to stay strong, and to keep it dominant position in China.

The slowdown of China’ s Gross Domestic Product growth rate could make negative impacts on the profit of Volkswagen in China because of the decrease in Chinese car sales, especially low-class passenger car segment.

As a result of the slowing economy, China's auto sales dropped from the previous year in the first four months of 2012. After years of ultra-fast growth in both sales and in new production ventures, now the Chineseautomobile market confronted decrease in auto sales after the first quarter of 2012.Overall auto sales, including passenger cars and commercial