BIZCHINA> 30 Years of Reforms
Driving force
By Li Fangfang (China Daily)
Updated: 2008-08-12 09:10

Initially, after global automakers saw the Shanghai Sedan Plant, they lost interest because the size of China's sedan industry was too small.

But during further discussions, US General Motors' suggestion to build a joint venture received support from Deng Xiaoping, the chief architect of China's reform and opening-up policy as well as vice chairman at the time.

In 2002, when Chinese President Jiang Zemin visited Volkswagen's headquarters in Germany, a Xinhua news report said that Jiang actually paid his first visit to the headquarters in 1978. At that time, he was an official with the machine-building ministry.

Jiang reviewed the German auto industry and came up with the idea of introducing Volkswagen technologies in China.

When Jiang became Shanghai mayor in 1985, he provided guidance and helped support the SVW plan.

According to the memoirs of Jiang Tao, the principal of the Shanghai sedan project, also known as the Father of Santana, he recalled that when Jiang Zemin came up with the idea of a joint venture, Volkswagen reacted very actively saying, "if China would like to cooperate, Volkswagen will not only transfer the technologies but also with pleasure provide part of the capital".

After they returned to China, Volkswagen sent a team to Shanghai to research the Shanghai Sedan Plant then started the discussions, which lasted six years.

Just walking out of the 10-year "cultural revolution" (1966-76), there was no integrated law system to follow in China, especially for business.

Furthermore, although in 1979 the Chinese government started to permit ownership of private automobiles, in the early 1980s, owning a bicycle was still a luxury for the most Chinese people. With a salary of less than 50 yuan per month, nobody dared to dream of someday owning cars costing hundreds of thousands of yuan.

"We want to start with the annual production of 150,000 units, however, China plans to assemble the imported auto components by domestic cheap labor for the sake of exporting complete vehicles to acquire foreign exchange in urgent need," says Carl H Hahn, the former chairman of the board of Volkswagen in his memoirs.

To test the production cooperation, the two parties eventually agreed to assemble 30,000 of Volkswagen's sedans in Shanghai first.

"For me, it should be a significant strategy to tap into China, the market with the most potential in the world, although at that time, the popularization of private sedans in the nation was far behind Nigeria - where one in 2,500 people owned a sedan. Moreover, in terms of average purchasing power, the threshold of owning private sedan is that the average per capita income of the country should reach $4,000 annually, which China was still far behind," says Hahn.

"However, China's 5,000 year history and its reform and opening up policy persuaded me and my colleagues."

After signing a contract in 1982, the first Volkswagen auto Santana rolled off the assembly line a year later in Anting on the northwest outskirts of Shanghai.

 Driving force

The first Santana assembled in Shanghai Sedan Plant in 1983.


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