Agreement to study challenges from dwindling oil, urban density

BEIJING - Volkswagen Group is looking far beyond its immediate goal of selling more cars in China as it considers future of mobility and new business models in the world's biggest auto market.

The company last week signed a memorandum of understanding with Tsinghua University's School of Economics and Management (SEM) to jointly cultivate innovative talent and cooperate on extensive automotive-related research.

Under the three-year agreement, Volkswagen aims to develop new business models that fit the future market - when oil supplies dwindle and urban areas become even more populated, said Klaus Dierkes, executive vice-president of human resources and board member of Volkswagen Group China.

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The question will become whether everyone needs to own a car, he said, adding that the company has an elementary idea about combining individual mobility with public transportation, but it needs further exploration.

Some foreign automakers have already introduced car-sharing services in overseas markets - including the "car2go" project by Daimler AG and "Mu by Peugeot" of French automaker PSA Peugeot Citroen - with similar notions that people can have individual mobility without actually owning a vehicle.

Yet all manufacturers are still in experimental stages of the car sharing business.

In addition to future mobility, the company will partner with the school to study innovative automotive financial services.

Volkswagen began its auto finance effort in China in 2004, but due to traditional buying habits by local customers, the sector is still in its infancy compared to mature markets.

"Basically today we offer only relatively simple (financial) products (here in China), but in our business, technology and innovation are incredibly important," said Guy Broekmans, general manager of Volkswagen Finance (China) Co Ltd.

Broekmans noted that automotive financial services will grow "more profoundly" in China in the future as they have in Europe, the US and Japan.

According to Volkswagen's agreement with Tsinghua, the auto group will support the SEM with scholarships and internship projects to bring top students to the company for hands-on experience.

China is a dramatically changing auto market that requires fast response and Volkswagen needs the best local management, Dierkes said.

Last year, Volkswagen sold more than 1.9 million vehicles in China.

Its total annual capacity at local joint ventures is nearly 2 million, which will be raised to 3 million over the medium term.

The group said earlier that it plans to spend nearly 11 billion euros ($15.6 billion) in China between 2011 and 2015 to develop new products and expand facilities.

Dierkes added that the group may double the number of its local employees over the next eight to 10 years.