Volkswagen: victim of industrial espionage in China?

The Chinese partner of Volkswagen Group China is suspected of engaging in an illegal transfer of technology, causing the detriment to the German car maker, says the German daily newspaper Handelsblatt on Friday, July 27.

For several months, the Chinese company FAW, fruit of a joint venture between Volkswagen and Chinese company, conducted “systematic and planned” spy activities to copy engines and gearboxes of the German group, according Handelsblatt, citing sources within the group.

The Chinese company had a market model of car equipped with these items in Russia, competing models of Volkswagen and its subsidiary Skoda. “It’s just a disaster,” said a senior executive of the German manufacturer to the newspaper, on condition of anonymity.

Until recently, the German manufacturer had simply found that the line of cars from its Chinese partner much like that of its own cars. But in late 2010, a first case had aroused suspicion at Volkswagen, FAW had once been suspected of copying the design of an engine for Polo Golf.

The CEO of FAW, Xu Jianyi (徐建一), then promised to end these practices, arguing that the reproduction plans of Volkswagen engines was due to individual error. But at the same time, the Chinese company has established a factory in China to copy these engines and production has already begun, the paper said.

At the time, the direction of the German automaker decided not to press charges against its partner in order to avoid weakening their presence in the Chinese market. In 2011, Volkswagen sold 2.26 million cars in China, which has become its largest export market.