European automakers cash in on China car boom

European automakers are building on China's long and storied love affair with their cars

Martin Winterkorn, chief executive officer of Volkswagen (VW), has made it abundantly clear his company's ambition is to become the world's largest automaker, surpassing Toyota in sales and profitability by 2018. He announced on Nov 19 last year that VW will invest 51.6 billion euros in its global automotive business over the next five years. In addition, its China joint ventures will invest 10.6 billion euros in the country. And he has made it even clearer that VW or the "People's Car" needs the world's most populated nation to achieve its goal. "It's hard to tell whether the CEO is trying to butter up the Chinese, but the performance of German cars recently in the Chinese market has been indeed impressive," says Yan Guangming, a veteran analyst of China's relatively fledgling automotive industry. "It's likely that German cars will win in the competition with the Japanese."

"Volkswagen is so familiar with many Chinese that some don't take it as foreign anymore. With its strong influence on Chinese, it is the most influential and recognized brand in China," he says.

VW controls about 17 percent of the Chinese market and is the second-largest foreign automaker behind General Motors, which sold 2 million vehicles in China in 2010, many of which were small mini-vans that enjoyed rural subsidies.

But in the popular Top 10 sedan category, VW had four of its models featured - the Lavida, Jetta, Santana and New Bora - and making up the rest were two General Motors models, a Honda model and three different Chinese brands.

According to Yan, German cars stand out in the Chinese market because of a long history in China and high standards of quality.

But he says buyer passion runs much deeper than mere mechanics and cultural and historical factors are at work.