Chinese 'theft' leaves VW competing against self

Volkswagen has said it is investigating allegations reported in a German newspaper that its Chinese partner has been illegally using the German car manufacturer’s patents in its models.

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Volkswagen managers in China have learned that FAW is allegedly imitating key components in a total of four patents, including the EA 111 engine, for use in its own models, according to the Handelsblatt newspaper on Friday.

State-owned Chinese car manufacturer FAW, in which Volkswagen owns shares, has apparently copied patented part of the successful VW engine and intends to use it in their own cars - which will then compete with VW models in China, wrote the paper.

The report further claims that VW also suspects FAW of planning to make a copy of the VW transmission MQ 200 without permission or a license, despite what a VW spokesman described as “long years of trusting collaboration” between the two manufacturers.

VW believes their transmission will be used in the new FAW Besturn B 50 small car, which will be exported to Russia, where VW is currently pushing for market growth with subsidiary Skoda. VW could therefore be in danger of coming into direct competition with its own technology.

The problem isn’t specific to VW, Willi Diez, automobile expert and head of the Nürtingen Institute for the Automotive Industry (IFA) told the DAPD news wire. “Transfers of technology on the edge of patent protection” when doing business with Chinese partners are nothing new, he said.

At the same time, he added, no European manufacturer can afford to stay out of the colossal Chinese automobile market for fear of patent theft alone. Those who have hesitated too long “are hardly ever in the Chinese market today,” said Diez.

VW, while risking patent theft, has certainly managed to gain a strong foothold in China, selling 1.3 million cars there in the first half of this year – that is around a third of all its global sales.

As with all foreign companies operating in China, VW is only allowed to manufacture in the country in collaboration with domestic partners – in this case state-owned manufacturers FAW and SAIC.

But the Chinese state is pushing for technology transfers within these joint ventures with a view to building a self-sufficient car industry. VW has so far reacted mildly, saying it is looking into the case, in a clear attempt to avoid open confrontation with China.

DAPD/The Local/jlb