By on July 27, 2012

A few months ago, Volkswagen extended its joint venture contract with Chinese partner FAW for another 25 years, with appropriate pomp and circumstance: Chinese Prime Minister Wen Jiabao and German Chancellor Angela Merkel witnessed the signature. Now, Volkswagen takes the unusual step of going semi-public with the theft of intellectual property. According to reports in German media, FAW has “systematically and repeatedly” stolen designs of important components such as engines and transmissions. Volkswagen’s hands are tied.

Volkswagen managers caught partner FAW stealing designs for the Volkswagen transmission MQ 200, writes Germany’s Handelsblatt in a long article which names several (albeit anonymous) Volkswagen managers as sources. “It’s a catastrophe,” a VW exec told the paper.

According to the report, this is not the first case or purloined patents. Two years ago, Volkswagen blueprints were used to copy the EA 111 engine.  Volkswagen’s Winterkorn complained  to FAW boss Xu Jianyi. Xu apologized, said it was an oversight by an overeager engineer who had been “severely criticized.”

“In the meantime, FAW built a factory in Changchun for the copied engine,” says the report.

Volkswagen had shared construction details with its joint venture FAW-Volkswagen, which builds the engine under license. It did not share the plans with FAW. “The plans should not have gotten to the outside,” a Volkswagen manager told the paper. ”This is no way to cooperate, trust is being violated.”

It is doubtful that Volkswagen will openly fight against the copy. Bigger things are at stake. China already is Volkswagen’s most important market. For 2018, Volkswagen has budgeted four million units for China. Even if Volkswagen would want to take action against the copy, their “hands are tied” until 2013, said a VW executive. That’s when the purloined powertrain will hit the market.

Well, maybe it was a Chinese revenge anyway. The official PR picture with Winterkorn shaking Xu’s hand after the signing of the contract has “Volkswagen/ SAIC” as the backdrop. VW’s other Chinese joint venture partner SAIC is regarded as a bitter rival by FAW, and the improper backdrop is a major loss of the all-important face.

Tip of the hat to the man in the mountains. Demand denied



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14 Comments on “German Paper: “China Steals Volkswagen Patents”...”

  • avatar

    What did they expect?…

  • avatar

    Is this the start of VW’s China hangover? Or is it just “dog bites man”, since IP theft is to be expected in China?

  • avatar

    In the hat tip line, what does “Demand denied” mean?

    I wonder if any of this and similar things will come back to bite China or not.

  • avatar

    So F$%# you VW…you deserve this as much as Chrysler did when they suddenly noticed more Jeeps on the road in China than actually were being built at the local factory…. or so the legend is told.

    The ability to wipe the mind and memory clean of all China’s sins and corruption and brutality for partnership in profit is really a continuance of history. Perhaps this is why we pine for the past… we have forgotten how pimple faced we were and how tormented high school years were.

    It’s a chaotic world we live in.
    If you think there is meaning and fairness, you are delusional.
    After reaching a certain age and awareness, it becomes obvious to address the reality with drugs or complete depression. Watching the games being played by neighbors and folks around me, big businesses and soulless politicians, I realize the fight to change is pure fantasy and it is far better to reduce the stress and try to make it as painless to the end as possible.

    I chose single malts.

  • avatar
    The Doctor

    Meh. Every Western company goes into China in the certain knowledge that they’ll have their IP pick-pocketed.

  • avatar

    Surely they can’t be surprised by this. China is using these partnerships to establish a modern domestic auto industry. There’s a reason that foreign auto makers have to buddy up with a domestic company. We’re already seeing Chinese companies start to produce and sell their own products that are equivelant to the products they were producing for foreign companies.

  • avatar

    It’s all fun and games until someone loses an eye (or intellectual property). The major competitive advantage Western companies have any longer is their intellectual property and I cannot help but feel that the Chinese are going to steal it – by hook and by crook, all while those same frustrated Western companies look the other way.

    The question is: when will those Western companies start to push back against this robbery? I see the seeds of a significant trade war brewing, especially in the automotive space. We’ve already seen it with threats against Chinese companies for blatently copying auto designs (BMW) and the EU turning around and blocking sale in Europe.

    I’m not surprised by any of this theft, but I am surprised at how accepting the Western companies have been about it. I would imagine that if growth in China slows that Volkswagen will be more inclined to push back. Predicting that is like predictions of fusion energy: it’s juuuuust around the corner.

    • 0 avatar

      “The question is: when will those Western companies start to push back against this robbery?”

      They’ll probably wait until the damage has been done and it’s too late to do anything about it. Those Chinese profits are just too addictive to most Western companies…

      • 0 avatar

        Agreed. That’s the distinct impression I get.

      • 0 avatar

        Pretty much. In the end Western companies are going to lose, and if they are smart withdraw their partnerships for the long run.

        Worldwide this is going to be an issue when Chinese car manufacturers start exporting these vehicles. Make no mistake they will and they will sell the same stuff for less, partially because they have so little R&D into them.

    • 0 avatar

      And when the Chinese copies come here with lower prices than the originals, will consumers stand up to the thieves? Or will they figure that’s somebody else’s problem?

      How does this not end in political escalation and armed conflict?

      • 0 avatar

        That’s the point where governments get involved. I believe that the EU has already banned sales of several of the blatant copiers in member states.

        But, point well taken – this has the potential to lead to a situation where trade and shooting wars begin, though I don’t foresee a shooting war anytime in the near future.

  • avatar

    One small edit:

    “VW’s other Chinese joint venture partner SAIC is regarded as a bitter rival by FAW, and the improper backdrop is a major loss of the all-important face.”

  • avatar

    Hahaha- stealing patents from VW! Now that is a dumb move. They better steal the patents for the ‘special tools’ too, cuz you can’t fix these POS VW products without those very special special tools.

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