Why Volkswagen wants to sell its China-made cars to the world

{"text":[[{"start":11.12,"text":"Nearly four years after setting out its “In China, For China” strategy to boost collapsing sales, Volkswagen is again having to pivot as it battles a sharp downturn hitting the world’s largest car market."}],[{"start":22.72,"text":"Its joint ventures in China swung to a loss in the January to September period, while vehicle deliveries to the market slumped 30 per cent year on year. Sales of its first electric vehicle developed with Tesla rival Xpeng have been weak and there is no sign that demand for combustion engine vehicles in China will pick up again."}],[{"start":41.56,"text":"“It’s a constant challenge in terms of pricing and in terms of volume,” Volkswagen’s chief financial officer Arno Antlitz said at an earnings briefing at the end of last month."}],[{"start":51.4,"text":"As sales of its new EVs falter, Europe’s largest carmaker has been forced to shift to an “In China, and beyond” policy, following Chinese rivals in expanding exports of cars with China-developed software and smart driving platforms. The group is also planning to deploy China-developed software and platforms into cars made at VW factories in parts of the world."}],[{"start":null,"text":"

"}],[{"start":73.56,"text":"Volkswagen’s struggles in what used to be its most lucrative market underscore a broader challenge for western carmakers as they fail to keep pace with the shrinking of legacy petrol businesses and the rise of affordable EVs from Chinese rivals."}],[{"start":86.48,"text":"“The market has fundamentally moved on,” said Chris Liu, a Shanghai-based analyst with Omdia, a consultancy, who warned that there was “very little prospect of a meaningful recovery for conventional petrol cars in China”."}],[{"start":98.88,"text":"Despite efforts to reduce its reliance on petrol vehicles, Volkswagen’s sales of EVs in China were down 43 per cent year-on-year for the nine-month period. Since its launch in April, its first SUV co-developed with Tesla rival Xpeng has sold only 2,523 units, according to Omdia."}],[{"start":null,"text":""}],[{"start":117.42,"text":"Falling sales in China coincide with drastic restructuring at the German group as it looks to cut more than 100,000 jobs to restore its financial firepower to survive the onslaught of newer EV rivals and the global trade war."}],[{"start":130.6,"text":"Volkswagen is not alone in struggling in the world’s largest car market. BMW, Mercedes-Benz and Volvo Cars have all issued profit warnings during the latest results due to the downturn in China, where sales have declined by a quarter. Geely, which owns Volvo Cars, has described conditions in the Chinese market as one of “the most challenging scenarios” it had experienced in the past 20 years."}],[{"start":154.78,"text":"In 2020, global brands had close to 75 per cent of the Chinese market of 25.2mn cars. ICE vehicles, which accounted for more than 95 per cent of sales, are now barely a third of the market. This is set to fall to a quarter of the market of around 20mn cars."}],[{"start":172.68,"text":"While Chinese carmakers’ China sales volumes were flat in the first nine months of 2026, those of German groups dropped 30 per cent while Japanese groups fell 25 per cent, according to data from Automobility, a Shanghai consultancy."}],[{"start":186.92,"text":"Volkswagen has the most to lose in China as the longtime dominant player. Although its pivot to EVs has been slow, the German group was among the first movers among legacy carmakers to make their models more Chinese, cutting the development cycle for its vehicles made in China by 30 per cent and halving its EV platform costs."}],[{"start":null,"text":""}],[{"start":206.18,"text":"It has pushed ahead with its multibillion investments in localised production and partnerships with Chinese companies in core technologies — including chips and advanced driving software."}],[{"start":216.8,"text":"The company is hoping that its electric cars will account for 10 per cent of its China sales this year and is planning to release 30 new battery-only and plug-in hybrid EVs in China by 2030."}],[{"start":227.8,"text":"As the legacy industry faces off against scores of increasingly competitive Chinese rivals, the head of a large auto dealership group in China said he remained “more optimistic” about Volkswagen’s prospects compared with premium German groups such as BMW and Mercedes."}],[{"start":242.76,"text":"“You can see Volkswagen is determined to change; they’re trying different ways to make the car more interesting,” he said, adding many Chinese buyers still looked for “reliability” when shopping for cars."}],[{"start":254.28,"text":"Ernan Cui, an analyst with Gavekal Dragonomics, a Beijing research group, agreed that the group’s latest products “are becoming more competitive” following the tie-ups with EV maker Xpeng, software group Momenta and chip design group Horizon Robotics."}],[{"start":268.72,"text":"“The problem is that VW started localising too late and remains constrained by its legacy development processes, global supply chains and slower product iteration,” she said."}],[{"start":null,"text":""}],[{"start":280.52,"text":"Another concern is that even VW’s electric cars produced with Chinese partners may not appeal to local consumers who have already shifted to strong rival offerings from Chinese brands."}],[{"start":291.58,"text":"“VW as a brand is associated with internal combustion engines and it is not deemed a new innovative carmaker,” Michael Tyndall, senior global autos analyst at HSBC, said. “These new products are not a slam dunk and they’re taking a while to gain momentum. It’s not abundantly clear if they ever will.”"}],[{"start":310.64,"text":"Other foreign groups face similar challenges. Ola Källenius, chief executive of rival Mercedes-Benz, acknowledged that it was virtually impossible to predict where the price point for cars in China would be a year from now. But he ruled out an exit from the Chinese market: “It has to be one of the pillars of your strategy and will remain to be for us.”"}],[{"start":329.96,"text":"Toyota, which managed to maintain its market share in China at 7.8 per cent by releasing locally developed EVs, cut its annual global EV sales target by 13 per cent to 463,000 units, blaming its China performance."}],[{"start":344.34,"text":"“We are still struggling and we’re in a tough situation,” said its executive vice-president Yoichi Miyazaki."}],[{"start":351.32,"text":"BMW, which cut its annual guidance for the second time since June, is betting on the success of new EV models that will be based on its “Neue Klasse” software-controlled platform to regain momentum in China."}],[{"start":364,"text":"Its chief financial officer Walter Mertl said the company was not giving up on petrol sales either, although it would be exporting its China vehicles to other parts of Asia as well."}],[{"start":null,"text":""}],[{"start":373.8,"text":"HSBC’s Tyndall said VW’s switch to an export strategy in China could have a benefit: cars produced there with more advanced software could be attractive in other markets."}],[{"start":384.6,"text":"Antlitz said VW aimed to export up to 300,000 units of its China-made vehicles by 2030, which represents about 10 per cent of its local sales."}],[{"start":394,"text":"The main risk, though, is that they would cannibalise vehicles produced in higher-cost regions such as Europe and pit the models against a flood of similar EVs and hybrids from Chinese rivals."}],[{"start":404.4,"text":"China has turned into an EV export powerhouse in the face of excess production capacity, with shipments to overseas markets rising from below 1mn cars in 2020 to likely exceeding 10mn this year."}],[{"start":null,"text":""}],[{"start":416.8,"text":"Bill Russo, the founder of Automobility and former head of Chrysler in north-east Asia, said the global groups were facing a “double squeeze” as BYD and other Chinese EV leaders export their way through the domestic downturn. “Their traditional ICE business is collapsing in China, while Chinese competitors are expanding aggressively into their home markets.”"}],[{"start":442.2,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1794298133_1966.mp3"}