Volkswagen Stays Committed to China Amid EV Price War Challenges
Volkswagen is determined to stay in China despite facing challenges from a tough electric vehicle (EV) price war. Thomas Schäfer, the CEO of the Volkswagen brand, stated that this price war cannot last forever. He emphasized that VW aims to maintain its position as the largest international automaker in China, the world’s biggest auto market.
In an interview with Welt Am Sonntag, Schäfer noted that Chinese manufacturers like BYD are offering more affordable and better-equipped EVs, making competition fierce for foreign automakers, including VW. Last month, General Motors CEO Mary Barra mentioned that the EV market in China is unsustainable due to falling prices from numerous manufacturers.
Volkswagen operates three joint ventures in China, producing over 4 million vehicles each year. However, sales for the VW group in China have dropped by 12% in the first nine months of this year, while domestic brands have gained popularity.
Like others in the industry, VW has benefited from profits in China to offset struggles in other regions. Schäfer remarked that it is essential to address the company’s financial situation. He plans to reduce overcapacity and costs by considering the closure of factories in Germany, as production expenses there are much higher than in other European countries.
How is Volkswagen planning to maintain its market position in China amid increasing competition from local EV brands?
Interview with Thomas Schäfer: Volkswagen’s Strategy in China Amidst the EV Price War
Welt Am Sonntag: Mr. Schäfer, Volkswagen has faced significant challenges in the Chinese electric vehicle market, especially with the rise of competitive local brands. How does VW view its position in China today?
Thomas Schäfer: Despite the fierce competition brought on by local manufacturers like BYD, Volkswagen is determined to remain in China. We have built strong foundations here, and we will not step back. This price war cannot last forever, and while we respect the challenges posed by lower-priced and well-equipped EVs from domestic brands, we are focused on maintaining our position as the largest international automaker in the world’s biggest market.
Welt Am Sonntag: There’s a perspective that the current EV market in China is unsustainable due to these falling prices. Do you agree with this assessment?
Thomas Schäfer: I do think that the current pricing strategies from various manufacturers raise questions about sustainability. We are in a transformation period, and over time, the market will likely stabilize. Our priority is to not just react to market changes but also to actively shape them with our offerings.
Welt Am Sonntag: Volkswagen operates several joint ventures in China, producing a significant volume of vehicles. How has the recent dip in sales affected your strategy?
Thomas Schäfer: Indeed, our sales in China have dropped by 12% in the first nine months of this year. This downturn is challenging, especially as domestic brands gain more popularity. However, VW has been able to use profits from the Chinese market to support our operations worldwide. We are focusing on our financial health, which includes addressing overcapacity and costs. This may entail tough decisions, such as potentially closing factories in Germany, where production expenses are significantly higher.
Welt Am Sonntag: Looking forward, what initiatives is Volkswagen taking to enhance its competitiveness in the EV sector?
Thomas Schäfer: We plan to launch eight new models by 2026, which will include affordable entry-level EVs. Our goal is certainly ambitious — to have three of our models among the top 10 best-sellers in Europe. This reflects our commitment to adapting our product portfolio to meet market needs and expectations.
Welt Am Sonntag: Besides focusing on the Chinese market, how is Volkswagen approaching growth in North America?
Thomas Schäfer: We’re building cars across China, Europe, and North America to meet local demands. This global production strategy allows us to be more responsive and scalable in our operations. By tailoring our production and offerings to regional markets, we can strengthen our presence and compete more effectively.
Welt Am Sonntag: what message do you want to convey to the stakeholders and consumers about Volkswagen’s future in the EV market?
Thomas Schäfer: Volkswagen is committed to adapting to market changes and enhancing our offerings globally. While we face challenges, our long-term vision remains strong. We are here to stay in China and will continue to invest in our electric vehicle lineup and our operations globally to meet the evolving needs of our customers.
To tackle these challenges, VW aims to launch eight new models, including affordable entry-level EVs, by 2026. Schäfer expressed the goal of having three cars in the top 10 best-sellers in Europe, reinforcing VW’s ambition to remain the continent’s largest automaker.
Volkswagen is also expanding its operations in North America. Schäfer mentioned that the company builds cars in China, Europe, and North America to better meet local demands. This global production strategy helps the company scale its operations effectively across regions.
VW is committed to adapting to market changes and strengthening its presence in China while enhancing its offerings worldwide.