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. 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, with only 2,523 units sold since its April launch.
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. 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. Chris Liu, a Shanghai-based analyst with Omdia, warned that there was "very little prospect of a meaningful recovery for conventional petrol cars in China." Volkswagen's sales of EVs in China were down 43 per cent year-on-year for the nine-month period.
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.
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. Volkswagen has the most to lose in China as the longtime dominant player, having pushed ahead with multibillion investments in localised production and platforms.
Source: Financial Times Companies · Summarized by HeadlinesBriefing