The leaders of German car giant Volkswagen (VW) expect the next two years to be difficult in the highly competitive Chinese car market, but are not afraid of challenges from rival Chinese carmakers in the European market.
Chinese carmakers will eventually have to invest in European production plants to build vehicles locally rather than shipping large numbers of finished vehicles by sea, Ralf Brandstätter, head of VW’s Chinese division, said in Beijing on Wednesday ahead of a major car show in the Chinese capital . .
That would also put Chinese competitors on a more equal footing with European rivals due to higher labor and energy costs in Europe, Brandstätter said.
“By sending a huge amount of car ships from China to Europe, I don’t think this will be a sustainable model,” he said. “They have to compete in the same environment as we do.”
Major Chinese brands such as electric car giant BYD and state-owned Saic Group currently use a fleet of freighters to export their vehicles worldwide. The first deliveries to Germany have already taken place.
Chinese vehicles have not flooded the European market as some feared, but Chinese brands are gaining a foothold among consumers.
In China, consumers are impressed by Chinese electric vehicle brands, which offer favorable prices and competitive technology.
Volkswagen, which invested heavily in the Chinese market, has not yet been able to keep up with BYD and American electric car manufacturer Tesla.
“I am not afraid of competition from Chinese brands in Europe,” Volkswagen CEO Oliver Blume said on Wednesday.
Blume said he would prefer to see a “fair deal” for all automakers, as opposed to punitive tariffs on Chinese-made cars that could result from the European Union’s ongoing anti-subsidy investigation.
Brandstätter predicted a difficult next two years for automakers in the Chinese market as fierce competition drives down prices and puts some companies out of business.
“In April we saw a new round of price cuts coming, so this intense competition will continue in the coming years,” Brandstätter said.
Many pure electric car makers have significantly damaged their profit margins in recent years, he said, “so this is leading to a consolidation of the market.”
He suggested that companies with lower sales volumes, less than 100,000 or 150,000 vehicles per year, would not survive the coming competition.
According to Brandstätter, Volkswagen plans to prepare for intense price competition over the next two years and finance the development of its e-car business in China with sales of combustion engine vehicles, which are still going strong.
“This means two tough years for us, because we will not make every volume at any price,” Brandstätter said.
He added that the company may have to accept lower sales figures to maintain prices, which will likely lead to market share losses in the short term.
Volkswagen plans to realign with competitors in China in terms of cost and technology for entry-level compact cars from 2026, he said.
The cost of vehicle platforms developed for China should be reduced by 40%, he said.
The Volkswagen Group, which also includes brands such as Audi, Porsche and Volkswagen, aims to sell around 4 million vehicles in China by 2030, with half of all cars sold electric.
According to VW, this would correspond to a market share of 15%.
