VW thinks price war in China will lead to many bankruptcies

Ralf Brandstätter, CEO of the Volkswagen Group in China, believes that the electric car market is “overheating”, with high investments and aggressive discounts that could threaten the stability of the sector. In particular, he points out that the pressure to which some manufacturers are subjected could lead to their demise.

This situation mainly affects younger brands: according to the manager, many new players will urgently have to seek additional capital investment, or else they will go bankrupt in the short term. “We are facing a situation where the market is overheating. The consolidation of the playing field is in full swing.

Although without making direct mention of Tesla, Brandstätter is very critical of the price war that has rocked the Chinese market in recent months. “Currently, there are more than 120 automakers in the [electric vehicle] market, and around 150 new models will be launched by 2023. Intense competition and high battery prices make them face strong economic pressure.

Short-term success requires an extremely high capital investment. The fierce competition has led to deep discounts in recent months. This will ultimately harm the interests of consumers. They will no longer be able to get services from retired brands or they will see a significant reduction in the [second-hand] prices of the models they bought.”

Volkswagen will adopt a conservative strategy in China, betting on profitability against growth

Volkswagen ID.7

Volkswagen’s strategy, whose electric range ID. is not achieving the expected success in China, will be conservative, avoiding growth at the expense of profitability. «For us, the profitability of the business is the most important thing. We will not engage in unhealthy competition for short-term delivery growth.”

In addition, the German firm will continue to bet on internal combustion engines in this market even though sales of thermal cars have begun to slow down due to the rise of electric models, which has led BYD (which only manufactures electric and plug-in hybrids) surpasses it as the best-selling brand in the region.

“ By 2030, we will launch a total of 17 internal combustion engine models. In addition, we are driving the development of hybrid technology and gradually transforming gasoline models into plug-in hybrids, becoming a strong player in this market segment.”

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