Volkswagen cuts price of EV and combustion engine cars to boost deliveries to China

Volkswagen reported unexpectedly strong growth in its deliveries of electric and combustion engine cars in China in the first quarter helped by price cuts, while deliveries of EVs in Europe fell sharply as demand dwindled.

Europe’s largest carmaker said China deliveries increased almost 8 per cent to 694,000 units in the first three months of the year compared with 2023, with battery-run vehicle deliveries increasing year on year by 91 per cent from a low base.

“Volkswagen Group China’s e-offensive is taking effect,” said VW’s China head Ralf Brandstätter. “In a market that continues to be characterised by an ongoing price war, we are able to record strong growth, especially with our pure battery vehicles.”

The Chinese market is experiencing a fierce price war between legacy carmakers and newer rivals such as BYD and Tesla. Analysts said VW had lowered its prices to retain market share, which the carmaker called “customary and time-limited marketing measures”.

“The Chinese carmakers have become predatory in their own domestic market,” said Matthias Schmidt, an independent auto analyst. “In order to retain market share western carmakers have to slash prices as well.”

Volkswagen said “despite ongoing high price discounts, particularly from local [Chinese] OEMs [original equipment manufacturers]” its pricing model in the country was “sustainable”.

Brandstätter said that, while the group’s EV registrations were growing faster than the market, VW’s combustion vehicle market share was also growing in China.

But in Europe, the picture was gloomier with Germany cutting consumer subsidies and consumer demand for EVs threatening to stagnate.

VW recorded a significant decline of almost a quarter in EV deliveries in Europe, including its home market of Germany where subsidies offered to consumers to buy electric were cut at the end of 2023. Overall deliveries to Europe fell 0.3 per cent.

Analysts also warned that in Europe Volkswagen faced potential fines if it failed to make significant progress in electrifying its fleet before a 2025 deadline.

Schmidt said: “On EU CO₂ targets, think of a limbo dancer that has to get under a bar that is reduced every five years.”

Globally, VW reported a 3 per cent increase in deliveries of all vehicles to 2.1mn year to date, led by the growth in China and in the Americas.

Meanwhile, rival German carmakers Mercedes-Benz and BMW reported declines of 12 and 4 per cent respectively in their China sales numbers in the first quarter of 2024 versus the previous year.

Mercedes said supply chain bottlenecks in Asia limited sales particularly of its new E-class vehicles. Sales of Mercedes-Benz cars fell 6 per cent worldwide, including a 17 per cent fall in the home market.

BMW sold 8 per cent more cars in Germany than in the previous year, and reported worldwide battery electric sales growth of 27 per cent.

Additional reporting by Gloria Li in Hong Kong