Volkswagen's Struggles in China Imperil Its Global EV Sales Goal
Today’s column by Dalibor Petkovic is part of our expanded coverage of all things EV. Petkovic is a freelance researcher specializing in Chinese industrial policies. Since 2017, he has focused on the Chinese EV market, as well as smart cities, urban logistics and battery recycling management.
China is the world’s largest electric vehicle market. It’s also Volkswagen’s largest market, accounting for almost half of global sales in 2021. But the German automaker’s EV sales have lagged in China, missing last year’s sales target by roughly 15%. And this year is not off to a promising start. VW sold 27,000 of its electric ID. series in the first quarter, less than 20% of its 140,000 annual target. The company has had to contend with shortages of semiconductors and raw materials, increased battery costs, and pandemic-induced shutdowns of its two China manufacturing plants, in Jilin and Shanghai. The numbers don’t bode well for VW’s forecast to sell 11.6 million EVs in China by 2028, half its global target for that year.
As much as anything, the sales shortfalls reflect gaps in VW’s EV lineup in China. VW’s ID. models were late to the party for high-end vehicles, after Tesla, Byd, XPeng, and others had captured much of the market. VW also has been slow to offer EVs for China’s middle market, $15,000 to $30,000 sedans such as VW’s own Lavida or the Toyota Corolla. Many of these were bought as first family cars during the Chinese auto sales boom from 2010 to 2017, and analysts expect families to begin looking for replacements next year.
The good news for Volkswagen: Few of its rivals are offering EVs in this range. Instead, the biggest-selling EVs in China are budget offerings such as the $4,000 SGMW Hongguang Mini or high-end models such as the $40,000 Tesla Model 3. That was a big reason why the government extended subsidies for middle-class cars through the end of this year.
In a statement, Stephan Wöllenstein, CEO of Volkswagen Group China, said VW delivered more than twice as many EVs in the first quarter as in the same period a year earlier and expects “a significant increase in ID. family deliveries” this year, assuming chips are available and the Covid-19 situation doesn’t worsen.
VW appears to be ramping up production capacity, including for batteries, in China and is expanding its product line. It says it will introduce eight new models based on its MEB chassis platform this year, but has offered few details. The MEB chassis is intended for both mid- and high-end models, so it’s likely the company will aim some of the new cars at the mid-market.
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About Steve LeVine
Steve LeVine is editor of The Electric. Previously, he worked at Axios, Quartz and Medium, and before that The Wall Street Journal and The New York Times. He is the author of The Powerhouse: America, China and the Great Battery War, and is on Twitter @stevelevine
