China’s EVs actually good, Volkswagen can’t keep up with fierce EV competition, says VW CEO

The CEO of Volkswagen Group, Oliver Blume, believes that China’s EV makers will prove to be a formidable challenge for anyone trying to make space for themselves in the Chinese market. He also believes that the Volkswagen Group simply can’t keep up.

In an interview with German newspaper FAZ on Friday, Blume admitted that VW is currently unable to maintain its among the top players in China’s EV market.

Volkswagen, which has traditionally been China’s leading automotive brand, faced a major setback last year when it was overtaken by its Chinese rivals, BYD an EV maker that is backed by Warren Buffett’s Berkshire Hathaway.

BYD, known for its electric vehicles and plug-in hybrids, somehow managed to outpace even Tesla in global EV sales for the first time in the fourth quarter last year. However, Tesla regained the lead in the following quarter.

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As the demand for traditional vehicles declines in China, manufacturers focusing on EVs are gaining market share at the expense of established automakers like VW by engaging in cutthroat price wars.

Despite VW’s continued sales of traditional vehicles in China through local partnerships, its EV offerings remain relatively limited compared to BYD.

The fierce competition in China’s EV market has broader implications for companies like VW and Tesla, both domestically and internationally.

Reports suggest that Tesla is scaling back production at its Shanghai plant due to increased competition from Chinese rivals offering more affordable EVs with advanced features.

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Chinese EV manufacturers have startled legacy automakers all over the world with their competitive pricing and compelling, feature rich cars. This has in turn prompted concerns in the United States, where policymakers are wary of Chinese EVs potentially entering the market via Mexico.

In the European Union, the European Commission is investigating whether Chinese EV makers enjoy unfair advantages from government subsidies, which could lead to recommendations for higher tariffs.

While Tesla CEO Elon Musk has expressed his admiration for the capabilities of Chinese automakers, he has also warned that without proper trade barriers in place, Chinese EV makers would eviscerate other carmakers.

Interestingly, Australia, with no legacy automakers of its own, is welcoming Chinese EV makers’ expansion within their borders without imposing any barriers.

Automakers are reacting to the threat of Chinese EV makers in some peculiar ways. Japanese automakers Nissan and Honda for example have formed a partnership to develop electric vehicles together. Nissan and Honda have one of the most fierce rivals in automotive history. Think Ferrari vs Ford.

The rise of emerging players in the EV market is accelerating with companies like Ford and GM showing that they are open to collaborating in order to mitigate production costs and counter the threat from Chinese EV makers.

Volkswagen is also considering partnerships with its French rival Renault and Chinese newcomers for mass-market EVs. In navigating China’s competitive EV landscape, VW’s Blume also cautioned against setting unrealistic expectations, emphasizing the need for a pragmatic approach amid intense industry rivalry.