EV Market ‘Overheating,’ Says Volkswagen China CEO

The CEO of the Volkswagen Group’s Chinese operations, Ralf Brandstätter, is warning of recent developments within the battery-electric-vehicle market, suggesting high capital investment and discounting “will ultimately harm the interests of consumers.”

In an address at the 2023 China Automobile Forum hosted by the China Association of Automobile Manufacturers in Shanghai, Brandstätter says current trends within the BEV market cannot contribute to its long-term positive development.

“There are more than 120 car makers within the (BEV) market, and about 150 new models will be launched in 2023. Intense market competition and high battery prices make them face severe economic pressure. Short-term sales success requires extremely high capital investment,” he says.

Ralf Brandstaetter VW

“We are facing a situation where the market is overheating. Consolidation of the playing field is in full swing,” he adds.

The former head of the VW brand is particularly critical of the discounting of EVs in China.

“The fierce competition has led to deep price discounts. 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 price cut on the models they buy.”

Brandstätter's comments are seen as shrouded criticism of rival Tesla, which has led the trend toward discounting with continued price cuts for its models in China over recent months.

The German executive says the VW Group will not pursue sales and growth within the Chinese EV market at all costs. “For us, the profitability of the business is the most important. We will not engage in unhealthy market competition in order to achieve short-term delivery growth.”

In a later posting on LinkedIn, Brandstätter writes: “A lot of capital is being destroyed (by high discounts) that is then not available for the development of cutting-edge technologies.”

Brandstätter’'s warning comes despite the Chinese government’s recent announcement that it intends to enact a new round of subsidies for so-called New Energy Vehicles from 2024 through to the end of 2027.

The RMB520 billion ($72 billion) tax-relief package is aimed at encouraging new-vehicle buyers in China to choose battery-electric and plug-in hybrid-electric vehicles over conventional internal-combustion-engine models and used vehicles by offering an exception on purchase tax, which currently stands at 10%.

Worldwide EV sales increased 55% in 2022 compared to a year earlier at 10.1 million units. China accounted for the largest share, with a total of 5.9 million units.

Outlining the VW Group’s plans for the Chinese market, Brandstätter says the company will not abandon the ICE market despite slowing sales.

“We will continue to leverage our advantages in the internal-combustion-engine market. Although its overall size is shrinking, the Group still maintains considerable profitability by virtue of its own scale and cost advantages. By 2030, we will launch a total of 17 new internal-combustion-engine models,” he says.

“In addition, we are promoting the development of hybrid technology and gradually transforming petrol models to plug-in hybrids, becoming a strong player in this market segment.”

So far in 2023, Volkswagen has grown its Chinese market share from 18% to 20%.

In spite of his warnings over the BEV market, Brandstätter confirms the VW Group is holding firm to plans to launch 30 new electric vehicles in China by 2030.

“Our new ID. 7 is opening up a new segment. And with other new pure e-cars soon to roll off the production line at Volkswagen Anhui, as well as new models from Audi on the basis of the Premium Platform Electric, we plan to expand our range of fully electric vehicles to 30 models by 2030,” he says.