Volkswagen vows to defend European EV market against Chinese rivals

German automakers are making a renewed push against their Chinese rivals in the region’s electric vehicle market, with Volkswagen (VW) vowing to defend its leadership in Europe “by all means necessary,” including a revamped vehicle and software strategy.

One year after VW presented plans to significantly reduce staff and capacity at its German factories, company executives at the Munich Motor Show this week said the group is ready to fight back against its Chinese competitors.

Thomas Schäfer, CEO of the VW brand, told the Financial Times (FT) that “we are in a dominant position in Europe, and we will defend it by all means necessary,” as the group grapples with a decline in its market share in China and the rise of BYD and other electric vehicle rivals.

He added that the new product lineup is “very competitive” and that Chinese manufacturers will face greater challenges entering the European market.

The latest comeback by German automakers signals that competition will intensify in Europe’s electric vehicle market, where Chinese groups are rapidly expanding their presence.

According to Schmidt Automotive Research, the market share of Chinese brands reached a record 5.7% in the UK and European car markets in the second quarter, rising to 10.7% in the electric vehicle market.

VW believes it is equipped to counter the Chinese threat, thanks to its new models, a stronger cost structure, and software partnerships with Rivian in the US and Xpeng in China.

Europe’s largest automaker is the clear leader in the region’s EV market, with a 30% share in August. According to Jefferies, this is an increase from 23% a year ago, while the market shares of Mercedes-Benz, BMW, and Tesla have declined.

Meanwhile, BYD’s share of the European EV market has risen from 2.5% to 3.8%.

“We believe we will be the global technology driver of the automotive industry in the future,” said Volkswagen Group CEO Oliver Blume.

In Munich, the Wolfsburg-based group introduced four entry-level electric car models that will go on sale next year with prices starting at €25,000: a new Škoda, a Cupra, and two new Volkswagen models.

These include the new ID. Polo and the Polo and ID.2, which merge old and new VW brands.

However, it was not just the Germans expressing confidence this week. BYD argued that its Western competitors have yet to catch up with its electric vehicle technologies.

“Even if some brands have caught up with us, I think there is still a lot more we can do,” said Stella Li, executive vice president of BYD.

The Chinese group plans to bring its ultra-fast charging technology to its European models starting next year and aims to begin producing all its electric vehicles in Europe within the next three years.

“This is a development that completely changes the rules of the game,” Li said, referring to the new charging system that can add approximately 470 km of range in five minutes.

State-backed Changan aims to establish a foothold in Europe by launching its electric Deepal S07 SUV in the UK this month, priced at £39,990.

The Chinese group plans to open a factory in Europe within the next few years and aims to be among the top 10 in the UK.

Thomas Schemera, global chief operating officer of GAC International, said the state-backed automaker plans to manufacture in Europe “as soon as possible” in response to high EU tariffs on Chinese-made electric vehicles.

Analysts say that as more Chinese brands enter the continent, one of the challenges companies face is differentiating their brands in the minds of European consumers.

Leapmotor, which is expanding its dealer network through its capital partnership with Stellantis, says its affordable pricing (the electric B10 compact SUV starts at €29,900) is a differentiating factor.

Tianshu Xin, head of the joint venture between the Chinese electric vehicle startup and Stellantis, said they are “almost very close” to price parity between gasoline and battery-powered vehicles.

On the other hand, Changan says it does not want to enter a price war in Europe. “That’s not our way into the market. If we’re looking for a price war, we need to look at the European brands right now… and there are very big discounts,” said Nic Thomas, managing director of Changan in the UK.

European auto executives say it will be difficult for Chinese brands to produce cars at competitive prices in Europe as they do in their domestic market, due to higher labor and energy costs.

But Li from BYD, which will open factories in Hungary and Türkiye, said the company will use what it learned from manufacturing cars in Thailand and its cost-effective production technology. “We have a good understanding of how to maintain production costs,” she added.