China's 'ruinous' EV price war cannot last forever, says Volkswagen exec

Volkswagen remains firmly committed to China despite a "ruinous" EV price war by domestic rivals that has hit overseas automakers hard, its boss said. Thomas Schäfer, CEO of the VW brand, said the "price war for electric cars cannot go on forever" in China and that the German group wants to remain the largest international automaker in the world's largest auto market.

Schäfer made the comments in an interview with Welt Am Sonntag, the German newspaper that is part of the Axel Springer group along with Business Insider.

Chinese car makers such as BYD have proved stiff competition for foreign players like VW by offering a wider selection of more affordable, better-equipped EVs. Last month, General Motors

CEO Mary Barra said China's EV market was unsustainable because a large number of manufacturers kept driving prices "lower and lower" to win sales. VW has three joint ventures in China, producing more than 4 million vehicles annually. VW group sales in China fell by 12% in the first nine months of this year amid the rising popularity of models made by domestic manufacturers.

Rival German automakers BMW and Mercedes-Benz have also suffered sputtering sales in China this year.

Like other foreign automakers, profits from China had helped VW balance financial difficulties in other markets. Schäfer said it was now "high time to address" this situation.

The VW group, which also owns marques such as Audi, Porsche, and Seat, has told unions that it plans to close factories in Germany for the first time and significantly reduce its workforce in Europe.

Schäfer said VW's production capacity in Europe was too high compared with market demand and the company had to move to a "stable economic footing."

"Any solution must reduce both overcapacity and costs. We can't just stick a plaster on it," he said.

Labor costs at its German factories were "twice as high" as in other parts of Europe and needed to "fall drastically," Schäfer said.

"Our plants in Spain, the Czech Republic, Portugal, and Slovakia have worked very intensively on their costs for years and have significantly lower wage and salary levels."

He outlined VW's plans to address its financial situation by the end of 2026 and launch eight new models, including affordable entry-level EVs the following year.

"The goal is to have three cars in the top 10 best-selling vehicles in Europe" and remain the continent's biggest automaker, Schäfer said.

Toyota maintained its top spot in the world for the fourth consecutive year in 2023, selling 11.2 million vehicles globally — about 2 million more than the VW group.

Asked about Donald Trump's plans to cancel EV subsidies and impose steep tariffs on imports, Schäfer said, "We worked sensibly with President Trump and his administration in the last term of office.

"We will do that again. We are well located in the USA and Mexico and are building a huge battery factory in Canada. With Scout, the group is reviving a legendary US brand. You certainly can't blame us for not investing there."

The prospect of higher trade barriers underlines the importance of having the right strategy, the executive added.

"We build cars in China for China; the same is happening in Europe and North America. Of course, this does not reduce development costs. But we are gaining resilience and can also serve the local demands of our customers even better," Schäfer said.

"It is a huge opportunity for us to be located as a manufacturer on all continents and thus be able to scale our large volumes across the regions."