Cheaper Volkswagen EV Coming For China

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Volkswagen is reportedly working on a cheaper electric vehicle platform to be built and sold in China. The first electric car on this platform is supposed to come to market in 2026, according to Handelsblatt, and the target price in euro terms is €20,000 ($22,000).

The Chinese EV platform may or may not be sold outside of China. Helpful, I know, but what we know from this is that it won’t definitely be sold only in China.

As Handelsblatt summarizes, “VW has an acute need to catch up in the most important electric car market.” That is certainly the case. Volkswagen has fallen quite far behind in the Chinese EV market, and Volkswagen’s global sales are heavily dependent on the Chinese auto market, so there must be at least a tinge of panic at VW headquarters about this fast-evolving market. Plus, when you see the high-tech competition in China, well, that’s downright scary to a legacy automaker. Just last week, the extremely compelling — high quality and affordable — Zeekr 007, BYD Sea Lion, and XPeng X9 were introduced.

It seems that Volkswagen may have come to the conclusion that in order to compete in the current EV market, what it really needs to do is use its economies of scale and manufacturing prowess to put affordable electric cars on the market — and its brand will do the rest. The company is also reportedly going to bring a more affordable electric car to the US market and produce electric cars more cheaply in Mexico. Are these efforts connected to the Chinese plans? Directly, I don’t think so. However, broadly, the overall goal of driving down costs and offering more affordable EVs are likely part of a focused global effort.

There’s a big difference between a $35,000 EV and a $22,000 EV (the estimated US price of a coming EV vs. the rumored Chinese price of a low-cost electric car). They may or may not have aspects in common, but they are unlikely to be essentially the same model. Like BYD is doing, though, you have to think that an affordable electric car (or electric car platform) created in China for the Chinese market could be just slightly modified for sales in South America, Africa, and other parts of Asia.

But really, the focus is China. China accounts for more than half of the world’s electric car sales. It’s a hyper-competitive market. Ralf Brandstätter, the head of Volkswagen’s Chinese efforts and a member of the Board of Management, says it bluntly that it’s “not as easy as it used to be to grow in China.” Indeed.

Whether Volkswagen’s efforts to go downmarket and bolster sales in China will work, who knows? There’s a lot of uncertainty about what can work for Volkswagen (or almost any brand) in China. The EV market is dominated by BYD and Tesla.

As the chart above (and our latest China EV sales report) shows, the 5 top selling plugin cars in China come from BYD and Tesla, and 9 out of the top 15 come from BYD and Tesla — 7 from BYD. There isn’t a model from a non-Chinese legacy automaker in the top 20. The Volkswagen ID.3 barely earned the #20 spot in July 2023. That’s the last we’ve seen from a non-Chinese legacy automaker.

Perhaps Volkswagen is banking on an ID.2 to turn things around and return to the top 20. Perhaps it will have some other sort of Chinese branding — a Volkswagen Mini Me or something. We’ll see.

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