Volkswagen AG has joined the escalating price war in China’s car market as a looming emissions regulation looms on the horizon. As the world’s biggest carmaker, Volkswagen has deployed a range of promotional activities and price cuts to entice customers to buy their vehicles, while also attempting to protect their profit margins.
The Chinese government is planning to implement stringent emissions standards in July 2021, which will require carmakers to pay a fee for any vehicles they produce that are not compliant. This has led to a surge in demand for cars this year, as consumers rush to purchase vehicles before the regulation takes effect.
Volkswagen has responded to the impending regulation by announcing a series of incentives for customers, including discounts of up to 10,000 yuan (around $1,500) on selected models. The incentives have helped to boost sales, with the company selling over 1 million vehicles in China since the start of the year.
Other carmakers have also entered the fray, with General Motors, Ford and Honda all offering discounts and promotions to attract customers. The price war has been particularly fierce in the SUV market, with some models now available for as little as 100,000 yuan ($15,000).
Analysts believe that the competition will continue to intensify in the coming months as carmakers compete for sales and market share. The Chinese government is also expected to introduce additional measures to encourage the adoption of new energy vehicles, which could further reduce demand for traditional gasoline-powered vehicles.
Volkswagen is well-positioned to benefit from the changing market dynamics, as the company’s range of electric vehicles is expected to be compliant with the new emissions regulations. However, the company is likely to face increasing pressure on its profit margins as the competition intensifies and customers become more price-sensitive.