A Desperate Battle with No Retreat

Volkswagen's "scalpel" has finally targeted its most bloated core.

On January 30, according to New Intelligence Driving, Qiu Shanxiang, General Manager of Volkswagen Import, officially resigned last month, with his position taken over by internal executive Zhou Mi.

Just a week earlier, on January 21, Volkswagen Group headquarters announced a deep restructuring of its "core brand cluster." The board members of the four major brands—Volkswagen Passenger Cars, Skoda, SEAT/CUPRA, and Volkswagen Commercial Vehicles—will be reduced from 29 to 19, a cut of over one-third.

The newly established Brand Group Core Management Committee will be chaired by Thomas Schäfer, overseeing finance, procurement, production, and technology R&D.

On one hand, Volkswagen is boldly "abandoning generals" globally, streamlining management and cutting costs. On the other, it is unprecedentedly "saving cars," announcing an unprecedented product offensive in China by 2026, with over 20 pure electric, plug-in hybrid, and extended-range models to be launched in the country.

This former "king of fuel vehicles" is attempting a drastic self-revolution to carve out a path in China's fiercely competitive electric and intelligent vehicle battleground.

01

The Giant Forced to "Cut Its Ivory"

Volkswagen's transformation is not impulsive but stems from profound anxiety, especially regarding its largest single market—China.

In 2024, Volkswagen Group's global sales revenue reached €324.656 billion, up 0.7% year-on-year. However, operating profit fell 15.4% to €19.06 billion, and net profit dropped 30.6% to €12.394 billion, with overall profitability under pressure.

Calculated under the equity method, the group's investment income from Chinese joint ventures was €1.742 billion, down 33.54% from €2.621 billion in 2023, accounting for about 9.1% of the group's operating profit. Its profitability in the Chinese market has raised red flags.

The weakness in the Chinese market is dragging down global performance like never before.

Behind the profit decline lies Volkswagen's " climate sickness " (inability to adapt) in the electric vehicle (EV) race and the erosion of market share. China is the epicenter of the global EV revolution, accounting for nearly half of global EV sales in 2024, with a nearly 40% year-on-year increase. By 2025, EV penetration in China is expected to reach 60%.

In this rapidly growing market, Volkswagen appears powerless. While its fuel vehicle business remains strong, with a market share exceeding 21% in China's fuel vehicle market in 2024—the highest since 2005—this resembles a "false prosperity."

The real battleground is in new energy, where Chinese local brands led by BYD are encircling Volkswagen. Data shows that BYD, with its "intelligent driving popularization offensive," captured over 15% of the market share in 2024, continuously eroding the market share of traditional automakers, including Volkswagen.

In 2025, Volkswagen's new energy vehicle sales in China reached 120,000 units, a sharp 40% decline from 200,000 units in 2024. New energy vehicles accounted for only 4.5% of Volkswagen China's total sales, far below the global level of 10.9% and lower than the previous three years' proportion in China.

Market setbacks inevitably led to management changes, with Volkswagen Group experiencing frequent personnel shifts in China in recent years. As early as 2022, Volkswagen Group fundamentally adjusted its Chinese management, replacing Feng Sihan with Ralf Brandstätter as President and CEO of Volkswagen Group China, and forming a new "China Board" to grant greater autonomy to the Chinese region.

On April 1, 2024, Thomas Ulbrich, with extensive experience in China, was appointed CTO of Volkswagen Group China and concurrently CEO of Volkswagen China.

These adjustments align with the global "board slimming" logic: streamlining hierarchy, improving efficiency, and staying close to the market.

From Wolfsburg to Beijing, Volkswagen is cutting redundant management positions and replacing generals unable to adapt quickly to market changes, clearing obstacles for frontline "battle tanks" and making decision chains shorter and more agile.

Qiu Shanxiang's departure is just the latest move in this grand strategy.

02

ID. Series: From " climate sickness " (Inability to Adapt) to "Volume-for-Price"

Volkswagen's core bet for the future lies in its ID. pure electric family. However, this highly anticipated series had a rocky start in the Chinese market.

Built on Volkswagen's new MEB platform, the ID. series carries all hopes for the group's electric transformation. However, in its early days in China, the ID. family faced significant " climate sickness " (inability to adapt).

Whether it was the widely criticized lack of intelligence in the infotainment system or the failure to fully align with Chinese consumers' preferences in design and space utilization, sales remained tepid for a long time, even failing to meet internal sales targets.

Facing the strong rise of local brands and Tesla's price cuts, Volkswagen finally shed its "giant" ego and adopted the most direct and brutal strategy—volume-for-price.

The turning point came in the second half of 2023 when significant price cuts for the ID.3 model ignited the market. This strategy paid off immediately, with the ID.3 quickly becoming one of the best-selling pure electric models in the compact hatchback segment. The sacrifice in price brought valuable market share and user base.

This strategy continued and deepened in 2024. Official data shows that Volkswagen Group delivered over 200,000 new energy vehicles in the Chinese market in 2024.

Among them, sales of the ID. pure electric family increased by 17% year-on-year. The ID.3 model sold 93,800 units in 2024, while the ID.4 ranked among the top in the compact SUV segment. By the end of 2024, cumulative sales of the ID. family in China had exceeded 550,000 units.

At that time, Volkswagen believed that the ID. series was not lacking in product strength but needed more flexible and grounded pricing and market strategies in China. Through "volume-for-price," Volkswagen aimed to stabilize the ID. family's position and buy time and space for subsequent product launches.

However, this "desperate" approach is not a long-term solution. Continuous price wars severely erode profit margins, as evidenced by the dismal profit data of Volkswagen's Chinese joint ventures.

More critically, low prices did not become a talisman for the ID. series.

In early 2025, the ID.3 Smart model was launched, but the new car did not substantially boost sales for the Volkswagen ID.3.

While the new battery pack capacity increased by 0.8 kWh and range by 1 km, the switch from ternary lithium batteries to lithium iron phosphate batteries raised suspicions of specification reductions. Theoretically, lithium iron phosphate batteries are cheaper, but ternary lithium batteries offer superior energy density and low-temperature performance.

Moreover, market competition has intensified, with new "players" continuously entering the 100,000-yuan domestic pure electric vehicle market, such as the XPeng MONA M03 and Geely Galaxy E5.

In comparison, the Volkswagen ID.3 falls short in size, intelligence, configuration, and pure electric range. Its excellent handling cannot compensate for the lack of cost-effectiveness.

When the price advantage fades, Volkswagen needs truly outstanding product strength and intelligent experience to retain users. This is the core challenge in the "saving cars" part of its "abandoning generals to save cars" strategy.

03

"In China, For China": Volkswagen's Desperate Counteroffensive

To "save cars" and secure Volkswagen's future, it proposes the "In China, For China" strategy. This is no longer just a PR slogan but a comprehensive localization system covering R&D, procurement, production, and marketing.

The core battleground of this counteroffensive is Volkswagen China in Hefei, Anhui, where Volkswagen has invested over €3.5 billion to establish a complete end-to-end R&D system. According to Volkswagen, localized R&D through VCTC will shorten new model development cycles by about 30% and reduce costs by about 40%.

The first fruit of the localization strategy is the CMP platform and CEA electronic architecture developed specifically for China's entry-level A-segment market. This means Volkswagen's future entry-level EVs will no longer be simple "localizations" of global models but will be custom-built for the Chinese market from the ground up.

Besides independent R&D, Volkswagen has also learned to "leverage strengths." Collaborating with Horizon Robotics aims to fill its gap in intelligent driving chip technology; partnering with Thundersoft seeks to optimize its criticized intelligent cockpit experience; and investing in Gotion High-Tech aims to control the cost and technology of batteries, a core component.

The cooperation with XPeng Motors is seen as a landmark event where Volkswagen "learns from the enemy to defeat the enemy." Volkswagen will use XPeng's platform technology to quickly launch two B-segment pure electric models, trading market access for time to compensate (make up for) its deficiencies in high-end intelligent technology.

This series of rapid deployments will culminate in a product explosion in 2026.

The Intensive advertising (intensive launch) of over 20 new models represents Volkswagen's largest-ever product offensive in a single market. Notably, this product matrix includes not only pure electric vehicles but also plug-in hybrid and extended-range models.

Additionally, Volkswagen is vertically integrating along the battery value chain, including autonomous battery production, to ensure supply chain stability and cost control. From R&D, collaboration, products to supply chains, Volkswagen's "In China, For China" strategy is no longer just a slogan but a well-coordinated and layered combination punch.

This indicates that Volkswagen has fully recognized the diverse needs of the Chinese market and is no longer stubbornly pursuing a pure electric route but is embracing new energy with a more pragmatic and flexible approach.

04

Epilogue

Looking back over the past year, Volkswagen's every step in the Chinese market has been thrilling. From organizational restructuring at the top to personnel changes in China; from the sales dilemma of the ID. family to the accelerated implementation of the "In China, For China" strategy, this German giant is attempting the most radical self-redemption.

Volkswagen even optimistically predicts that 2027 will be a turning point for its Chinese joint ventures, with profit contributions expected to rebound to €2 billion.

The pain of "abandoning generals" has begun, with headquarters delegating power and streamlining organizations to enable frontline "battle tanks" to charge swiftly. The blueprint for "saving cars" is also in place, with localized R&D, open collaboration, and diverse technology routes. Volkswagen has bet almost all its available chips.

However, the Chinese new energy market in 2026 will be more brutal than ever. BYD's price-cutting blade is sharper, Tesla's technological moat remains deep, and the intelligentization (intelligent) wave unleashed by tech giants like Huawei and Xiaomi is putting traditional automakers under immense pressure.

Volkswagen has secured a ticket to the finals, but will the upcoming 20 new models truly resonate with Chinese consumers in terms of design, intelligence, and price? Can Volkswagen's "China speed" keep pace with competitors' iterations?

The answers to these questions will directly determine the ultimate success or failure of Volkswagen's "abandoning generals to save cars" gamble.

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