- Volkswagen AG VWAGY VWAPY said that despite some sales gains in recent months, it expects its market share in China to be around 16% this year, down from 20% since 2019.
- The German giant is also facing soaring energy costs, supply-chain issues, and delays in delivering in-house software resulting in a disrupted model-release schedule, reports the Wall Street Journal.
- China has been Volkswagen’s cash cow for years, making the market-share erosion a particular concern.
- The country accounted for 37% of the company’s new car sales last year and 15% of the pretax profit from its passenger-car business.
- The company operates 40 manufacturing plants in China. The report noted VW was the biggest foreign investor in China last year, citing a study by Rhodium Group, a research institute.
- VW’s China problem comes from lost ground to Tesla Inc TSLA as many Chinese electric-vehicle consumers see Tesla’s cars as more sophisticated and attractive than VW’s.
- Another challenger is Warren Buffett-backed BYD Co BYDDY, which has seen its share of the broader Chinese auto market more than double this year to 7.2%.
- The report further added that Volkswagen has also struggled to win over younger Chinese consumers who are especially attracted to pure battery electric vehicles replete with gadgets—advanced voice-control systems, self-parking, and driver assistance technology.
- Price Action: VWAGY shares closed at $18.67 on Wednesday.
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