Volkswagen Enters A Price War In China With Approaching Of A New Emissions Regulation

SAIC Volkswagen Automotive Co. is joining more than 40 brands in slashing prices ahead of a change in emissions rules in the world’s largest auto market by offering 3.7 billion yuan ($537 million) in cash subsidies for car purchases in China.

The Teramont, Lavida, and Phideon models are all eligible for subsidies from the joint venture between China’s SAIC Motor Corp Ltd and Germany’s Volkswagen AG through April 30. SAIC-VW announced this late on Thursday on its WeChat account.

The Chinese partner of both Honda Motor Co Ltd and Toyota Motor Corp, Guangzhou Automobile Group, has also provided subsidies from March 15 to March 31.

According to industry data, Chinese passenger vehicle sales decreased 20% in January and February despite some manufacturers offering price reductions to increase demand.

Over 30% of vehicle sales in February were made up of new energy vehicles, which include all-battery and plug-in battery-petrol hybrid models. For the second time in four months, Volkswagen-branded vehicles were outsold by Chinese electric vehicle manufacturer BYD Co Ltd in the same month.

According to Fitch Ratings analysts in a client note published on Thursday, government plans for a stricter auto emissions standard to take effect on July 1 has increased pressure on automakers and dealers to get rid of inventories of vehicles that do not meet the standard.

“There is no other way to describe what is happening other than a catastrophic decline in performance of multi-national ICE(internal combustion engine) brands,” said Shanghai-based Bill Russo of consultancy Automobility.

According to a commentary published on Friday in the state-owned newspaper Economic Daily, the price war is likely to hasten the consolidation of the country’s over 130 passenger car manufacturers’ fragmented auto industry.

However, the newspaper warned that it might also harm innovation and profitability and halt the growth of the sector as a whole, which is a pillar of the economy.

The demand for cars made by local automakers has been reviving thanks to additional incentives provided by local governments. For the entry-level Citroen C6 sedan made by its joint venture with Stellantis NV, the central Hubei province and state-backed Dongfeng Motor Group Co Ltd. have jointly offered subsidies of up to 90,000 yuan, or 40% of list prices.

(Adapted from


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