Investing.com – Volkswagen (Etr: Vowg_P) is accelerating its restructuring in China while fighting to stop a strong decline in the largest car market in the world.
Citi Research analysts see signs of a cultural change within Volkswagen’s operations in China that could help the manufacturer stabilize their position, even in the middle of a fierce competition in electric vehicles.
In the Shanghai Motor Show, Citi analysts observed a renewed urgency within Volkswagen China, a contrast to the stagnation that left European manufacturers behind national competitors.
VW EBIT is expected to collapse between 500 million and 1,000 million euros in fiscal year 2025, 90% less from its maximum of 4,400 million euros in 2015.
During the last year, vehicle sales have fallen from 4.5 million to less than 3 million, and the market share has dropped to 9.4%.
The fall reflects the intense price competition in the Chinese market for electric vehicles and the decrease in the demand for models with internal combustion motor.
Citi analysts warn that profitability is unlikely to recover rapidly in current conditions, but argue that the magnitude of losses has forced Volkswagen to undergo a rapid transformation that could ensure their survival.
After adopting a totally integrated strategy “in China, for China” earlier this year, Volkswagen has intensified local associations and accelerated products.
He has collaborated with Xpeng (NYSE: XPEV) in electronic architecture, with Carizon for driver assistance systems, and has strengthened ties with traditional partners such as Saic and Anhui.
In 18 months, Volkswagen China launched several new models with flexible power trains developed in considerably reduced deadlines. Although it still does not lead the market, the fastest execution and the lowest costs of the company mark a significant break with its past.
Volkswagen is also pointing to important cost reductions. The development of localized vehicles, the greatest use of iron and lithium phosphate batteries, and a new zonal electric architecture have provided a cost reduction of 40% between the MEB and CMP platforms, with an additional reduction of 10% planned by 2026.
When changing local LFP batteries, Volkswagen expects the costs of batteries to fall approximately 50%, with the proportion of LFP batteries increasing to approximately 90% of its line in China by 2026.
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The company plans to launch 30 new models of new energy vehicles by 2027, including 10 new Volkswagen models in 2026. It believes that it can compete in a profitably at prices below 170,000 RMB ($ 23,500) with faster development cycles, from 24 to 30 months.
Volkswagen is also exploring exports from China to foreign markets, including Southeast Asia and Latin America.
Citi analysts emphasize that a strong recovery of profitability remains unlikely in the short term. However, stabilizing operations in China would mark on their own an important change in investor confidence.
Faster development times, cost -centered platforms and flexible associations could significantly improve Volkswagen’s global competitiveness.
Despite the risks, including tariffs and intense competition in its local market, Citi believes that Volkswagen is going in the right direction, faster than many investors realize, since a profit base mainly in Europe provides short -term resistance.
This article has been generated and translated with the support of AI and reviewed by an editor. For more information, see our T&C.
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