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Targets 15% market share in China by 2030

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Expects to sell 4 million cars annually in China by 2030

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Expects price war to continue

By Sarah Wu, Daniel Leussink and Christoph Steitz

BEIJING/FRANKFURT, April 24 (Reuters) - Volkswagen aims

to keep its Chinese market share roughly stable until the end of

the decade, the head of its China business said, betting heavy

investment will support sales despite a raging price war with

local electric vehicle (EV) rivals.

The targets for 2030, including Volkswagen's

ambition to take a share of around 15% of the Chinese car market

in 2030 compared to 14.5% last year, underscores the challenges

Europe's top carmaker faces in the world's biggest auto market.

"Prices are going faster down than the cost improvements,"

Volkswagen management board member and head of its China

business Ralf Brandstaetter said on Wednesday.

"We expect in the next years, the next two years especially,

that this price war will continue," he told analysts during a

capital markets event around its China business, adding that

would put pressure on profits.

Volkswagen ceded its title of best-selling car brand in

China to Chinese EV giant BYD in late 2022, and the

group's market share in China fell to 14.5% last year from 19.3%

in 2020 as combustion-engine sales declined.

Brandstaetter cited investments in a new Chinese research

hub and partnerships with EV makers and suppliers in China to

develop more affordable EVs, more quickly.

The 15% market share target would correspond to selling

around 4 million cars in China annually by 2030, up from 3.07

million last year, Volkswagen said.

Volkswagen is also targeting proportionate operating profit

of more than 2 billion euros ($2.14 billion) in China in 2027

and around 3 billion euros by 2030, up from 2.6 billion euros

last year.

Brandstaetter said Volkswagen remained in talks with SAIC

about their jointly owned plant in Xinjiang, a

region where rights groups have documented abuses. He added

Volkswagen was examining different options for the business.

Volkswagen CEO Oliver Blume said this month the group

"cannot keep up at the top of the table at the moment" in

China's fast-growing EV market, adding a market share of more

than 10% would be "very respectable" given fierce competition.

"The implicit admission of previous non-performance and new

accountability, in our view, are huge steps in the right

direction strategically, and miles away from VW's historical

culture," Citi wrote.

"This builds on our view that VW is changing. At least in

China, it has had no choice."

China has undergone a big shift from the combustion-engine

age when foreign-made cars, especially those from Germany and

Japan, were seen as the pinnacle of global engineering, to the

electric age that has seen their Chinese counterparts move much

faster on developing EV technology.

Among the incumbent foreign automakers, Volkswagen has

arguably mounted the biggest fight to stay competitive against

the likes of BYD and U.S. automaker Tesla, including

participating in a bruising price war that started last year and

has since drawn in more than 40 brands.

Volkswagen's ID.3 became one of the best-selling EVs in

China after the automaker slashed the price by just over $5,100.

With its current offerings priced above that of many Chinese

electric-only rivals, Volkswagen is pushing to expand its

product range in China to attract customers in the entry- and

mid-level segment of EVs.

"The price war has victims and we don't want to be a

victim," Matthias Glodny, Volkswagen Group China's vice

president for products, told reporters at the Tuesday briefing.

"We're feeling it's not a sustainable way to continue, but

of course we are fighting back."

($1 = 0.9345 euros)