BEIJING/BERLIN — When Volkswagen turned to electric vehicle (EV) maker Xpeng in 2023 to help fix its flailing Chinese business, executives touted the partnership as a shortcut to developing cars tailored for China at the high speed of the local auto sector.
Three years later, the alliance’s first product exemplifies Volkswagen’s descent in the world’s largest car market. The ID.
UNYX 08 electric SUV sold an average of 267 vehicles a month between its April launch and August, data from automotive consultancy ThinkerCar show. That’s a fraction of the 3,622 monthly sales Volkswagen initially aimed to achieve this year, according to company planning documents.
The weak debut reflects Volkswagen’s battle to revive its fortunes in China, where it reigned for decades until 2022 as the top automaker. China represents the challenge at the heart of Volkswagen’s global crisis: A market that once contributed nearly 50 percent of group profits now accounts for about 10 percent. That stunning reversal has forced the company into the biggest restructuring in its 89-year history.
The UNYX 08 also highlights a persistent problem in Volkswagen’s China strategy. Volkswagen recognized the market’s shift toward higher-end technology and sought local partners to catch up. Yet the German automaker struggled to turn those bets into commercial success.
This report is based on a Reuters review of previously unreported company documents and interviews with six people familiar with Volkswagen, including current, and former executives and consultants. It shows the automaker’s ambitions ran ahead of what its products, pricing and sales strategy could deliver.
Volkswagen sold the UNYX 08 through a nascent and limited distribution network. The vehicle also struggled against newer, software-laden Chinese electric SUVs.
In a statement, the automaker said its partnership with Xpeng has delivered a new electric architecture to underpin locally made models and support faster vehicle development — a project it said was completed in a record 18 months. The UNYX 08 SUV and the related UNYX 09 sedan were additional outcomes of the tie-up, the company added.
Problems with the UNYX 08 began with the vehicle itself. The car launched with a price tag of about $34,260. But similarly priced Chinese rivals offered more-sophisticated features.
Xiaomi’s YU7 had an advanced sensor package; Zeekr’s 7X offered fast charging. Xiaomi sold almost 57,000 YU7s and Zeekr sold more than 21,000 7Xs between April and August, compared with about 1,300 UNYX 08s, according to ThinkerCar.
“Chinese customers ask: Why buy an expensive German car if they can get the technology much cheaper,” said Pedro Pacheco, vice president of research at Gartner.
Stephen Reitman, an auto analyst at Bernstein, recalled that Volkswagen showed analysts computer renderings of the Xpeng-linked models in April 2024. “The next day we went to the Beijing auto show, and you could basically see this kind of design already on the market,” Reitman said.
A distribution gamble compounded the product’s challenges, five people told Reuters. Volkswagen largely sold the UNYX 08 through a separate, new dealer network run by Volkswagen Anhui, an EV-focused venture, rather than the more than 3,000 dealerships Volkswagen operated with joint venture partners FAW and SAIC.
Volkswagen Anhui’s far-smaller footprint meant many consumers were unaware the vehicle existed, two of the people said.
Volkswagen said sales of the Anhui models, including the earlier UNYX 06 and 07, were growing. The unit had expanded its sales network to 166 outlets and was working with FAW-Volkswagen at selected dealerships, the company said, adding that this approach aimed to reach more customers.
For Volkswagen, the Xpeng partnership follows a string of troubled ventures, missed opportunities and abandoned initiatives in China that spanned batteries, autonomous driving, charging infrastructure, software and even flying cars.
Volkswagen was “too slow in building the competence they need today,” said Stefan Bratzel, founder and director of the Center of Automotive Management, a German research institute.