Volkswagen Joins China Price War With Discounts on Full Lineup
Comment of the Day

March 17 2023

Commentary by Eoin Treacy

Volkswagen Joins China Price War With Discounts on Full Lineup

This note may be of interest. Here it is in full:

Volkswagen’s China joint venture with SAIC Motor is offering 3.7 billion yuan ($540 million) in cash subsidies to boost sales, according to a statement on the company’s Wechat account, making the German automaker the latest participant in the ongoing price war. 

The venture will provide a subsidy of between 15,000 yuan and 50,000 yuan on any model in its lineup until April 30, which includes brands like Teramont, Lavida, Lamando, Tiguan, Passat, Touran, and the all-electric ID. series

Other incentives include short-tern interest-free loans, lifelong service packages, upgraded components and buy-back guarantees.

Eoin Treacy's view

It’s been a busy week for Volkswagen. They are attempting to compete on price in China. The company revealed the design of a compact electric vehicle slated for mass production and costing around €25,000. Then they are also talking about direct investments in mining companies to boost access to resources. That all sounds expensive.

The share pulled back sharply this week to confirm resistance at the upper side of the nine-month range. The internal dynamics, with a several big downward dynamics suggest the breakout is more likely to be on the downside from here. The major car companies have enjoyed outsized demand for their products over the last couple of years. That may not last during a recession.

During economic turmoil luxury goods tend to hold up better than other forms of discretional spending. Hermes International rebounded impressively from the June 2022 low and is pausing above the 2021 peak at present. A sustained move below €1600 area would confirm a failed upside break. 

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