VW, Toyota use subsidies in Chinese price war

A full-scale price war is under way in the Chinese vehicle market with both VW and its partner, as well as Toyota and Honda and their Chinese partner, offering substantial subsidies on their vehicles.

Eric prouzet mt3v M3r RO Ro unsplash

SAIC Volkswagen Automotive Co is offering 3.7 billion yuan ($537 million) in cash subsidies for car purchases in China, joining more than 40 brands in slashing prices ahead of a change in emission rules in the world's largest auto market, Reuters reported this past Friday.

The joint venture between China's SAIC Motor Corp Ltd and Germany's Volkswagen AG is offering 15,000 yuan to 50,000 yuan in subsidies until April 30 for its full line-up, which includes the Teramont, Lavida and Phideon models, SAIC-VW said on its WeChat account late on Thursday.

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

Chinese passenger vehicle sales fell 20% in January-February, industry data showed, even as some manufacturers offered reduced prices to stimulate demand.

Sales of new energy vehicles, which include all-battery and plug-in battery-petrol hybrid vehicles, grew faster than the overall market, accounting for over 30% in February. In the same month, Chinese electric vehicle maker BYD Co Ltd outsold Volkswagen-branded cars for the second month in four.

Governments’ plans for a stricter auto emissions standard effective July 1 have added pressure on automakers and dealers to clear inventories of vehicles that do not meet the standard, Fitch Ratings analysts said in a client note on Thursday.

"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.

The price war is likely to accelerate consolidation of the fragmented local auto industry, which has over 130 passenger car manufacturers, state-owned newspaper Economic Daily said in a commentary on Friday.

But it could also hurt profitability and innovation and stall the development of the overall sector, which is a pillar of the economy, the newspaper said.

Local governments have been supplementing incentives to revive demand for cars produced by local automakers. 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 for the entry-level Citroen C6 sedan produced by its joint venture with Stellantis NV.

More Industry News stories

Isuzu’s ambitious plans for truck manufacturing in South Africa

Isuzu’s ambitious plans for truck manufacturing in South Africa

Isuzu Motors South Africa is positioning itself to become the primary manufacturing centre for commercial trucks across the African continent, a strategic move that could significantly boost production volumes while increasing the use of locally sourced components.

  • 21 August 2025
Kiara driving change, one pink truck at a time

Kiara driving change, one pink truck at a time

In a move that’s turning heads across the transport industry, Kiara Baijnath (photo), the founder and director of HerWay Logistics, is redefining what it means to be a woman in trucking by adding another pink Mercedes-Benz Actros 2645 to her fleet.

  • 21 August 2025