European automakers struggle in China

European automakers, especially German companies like Volkswagen, BMW, and Mercedes, have struggled in the Chinese market, losing significant ground to local competitors. Volkswagen's sales in China dropped by 36.6% in the second quarter of 2026 compared to the previous year, far outpacing the overall market decline of 20%.

Volkswagen's joint venture with Xpeng

Volkswagen formed a strategic partnership with the Chinese electric vehicle company Xpeng in 2023 to improve its position in the Chinese market. Together, they developed two models, the SUV ID. Unyx 08 and the sedan ID. Unyx 09, aiming to leverage Xpeng's local expertise and electric vehicle technology.

Poor sales performance of ID. Unyx 08

Despite the partnership, the ID. Unyx 08 has performed poorly, selling an average of only 267 units per month between its launch in April and the end of August 2026. This is just 7% of Volkswagen's target, according to the car review site ThinkerCar.

Volkswagen revises sales expectations

Volkswagen had initially projected monthly sales of 3,622 units for the ID. Unyx 08 in 2026. However, the company has since revised its 2026 sales forecast for the model down from 32,600 to 12,300 units, a decrease of more than 60%, according to internal documents obtained by Reuters.

Chinese competitors outperform Volkswagen

Chinese competitors like Xiaomi and Zeekr have outperformed Volkswagen in the electric vehicle market. Between April and August 2026, Xiaomi sold nearly 57,000 units of its YU7 model, while Zeekr sold more than 21,000 units of its 7X model, compared to about 1,300 units of the ID. Unyx 08, according to ThinkerCar.

Volkswagen offers discounts and faces challenges

To boost sales, Volkswagen has offered the ID. Unyx 08 with a 17% discount on its original price. However, the company's distribution network remains limited, as the ID. Unyx range is primarily sold through Volkswagen Anhui, a joint venture with only 166 sales points, compared to the more than 3,000 dealerships operated by Volkswagen's other partners.

Volkswagen shifts strategy and looks to Europe

Volkswagen is considering selling some of its China-designed electric vehicles in Europe, possibly producing them locally to utilize underused factories. The company is also counting on the ID. Unyx 09, the sedan version from its partnership with Xpeng, which is expected to launch in Chinese dealerships this month.

Volkswagen remains optimistic despite setbacks

Despite the poor performance of the ID. Unyx 08, Volkswagen has not reduced its long-term goals. Internal documents suggest the company still expects nearly 4,900 monthly sales of the ID. Unyx 09 and more than 90,000 units per year by 2034, according to Reuters. However, these targets now seem highly optimistic.