Volkswagen-Xpeng alliance underperforming

Volkswagen formed an alliance with Chinese manufacturer Xpeng in 2023 to accelerate its presence in the Chinese electric vehicle market. The first model resulting from this partnership, the ID. Unyx 08, launched in April 2026 and sold an average of 267 units per month through August 2026, far below the 3,622 monthly sales initially projected in internal planning documents reviewed by Reuters.

Sales forecasts significantly revised downward

The 2024 plan had projected 32,600 units by the end of 2026, then 70,400 in 2027. By early 2026, the annual forecast was reduced by more than 60 percent, to 12,300 vehicles, with the 2027 forecast remaining at 64,000, just 10 percent below the initial target. In recent weeks, the model is being offered with a 17 percent discount on its launch price.

ID. Unyx 08 faces strong competition

Priced at around the equivalent of 30,500 euros at launch, the ID. Unyx 08 faces technically better-equipped competitors such as the Xiaomi YU7 and the Zeekr 7X. Between April and August 2026, about 57,000 YU7 and more than 21,000 7X units were sold, compared to about 1,300 Unyx 08 units. Volkswagen primarily sold the SUV through a recent network managed by Volkswagen Anhui, with 166 sales points, rather than through the more than 3,000 dealerships operated with FAW and SAIC.

Volkswagen struggles in China's electric vehicle shift

Volkswagen has long been one of the leading players in the Chinese automotive market but has been losing ground to local groups such as BYD or Geely since 2022. While the manufacturer still holds its position in the market for internal combustion engine vehicles, it has missed the shift toward electrification in China. The ID. Unyx 08 had technical issues at launch, and its design was criticized for lacking originality, relying too closely on existing Xpeng models.

Volkswagen adjusts strategy amid challenges

The head of Volkswagen China anticipates a 20 percent decline in the market this year and has called for adjusting production capacities to the "realities of the market." Reuters reports that management internally referred to its partnerships as "marriage and divorce": to partner in order to learn, then to leave. Despite the underperformance of the Unyx 08, Volkswagen remains optimistic about the upcoming ID. Unyx 09 sedan, which is expected to launch this month and is based on ambitious forecasts, with nearly 4,900 monthly sales targeted.

New model could determine alliance's future

Volkswagen highlights an electric architecture developed in 18 months. However, the success of this model will be crucial to determining the viability of the Volkswagen-Xpeng alliance.