Volkswagen's China decline deepens as European EV demand rises

Volkswagen's global sales performance is becoming increasingly uneven. The group delivered 6.01 million vehicles in the first nine months of 2026, down 9% from the same period last year. Much of the decline came from China, where deliveries fell by 30.2% to 1.38 million units. Meanwhile, European demand continued to grow, supported by a stronger market for battery electric vehicles.

The contrast has implications beyond the sales figures. Volkswagen is trying to expand its electric vehicle operations in Europe while facing declining volumes in China and North America. For its manufacturing network, the challenge is to balance investment and capacity against demand that is developing at very different rates across regions.

China accounts for the largest decline

Volkswagen's difficulties in China became more pronounced during the third quarter. Deliveries between July and September dropped by 38.5% to 405,800 vehicles, compared with 660,300 in the corresponding period of 2025.

The group points to weakness in the Chinese market, particularly in the combustion engine segment. At the same time, competition from domestic manufacturers continues to place pressure on established international brands.

Volkswagen is introducing more locally developed electric models in an effort to respond to Chinese market requirements. Deliveries of electrified vehicles increased by around 30% in the third quarter, according to the group, with plug-in hybrids and extended-range electric vehicles contributing to that growth.

However, the improvement in the broader electrified category should not be confused with demand for fully electric vehicles. Volkswagen's BEV deliveries in China declined by 42.5% to 48,900 units over the first nine months.

The figures raise questions about the utilisation of Volkswagen's Chinese manufacturing footprint, although the company has not released plant-level capacity or production data alongside its delivery results.

Europe's EV order book points to higher production demand

The situation in Europe is markedly different. Volkswagen delivered 586,100 battery electric vehicles in the region between January and September, an increase of 12.1%. Third-quarter growth reached 19.6%, while BEVs accounted for 20% of all vehicles delivered in Europe over the nine-month period.

The order book suggests that the shift towards electric vehicles could continue. Volkswagen says BEVs now represent approximately 40% of its European vehicle order backlog, with the absolute number of outstanding BEV orders roughly doubling compared with the end of 2025.

This is an important distinction for production planning. Order intake provides an indication of future manufacturing demand, but those vehicles have yet to be built and delivered. The rate at which outstanding orders can be fulfilled will depend on plant capacity, production ramp-ups and supply chain performance.

One programme that will influence that process is Volkswagen's Electric Urban Car Family. The ID. Polo, ID. Cross, Cupra Raval and Škoda Epiq have attracted almost 150,000 orders, according to the group.

The four vehicles share more than 80% of their components and will be manufactured at Martorell and Pamplona in Spain. Their common technical architecture is intended to support higher volumes and lower costs across several brands. The immediate manufacturing challenge will be translating the initial order intake into stable series production.

Global BEV deliveries move in the opposite direction

Despite Europe's growth, Volkswagen's worldwide BEV deliveries declined by 5.4% to 678,700 units during the first nine months.

The US market contributed significantly to the fall. Volkswagen delivered 14,900 BEVs there, down 78.4% year on year. The company cites the withdrawal of federal incentives and the impact of import tariffs among the factors affecting demand.

The figures underline the limits of treating the global EV market as a single trend. European demand is increasing, while Volkswagen faces substantial declines in two other major markets. Changes in government incentives, competitive conditions and local product requirements are creating different operating environments for manufacturers.

Plug-in hybrids and extended-range electric vehicles provide another contrast. Volkswagen delivered approximately 368,000 vehicles with these powertrains worldwide, representing growth of around 23%.

For manufacturing operations, such differences complicate powertrain planning and decisions about future capacity. The balance between BEVs, hybrids and combustion engine vehicles is not shifting uniformly across markets.

Brand performance adds another layer of complexity

The group's individual brands also recorded widely differing results. Škoda increased deliveries by 6.1% to 812,400 vehicles, while Volkswagen Commercial Vehicles grew by 2.8%.

Volkswagen Passenger Cars, however, delivered 3.01 million vehicles, a decline of 13.7%. Audi volumes fell by 11.4% to just over 1.04 million units, and Porsche recorded a 16% decline.

These differences reflect the varying market exposures and product portfolios of the brands, although the delivery data alone cannot establish how much each factor contributed.

Volkswagen's production network therefore faces two distinct pressures. In some markets, weaker demand raises questions about capacity utilisation. In Europe, the growing electric vehicle order book creates pressure to industrialise new models efficiently and convert orders into deliveries.

How successfully the group manages these competing requirements will depend not only on the demand for its vehicles, but also on the flexibility of its manufacturing operations and the speed at which production can respond to regional changes.