Volkswagen once dominated China’s automotive market, but the rise of domestic electric vehicle manufacturers has turned its fortunes upside down. Hoping to regain lost ground, the German automaker partnered with Chinese EV specialist Xpeng in 2023.
On paper, the idea was simple enough: combine Volkswagen’s manufacturing experience with Xpeng’s technology and development speed, and watch the turnaround begin. Three years later, however, the partnership’s first production model is struggling to attract buyers.
According to a recent Reuters investigation, the Volkswagen ID. UNYX 08 electric SUV averaged just 267 monthly sales between its April 2026 launch and August. That’s far below the company’s original target of 3,622 vehicles per month.
The disappointing figures emphasize Volkswagen’s increasingly difficult position in China, where established foreign brands are struggling to compete with technologically advanced, competitively priced domestic alternatives.
Volkswagen’s New Electric SUV Is Struggling
The ID. UNYX 08 launched at approximately $34,260, placing it against formidable Chinese competitors such as the Xiaomi YU7 and Zeekr 7X. The Xiaomi YU7 boasts an advanced sensor package, while the Zeekr 7X offers particularly fast charging capabilities.
Between April and August, Xiaomi sold nearly 57,000 YU7s, while Zeekr delivered over 21,000 7Xs. Volkswagen managed approximately 1,300 UNYX 08 sales during the same period.
Distribution hasn’t helped matters, either. Rather than relying primarily on its extensive existing dealer network, Volkswagen initially marketed the SUV through a much smaller Volkswagen Anhui operation.
The company says that network has expanded to 166 outlets, with additional support from selected FAW-Volkswagen dealerships.
China’s Changing Market Is Hurting Volkswagen
Volkswagen’s problems extend well beyond one unsuccessful launch. According to Reuters, China once generated nearly half of Volkswagen Group’s profits, compared with approximately 10% today.
Its market share has also declined sharply, from roughly 20% in 2019 to 10% during the first eight months of 2026. Meanwhile, Chinese manufacturers such as BYD and Geely have gained ground with increasingly competitive electric vehicles.
Volkswagen has responded by pursuing local technology partnerships, but accessing Chinese expertise hasn’t automatically translated into stronger sales.
Another Xpeng-Developed Volkswagen Is Coming
Despite the UNYX 08’s disappointing debut, Volkswagen is preparing another Xpeng-linked model, the UNYX 09 sedan. Internal planning documents reviewed by Reuters projected nearly 4,900 monthly sales for the upcoming vehicle.
Those expectations look ambitious given the SUV’s disappointing sales, although it’s still too early to predict how the sedan will perform.
Volkswagen says its cooperation with Xpeng has already delivered a new electric vehicle architecture developed in just 18 months. That represents noteworthy engineering progress, even if commercial success has proved elusive.
The challenge now is turning faster development and improved technology into Volkswagen vehicles Chinese buyers actually want.