Chinese switch to local marques

VOLKSWAGEN and BMW are losing ground in China as local manufacturers rapidly expand.

Volkswagen suffered a 15pc drop in sales in China, its top market, in the first three months of the year. BMW sales there fell by 6.6pc over the same period.

The German car giants are falling behind in the world’s biggest car market amid intense competition.

Electric car makers have been growing thanks to Beijing-directed investments in domestic steel and lithium production, cheap labour and an industry less burdened by the legacy of petrol and diesel manufacturing. Western manufacturers are also facing more pressure in Europe.

Chinese car exports rose 82pc at the start of the year and it is set to become the world’s second biggest car exporter.

Arno Antlitz, Volkswagen’s finance chief, said: “Competition will intensify with more chips and more availability.”

Many Chinese manufacturers are undercutting Western rivals, which has triggered a price war. Tesla has slashed its prices in recent months to boost sales and maintain market share.

Elon Musk’s company and BYD, a Chinese maker backed by Warren Buffett, contributed just under half of battery-powered car sales in China during the first quarter. The pair ate into Volkswagen’s lead in the country. China’s car industry has already surpassed Germany’s in terms of global sales.

Mercedes-benz yesterday said it wanted to hire Martin Brudermüller, the boss of chemical group BASF, as its next chairman in a sign that it may be adopting a more China-friendly stance.

Mr Brudermüller last year warned businesses against “China bashing”.

VW said it wanted to maintain profitability, a signal that it is unwilling to enter a costly price war.

BMW said its profit margin surged to 12pc from 9pc a year ago.