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Volkswagen Seeks to Regain Edge in China as It Cuts Delivery Forecast

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Volkswagen Seeks to Regain Edge in China as It Cuts Delivery Forecast

Volkswagen said its after-tax earnings fell by 20 percent in the first half of the year, to 8.5 billion euros, or $9.45 billion, compared with the same period last year. But overall revenue increased 18.2 percent as the company stemmed some of its losses in China, where deliveries were down 1.2 percent.

Western Europe provided the company with its strongest business, with 1.65 million vehicles ordered in the first half of the year, and 200,000 of them — or 12 percent — were electric vehicles, the company said. It expects wait times to reduce by the second half of the year, when constraints on supplies and transport as well as logistics tangles will ease.

The company also confirmed that it had sold its Russia operations, including a manufacturing plant, for €125 million. The sale of Volkswagen Group Rus to Avilon, a Moscow-based dealership, was announced in May.

As part of an effort to claw back ground lost in the Chinese market, Volkswagen said on Wednesday it would invest $700 million for a nearly 5 percent stake in XPeng, a Chinese start-up that makes electric vehicles.

Last year, the Chinese automaker BYD overtook Volkswagen as the leading brand in the country. BYD widened the gap in the second quarter of the year, selling more than 595,000 hybrid or fully electric models, compared with 544,000 vehicles sold by Volkswagen, only 23,400 of them electric.

Volkswagen hopes that its investment in XPeng will help advance the German automaker’s electric vehicle software to the standards produced by Chinese manufacturers. Analysts say that German companies have yet to match the technological advancements in phones, homes and vehicles as well as in-car entertainment that drivers in China expect.

The company also said that its Audi division would expand its existing relationship with SAIC, a Chinese automaker that sells cars under the British brand MG.

Some analysts interpreted the move as a concession that Volkswagen was unable to compete with Chinese companies on the latest technology.

“The automobile of the future is coming from China. The Chinese are the leaders in important technology sectors,” said Ferdinand Dudenhöffer, the director of the Center for Automotive Research in Duisburg, Germany. “Without the know-how of the Chinese, Volkswagen would lose customers in China, and in a few years, in the rest of the world.”

Unlike Tesla, which has become the world’s most popular electric-car company partly by producing relatively few models in a limited palette of exterior and interior colors, Volkswagen Group offers dozens of models from its 10 brands, which include Audi, Porsche, Lamborghini and others. Analysts have increasingly questioned whether such a complex offering can remain competitive in today’s market. But Oliver Blume, Volkswagen’s chief executive, expressed confidence that VW customers, including those in China, want more variety in their vehicles.

“People love brands, people love design and individuality,” Mr. Blume said on Thursday. “We think that is our specialty.”

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