VW joins e-car price war as global rivalry heats up

German giant Volkswagen is set to follow Tesla's lead with a high-profile price drop as the battle for global dominance in the electric car segment intensifies, and local challengers race ahead in key market China.

A new version of Volkswagen's flagship ID.3 electric car model will go on sale from the end of March for just under 40,000 euros ($42,000), the VW brand announced this week.

That is a 3,000-euro markdown from the current ID.3 price tag, putting it on par with U.S. rival Tesla's popular Model Y.

Industry insiders see the move as a direct response to several rounds of price-cutting by the Elon Musk-owned company in recent months, including discounts of up to 20 percent in Europe and the United States.

In Germany, Tesla's sales soared by more than 900 percent year-on-year in January as a result, making it the top-selling e-car in the country that month.

Although the 10-brand VW group was Europe's leading e-car manufacturer in 2022 with 352,000 vehicles sold, Tesla's audacious markdowns have forced the German firm's hand, said industry analyst Ferdinand Dudenhoeffer.

"Volkswagen sees how big the threat is from Tesla," he told AFP.

The automaker will have "no choice" but to enter "a price war" to defend its place in the hotly contested market for battery-powered vehicles, even if that means profit margins take a hit for a while.

VW group CEO Oliver Blume has so far ruled out a general price drop on all e-cars, but the topic is bound to come up when the group presents its 2022 financial results on Tuesday.

But Musk is not VW's only headache. In China, the world's largest car market, the industry's electrification has shifted into higher gear and VW is rapidly falling behind domestic competitors.<...