It is a glamorous place that Volkswagen has chosen for the "world premiere" of its hopeful model. Nowhere else is China more beautiful, more expensive, more international than on Shanghai's Western Bund, where luxury apartments are joined by the spectacularly designed art museums of Chinese billionaires.

Hendrik Ankenbrand

Business correspondent for China, based in Shanghai.

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Christian Müßgens

Business correspondent in Hamburg.

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On the promenade on the banks of the Huangpu River, Western luxury brands will compete for the customers of the up-and-coming billion-dollar nation during the art fair in autumn, alongside the world's leading gallery owners. Star architect David Chipperfield has built an offshoot of the Centre Pompidou here, which French President Emanuel Macron himself opened a few weeks before the start of the Corona pandemic.

When the ID.7 takes to the stage here in an event hall on Monday evening, before the world's largest car show opens in Shanghai the next morning, in front of the assembled VW board of directors, the Germans want to present their masterpiece that outshines all the works of art on the federal government: an electrically powered luxury sedan with dimensions that come close to Mercedes' S-Class, A range of 700 kilometres and an air conditioning system that detects the position of the sun and cools down the car as soon as the driver approaches it.

Annoyingly, the regulator responsible for the acceptance of new cars in Beijing has already published pictures of the uncamouflaged ID.7 on the Internet on Tuesday, which, according to the taste of many Chinese, did not want to come across as a world sensation at all. On the contrary, the ID.7 resembles the "C01" like one egg to another, was the most common comment. The electric car from the manufacturer Leapmotor from Hangzhou, a two-hour drive from Shanghai, has been on the market since last year. A nasty suspicion is spreading in the country, where VW sells more vehicles than anywhere else in the world: Have the Germans copied from a Chinese start-up?

Strong headwind for Wolfsburg

So this is what has happened in the "second home" of the VW Group. The journalist Felix Lee has described in a new book ("China, my father and I") how the Chinese Minister of Mechanical Engineering appeared in front of the Wolfsburg VW factory gate in 1978. After that, the Germans quickly became the top dog in China, which no one could ignore. At the same time, dependence on the People's Republic grew, where the group now sells four out of ten of its cars.

Still. Because in the fast-growing market of e-cars, VW is a nobody. The share of Germans is 2.7 percent, not much more than Leapmotor, a manufacturer whose cars have only been available for purchase for four years. Why Chinese car buyers should opt for a VW, the governor of the Wolfsburg-based brand was asked last week on Chinese state television – again and again, after all, the answer that VW has been selling cars in the country for 40 years left the young reporter visibly dissatisfied. Perhaps no longer having a head start through technology, but one through trust in German honesty: This sales argument does not seem to impress the innovation-obsessed Chinese very much, as a look at the sales statistics shows.

Of course, CEO Oliver Blume, who will have to save what may no longer be salvageable in Shanghai next week, also knows this. After all, VW is also running away from customers in the conventional bread-and-butter business with the old gasoline engines in its "second home". The group sold more than 4 million cars in the best of times in the country, today there are 1 million less. Last fall, VW lost the title of market leader in China to BYD. The manufacturer from Shenzhen does not make a big fuss out of the fact that the country is actually allowed to call home. Instead, BYD has achieved annual growth rates of almost 90 percent with powerful and affordable electric cars.

For VW, on the other hand, things could soon go down much faster in the world's largest car market. The Group is already rapidly losing shares there. While the Chinese market as a whole remained on the road to recovery last year and largely left the Corona valley behind, VW sales continued to decline by around 4 percent. And according to figures from IHS, the downward pull could accelerate. The experts at the London-based analysis company predict a sensitive minus of around 9 percent for the group in the People's Republic for the current year. The strategists at the Beijing headquarters, it seems, have so far lacked any recipe to stop the negative dynamics.