In 1978, a Chinese delegation dressed in Mao suits travelled to Wolfsburg with a stunning message for the men running Volkswagen: Deng Xiaoping’s China was open for business.

Now, after four decades building the world’s biggest car market from scratch and profiting from the rise of an economic superpower, the automaker has suddenly found itself fighting for its position in China.

While the sprawling German group, which today includes Porsche and Audi, sells more cars in China than any other company, its flagship VW brand was recently dethroned as the country’s best-selling car by BYD, the Shenzhen-based conglomerate backed by Warren Buffett.

The German company is falling behind in the fast-growing electric car segment, where the VW brand sits in ninth place with a market share of just 2 per cent. BYD, which holds the top spot, has nearly 40 per cent and Elon Musk’s Tesla, in second, has more than 10 per cent.

Chinese makers of electric vehicles, which include plug-in hybrid and battery-powered cars, dominate in their own market and are also expanding aggressively overseas. China overtook Germany in auto exports in 2022 and is set to eclipse Japan as the world’s biggest car exporter this year.

VW, one of Germany’s largest and most prestigious companies, depends on China for at least half of its annual profits, which last year reached €22bn. Its position in the race for EV market share is placing the future security of those earnings in jeopardy.