SAIC Volkswagen Automotive is providing cash subsidies worth 3.7 billion yuan ($537 million) as China’s new emissions policy forces carmakers to offload inventory.
Over 40 brands have made price cuts. The Volkswagen Group joint venture with local manufacturer SAIC Motor is offering subsidies ranging from 15,000 yuan to 50,000 yuan.
Other automakers such as Guangzhou Automobile Group, the Chinese partner of Honda Motor (NYSE:HMC) and Toyota Motor (NYSE:TM), have also provided subsidies.
Chinese passenger vehicle sales plunged 20% in January-February, even with some manufacturers offering reduced prices to boost demand.
New energy vehicle sales, including all-battery and plug-in battery-petrol hybrid vehicles, grew faster than the overall market in February, accounting for over 30%.
Upcoming stricter auto emissions standards have pressured automakers and dealers to clear inventories of vehicles that don't meet the standard.
Bill Russo of consultancy Automobility told CNBC the situation represented a "catastrophic decline in the performance of multi-national ICE (internal combustion engine) brands."