UPDATE 2-Volkswagen aims to keep China market share stable as price war rages

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Targets 15% market share in China by 2030

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Expects to sell 4 million cars annually in China by 2030

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Expects price war to continue

(Adds China chief comments in paragraph 9, Citi comment in paragraphs 11-12)

By Sarah Wu, Daniel Leussink and Christoph Steitz

BEIJING/FRANKFURT, April 24 (Reuters) - Volkswagen aims to keep its Chinese market share roughly stable until the end of the decade, the head of its China business said, betting heavy investment will support sales despite a raging price war with local electric vehicle (EV) rivals.

The targets for 2030, including Volkswagen's ambition to take a share of around 15% of the Chinese car market in 2030 compared to 14.5% last year, underscores the challenges Europe's top carmaker faces in the world's biggest auto market.

"Prices are going faster down than the cost improvements," Volkswagen management board member and head of its China business Ralf Brandstaetter said on Wednesday.

"We expect in the next years, the next two years especially, that this price war will continue," he told analysts during a capital markets event around its China business, adding that would put pressure on profits.

Volkswagen ceded its title of best-selling car brand in China to Chinese EV giant BYD in late 2022, and the group's market share in China fell to 14.5% last year from 19.3% in 2020 as combustion-engine sales declined.

Brandstaetter cited investments in a new Chinese research hub and partnerships with EV makers and suppliers in China to develop more affordable EVs, more quickly.

The 15% market share target would correspond to selling around 4 million cars in China annually by 2030, up from 3.07 million last year, Volkswagen said.

Volkswagen is also targeting proportionate operating profit of more than 2 billion euros ($2.14 billion) in China in 2027 and around 3 billion euros by 2030, up from 2.6 billion euros last year.

Brandstaetter said Volkswagen remained in talks with SAIC about their jointly owned plant in Xinjiang, a region where rights groups have documented abuses. He added Volkswagen was examining different options for the business.

Volkswagen CEO Oliver Blume said this month the group "cannot keep up at the top of the table at the moment" in China's fast-growing EV market, adding a market share of more than 10% would be "very respectable" given fierce competition.

"The implicit admission of previous non-performance and new accountability, in our view, are huge steps in the right direction strategically, and miles away from VW's historical culture," Citi wrote.

"This builds on our view that VW is changing. At least in China, it has had no choice."

China has undergone a big shift from the combustion-engine age when foreign-made cars, especially those from Germany and Japan, were seen as the pinnacle of global engineering, to the electric age that has seen their Chinese counterparts move much faster on developing EV technology.

Among the incumbent foreign automakers, Volkswagen has arguably mounted the biggest fight to stay competitive against the likes of BYD and U.S. automaker Tesla, including participating in a bruising price war that started last year and has since drawn in more than 40 brands.

Volkswagen's ID.3 became one of the best-selling EVs in China after the automaker slashed the price by just over $5,100.

With its current offerings priced above that of many Chinese electric-only rivals, Volkswagen is pushing to expand its product range in China to attract customers in the entry- and mid-level segment of EVs.

"The price war has victims and we don't want to be a victim," Matthias Glodny, Volkswagen Group China's vice president for products, told reporters at the Tuesday briefing.

"We're feeling it's not a sustainable way to continue, but of course we are fighting back." ($1 = 0.9345 euros)

(Reporting by Sarah Wu and Daniel Leussink in Beijing; Additional reporting by Christoph Steitz in Frankfurt; Editing by Brenda Goh, Jan Harvey, Kim Coghill and Alexander Smith)