| Thanks for reading Hyperdrive, Bloomberg’s newsletter on the future of the auto world. Read today’s featured story online here. China’s electric-vehicle makers are on track to hit ambitious annual sales targets as they emerge as the victors from an intense price war that’s seriously wounded legacy foreign brands in the world’s biggest auto market. The picture for major Chinese EV players at the end of the third quarter is improved compared to the same time last year, with robust deliveries pointing to less need for further discounting. Analysts also are forecasting a sales bonanza in the final three months of this year. EV and hybrid vehicle sales are surging — along with the companies’ stock prices — fueled by expanded national and local subsidies to encourage consumers to trade in older cars. The incentives contributed to Tesla’s best quarter yet for Chinese shipments, while EVs and hybrids reached around 53% of total new monthly car sales in September.  Traffic in Pudong's Lujiazui Financial District in Shanghai. Photographer: Qilai Shen/Bloomberg Chinese EV sales are set for an even bigger lift on a reported directive earlier this week instructing central government agencies to increase purchases of new-energy vehicles. “Industry demand has been better than expected since the third quarter following China’s beefed-up subsidies for replacing older cars, but many automakers still need a major push in the fourth quarter to hit their annual sales targets,” Bloomberg Intelligence analyst Joanna Chen said. “The first nine months usually contribute 70% of annual car sales, and automakers below that threshold are under greater pressure to step up discounts in the quarter.” The likes of Leapmotor, Nio and Zeekr are enjoying banner years off the back of agreeing to transformational deals, going public or adding brands. Top-sellers BYD and Geely, meanwhile, are on track to meet their increased targets. The pair are aiming for 4 million and 2 million in annual sales, respectively. BYD’s pricing moves earlier this year rocked the market into months of discounting. “I do not see a need to launch another price war,” said Yale Zhang, managing director at Shanghai-based consultancy AutoForesight. “Most of them are in pretty good shape. The majority of these NEV or carmakers will reach their volumes.” It’s possible foreign manufacturers will keep steep discounts to maintain the base volume sales they’re used to for gasoline-powered cars, Zhang added. One of the wildcards that could unsettle the buoyant market is Tesla. The Elon Musk-led company will have to deliver a record number of EVs globally in the quarter — at least 515,000 — to make good on its guidance for “slight growth” in annual sales. This will likely require Tesla to rely heavily on China, a market large enough to pick up any slack in other parts of the world. This means Tesla and other EV brands could still cut prices again during the industry’s peak sales season, Citibank’s Jeff Chung wrote in a note earlier this month. The fourth quarter is shaping up for a surge in spending on autos, with brands set to launch several dozen new EV models. The year-end deadline to use the trade-in subsidy could pull forward sales from the first three months of next year, Yuqian Ding of HSBC Qianhai Securities said in her latest report on China’s auto market. Data tracked by Ding points to a likely divergence in sales strategies, with EVs requiring fewer discounts while gasoline-powered cars maintain average discounts of around 22% compared to the same time last year, the highest in at least three years. Other prime candidates likely to dangle price cuts include European manufacturers like Volkswagen, Mercedes-Benz and BMW, which suffered one of their worst third quarters in China in years. Data from AutoForesight points to risk of a price war in the premium segment among combustion-car manufacturers. The market could be about to see the end of 15 consecutive years of output growth in the price point occupied by traditional luxury brands such as Mercedes, Audi and BMW. AutoForesight data up to September point to a 4% decline in production compared to last year. — By Danny Lee  The VW logo on top of a building at the automaker’s headquarters in Wolfsburg, Germany. Photographer: Liesa Johannssen/Bloomberg Volkswagen is embarking on an unprecedented German restructuring after having allowed issues at its namesake brand to fester for years. The manufacturer plans to close at least three German factories, shrink all other remaining sites in the country and slash wages by 10% for around 140,000 workers. It’s also looking to freeze pay next year and in 2026, and abolish one-off payments to long-tenured employees. The proposals reflect the scale of the challenges facing a company that’s neglected to address overcapacity and persistently high costs. While Volkswagen staff still have the protection of a powerful works council, as well as government ownership and supervisory board representation, this may no longer be enough to insulate the namesake VW brand’s bloated operations. | 
