China has become the world’s most important test case for the future of cars. Tesla, Porsche, Volkswagen, GM, Honda, Nissan, BMW, and Mercedes-Benz are all facing pressure as Chinese automakers gain share with faster product cycles, lower prices, stronger software, and more locally tailored electric vehicles.

Volkswagen is cutting up to half of its vehicle lineup, but the real story is what happened in the boardroom. The July 9 Supervisory Board meeting may have approved the first phase of Volkswagen's transformation—while leaving the most difficult decisions for another day.