On April 11th, Volkswagen China announced that the Volkswagen Group is investing €2.5 billion to further expand its production and innovation center in Hefei, strengthening local research and development. This move will also accelerate the production of two Volkswagen brand smart electric vehicles developed in collaboration with Xiaopeng Motors, with the first model being a mid-sized SUV planned for production in 2026.
Volkswagen stated that the new models will expedite the group's electrification process in the Chinese market. By 2030, the group's brands will offer over 30 pure electric vehicle models in China. Volkswagen China Technology Co., Ltd. (VCTC), a wholly-owned subsidiary located in Hefei, will play a central role in localizing products and work closely with the group's joint ventures in China to undertake core development tasks.
VCTC is Volkswagen's largest research and development center outside of Germany, focusing on the development of intelligent connected vehicles and undertaking key development tasks for the Volkswagen Group. Berthold Krüger, CEO of Volkswagen China, has previously noted that VCTC serves as a vital interface for coordinating with joint ventures and local partners. Through VCTC, Volkswagen will integrate development departments and decision-making processes in Hefei to develop models tailored for the Chinese market. Additionally, the company will integrate vehicle and component development with procurement at the early stages of product development, progressing in tandem.
Since entering the Chinese market officially in 1984, Volkswagen has deepened its roots in China for nearly forty years. During the era of traditional internal combustion engine vehicles, Volkswagen played an absolute "dominant" role in the market, thanks to its outstanding market performance and brand influence. However, with the automotive industry transitioning to new energy, Volkswagen's existing advantages in this emerging field are being challenged, and its leading position is no longer as stable.
According to Volkswagen Group's released sales data for the Chinese market in 2023, the group delivered a total of 3.236 million new vehicles domestically, a 1.6% year-on-year increase. However, its overall market share has dropped from 18% in 2018 to 14%, mainly due to the increase in market share of local pure electric vehicle manufacturers amid declining sales of internal combustion engine vehicles.
In the specific field of new energy vehicles, although Volkswagen delivered a total of 191,800 pure electric vehicles in China, a 23.2% year-on-year increase, its share is just reaching 2% compared to the overall annual market of 9.495 million new energy vehicles in China.
In contrast, BYD's cumulative sales of new energy vehicles reached 3,024,417 units last year, a 61.86% year-on-year increase, with a market share of over 30% in the domestic new energy vehicle market. Among them, EV passenger cars sold 1,574,822 units, accounting for 52.27% of the group's total new energy passenger car sales.
Volkswagen Group stated that by strengthening its own research and development capabilities and cooperating with local high-tech companies in China, along with collaborating with Xiaopeng Motors, SAIC Group, and other Chinese automakers, it will continue to introduce new electric vehicle models, expand its product portfolio, and introduce cutting-edge local technologies to its brands under the concept of "China Speed." Through this approach, the product development cycle will be shortened by more than 30%, while also focusing more precisely on and meeting the needs of Chinese customers.
In fact, since 2017, Volkswagen Group has initiated its electrification strategy in the Chinese market. In the same year, it jointly established its first joint venture focused on electric vehicles with JAC Motors in Anhui. Volkswagen Anhui is the group's first wholly-owned vehicle joint venture in China. Volkswagen Group's layout in Hefei encompasses production, research and development, and procurement functions, evolving into a strategic innovation center "in China, for China."
"Based on the 'in China, for China' strategy, Volkswagen Group is accelerating the adjustment of its China business through a deep focus on customer needs, faster development pace, and stronger local research and development," emphasized Berthold Krüger earlier this year. "In the future, with the continued investment in Hefei's production and innovation center, the speed at which new technologies reach the market will increase by approximately 30%, reflecting our determination to rapidly strengthen local innovation capabilities."
In March of this year, Volkswagen Anhui's first new energy vehicle model for the Chinese market appeared in the new car catalog of the Ministry of Industry and Information Technology. This pure electric coupe SUV with the golden Volkswagen logo was named "ID.UNYX with Crowd." The vehicle falls under the category of pure electric multi-purpose passenger vehicles, produced on Volkswagen's existing MEB electric vehicle platform, positioned as an A-class coupe-style SUV, and is planned for launch in the second quarter of 2024.
Chairman of the Management Board of Volkswagen Group, Herbert Diess, stated at the beginning of 2024 that Volkswagen's goal is to maintain its position as the leading international carmaker in China and become one of the top three car manufacturers in the Chinese market. The Hefei base is undoubtedly key to achieving these goals and is the core starting point for the increased investment in Hefei's production and innovation center this time.
