Volkswagen is readjusting to the Chinese market after 40 years of activity in the world’s largest car market.
By introducing German engineering and technology into the era of gasoline-powered vehicles, it has earned praise and good luck over the decades, becoming one of China’s most popular automakers.
However, the electrification of the country threatens the position of Volkswagen, which is losing ground to national brands.
In the first part of this year, the Volkswagen Group sold 1. 34 million cars in China, down 7% from the previous year and more than 50,000 units less than BYD.
But the German automaker, long accustomed to Chinese speed, is the fastest – if not the first – among foreign automakers to align with local technologies to regain a competitive advantage.
Last week, Volkswagen expanded the scope of its cooperation with Xpeng to build more electric cars using the electronic architecture they are jointly developing.
Starting in 2026, the architecture will be used in all locally produced Volkswagen models based on the Chinese core platform and the MEB platform, according to the agreement. This follows its agreement in April to expand the architecture, which will be used only for CMP models.
The two corporations agreed in July 2023 to expand two models by leveraging Xpeng’s expertise in electric platforms, smart cockpits, and autonomous driving.
Both models, which will carry the Volkswagen badge, are expected to hit the market in 2026.
Ralf Brandstaetter, member of the Volkswagen Group management for China, said: “This will not only improve the competitiveness of our global electric platform in China, but will also reduce technological complexities and increase our profitability in the region. “
Volkswagen is also drawing on the resources of its former Chinese partner, SAIC Motor. The two brands will jointly expand three plug-in hybrid vehicles and two natural electric vehicles in China, according to agreements signed at the end of June.
The first of the models is expected to hit the market in 2026, the same year as the two models jointly developed with Xpeng.
The agreements are an agreement signed through SAIC in May with Audi, a Volkswagen subsidiary, to expand a virtual platform for SAIC Audi cars.
Analysts say the deals allow the Volkswagen Group to be more competitive in China’s developing but increasingly competitive NEV market, at least compared to other classic carmakers such as Toyota or Ford.
Volkswagen’s efforts to remain competitive in China are limited to partnerships. It has built a mega-center of production and innovation in the country committed to NEVs.
In April, the automaker announced an additional investment of 2. 5 billion euros ($2. 7 billion) to expand the center and prepare for production of long-duration models with Xpeng.
“Our new production and development center in Hefei will allow technologies to reach the market approximately 30% faster in the future.
“This new investment in the site underlines our ambition to expand our local innovation strength,” Brandstaetter said.
He added that the company is also strengthening its competence and decision-making authority in China to further localize its technologies.
“One thing is clear: we will constantly pursue our ‘In China, for China’ strategy and further leverage the cutting-edge strength of the market to play a leading role in the era of intelligent connected vehicles,” he added.
Analysts say it is difficult to expect whether Volkswagen will regain its glory when a gigantic number of new models hit the market in two years, as new developments seem faster than in the era of gasoline engines.
But their serious and immediate efforts to repurpose and seek answers from local technologies and partnerships deserve praise, with maximum supply from classic car manufacturers in China, they said.