Volkswagen has announced a significant investment of 2.5 billion euros ($2.68 billion) to further expand its production and innovation center in Hefei, Anhui province, and enhance its local research and development capabilities.
As part of its “In China, for China” strategy, Volkswagen is accelerating innovation efforts, aiming to strengthen its presence in the Chinese market. The company plans to produce two Volkswagen-branded models developed in collaboration with Xpeng, a Chinese electric vehicle (EV) manufacturer listed on the NYSE.
The first model, a mid-size SUV, is scheduled to begin production in 2026. This initiative follows Volkswagen’s announcement in July 2023 of a $700 million investment to acquire a 4.99 percent stake in Xpeng, with plans to co-develop two Volkswagen-branded EV models for the mid-size vehicle market in China.
Utilizing Xpeng’s G9 platform and expertise in connectivity and Advanced Driver Assistance Systems (ADAS) software, Volkswagen aims to leverage its partnership with Xpeng to drive innovation and reduce costs through joint sourcing.
The new models will play a crucial role in Volkswagen’s electrification strategy in China, with the group’s brands expected to offer more than 30 purely electric models in the market by 2030. Volkswagen is also developing its first EV architecture tailored for the Chinese market, the China Main Platform (CMP), which will serve as the foundation for four EV models targeting the compact entry market starting in 2026.
The investment in the Hefei center is expected to accelerate the introduction of new technologies, with a planned increase in market introduction rate of about 30 percent, according to Ralf Brandstaetter, Volkswagen Group’s management board member for China. This reflects Volkswagen’s commitment to enhancing its local innovation capabilities rapidly.
Volkswagen initiated its electrification strategy in China in 2017, establishing a joint venture with Anhui Jianghuai Automobile Group (JAC). Initially known as Jianghuai Volkswagen Automobile, the company was renamed Volkswagen Anhui after Volkswagen increased its stake to 75 percent at the end of 2020.
The investment in the Hefei center underscores Volkswagen’s long-term commitment to innovation and growth in the Chinese market, solidifying its position as a key player in China’s rapidly evolving automotive industry.
