At the 7th China International Import Expo, multinational automotive companies conveyed a strong message: the Chinese market has become a crucial testing ground for their transformation efforts.
These companies are no longer limiting their technological innovations to meet the demands of specific markets; instead, they view the Chinese market as a vital driving force for global technological innovation and upgrades.
“Strengthening localized research and development” is not only reflected in the discussions of multinational automotive executives but is also evident in the cooperation agreements with local tech firms, the increasingly prominent leadership of Chinese teams, and the continually updated research and development centers.
As a witness to China’s reform and opening-up and a pioneer in the automotive industry, the Volkswagen Group undoubtedly leads this reform, having an unprecedented history of transformative investments in the Chinese market and currently being the most resolute among known automakers.
In contrast to many companies engaging in smart cockpit and smart driving collaborations with Chinese teams, Volkswagen Group is directly developing new energy vehicle architectures and platforms at its 75%-owned "Volkswagen Anhui," and is collaborating with Xpeng to create a brand-new vehicle from scratch for the Chinese market.
Stefan Mecha, CEO of Volkswagen Passenger Cars China
It is foreseeable that such a resolute investment targets not just the Chinese market but aims to export China's achievements globally.
In an interview with The Paper, Stefan Mecha revealed that the most crucial secret Volkswagen learned in China is the importance of speed. “We can shorten the new car development cycle to 36 months in China; if we can do this in China, then why not in other countries?”
This year, Volkswagen Anhui, which is dedicated to producing pure electric vehicles, launched its first model—the Volkswagen ID.4. This vehicle marks the beginning of Volkswagen's intelligent electric transformation in China, although its sales have yet to show impressive results.
As a new joint venture established just a year ago, Volkswagen Anhui does not yet have a fully developed distribution network. “In such a competitive market, it's still too early to significantly expand the dealer network,” Mecha stated. “We cannot definitively say that the ID.4 will be a blockbuster as the first car.”
The prospects for Volkswagen Anhui's first product bring some uncertainty to Volkswagen's transformation in China, but its significance at this moment is to express a firm strategic determination.
Mecha mentioned that Volkswagen Group’s strategic transformation in China mainly includes three aspects—good design, innovative technology, and a new vehicle lineup.
First, by leveraging China-specific design and technological DNA, they aim to sharpen brand experience. For instance, the ID. CODE concept car, co-developed by teams from Volkswagen China and Germany, showcases a new Chinese DNA designed for the new era of mobility, which will be reflected in future models of the joint venture.
Secondly, they are committed to innovation. Volkswagen Group has established Volkswagen (China) Technology Co., Ltd. (VCTC), which plans to recruit 3,000 experts by the end of this year to accelerate various R&D endeavors.
Additionally, there has been significant progress in the new CEA electronic and electrical architecture developed in collaboration with Xpeng. They are also closely working with local tech partners, such as the joint venture between Volkswagen's Cariad software company and Horizon’s Cool Core Company, which is actively integrating into China's mobility ecosystem while advancing new technology R&D. “This not only enhances our technological preparedness but also achieves cost reduction and efficiency, with costs decreasing by 30%.”
According to planning, by 2030, Volkswagen Group aims to launch about 35 new models across all key market segments. Starting in 2026, they will form a rich lineup that includes efficient gasoline vehicles, long-range plug-in hybrids, and pure electric models, which will feature a brand-new SUV developed in collaboration with Xpeng and vehicles built on the innovative CMP platform. They will also not rule out the development of range-extending electric vehicles, which are currently experiencing rapid growth.
Today, multinational automakers have come to a basic consensus: products are merely a necessary condition for successful transformation. The second step is to “allow the new generation of consumers to re-recognize Volkswagen, to take root and flourish in the hearts of enthusiasts and young people. It must become synonymous with dynamism, ambition, innovation, and fashion,” Mecha stated. “Volkswagen may have higher brand recognition among the 40-year-old demographic. Younger individuals may not understand the brilliance achieved by the Santana back in the day, believing that the past success of the Santana cannot represent success now or in the future. This is why Volkswagen needs to further sharpen its brand image.”
Mecha also revealed that Volkswagen Anhui is adopting a new retail concept by establishing brand experience centers in major cities to create a comprehensive user experience.
Indeed, the transformation of multinational automakers in China is a complex issue, where every investment does not guarantee a certain return. For the joint ventures of multinational companies in China, the attribute of being a “profit cow” has weakened due to the influence of market competition, which in turn affects the returns for both shareholders and influences subsequent R&D and sustainable development.
Volkswagen Group, having deeply cultivated the Chinese market for 40 years, is still exploring avenues in this transformation era.
