Volkswagen is making significant changes to its electric vehicle (EV) development strategy in China. The German automaker is centralizing its EV operations in Anhui province, aiming to better compete with local manufacturers and meet the unique demands of Chinese consumers, according to a report from CNEVPost.

Shifting R&D Focus to Anhui

Volkswagen’s current R&D center in Beijing will reportedly scale back to focus primarily on hybrid vehicle projects. Meanwhile, a “large number of Volkswagen employees will be transferred to VCTC in Anhui, or redeployed to other operations,” according to Chinese media agency 36kr. This move positions Anhui to become Volkswagen’s second global R&D hub alongside its headquarters in Wolfsburg, Germany.

The Volkswagen China Technology Company (VCTC) in Anhui is expected to grow from 2,000 to 3,000 employees this year, underlining the company’s commitment to its “In China, for China” strategy.

Streamlining EV Platforms

Volkswagen plans to base its future electric cars in China on two platforms:

The MEB (Modular Electric Drive Matrix)
The CMP (China Main Platform)

The CMP is a China-specific platform designed to slash costs by 40% by 2026, helping Volkswagen achieve cost parity with local competitors for entry-level compact models.

Embracing Local Technologies

To better serve Chinese consumers, Volkswagen is partnering with local companies like Xpeng for E/E (Electrical/Electronic) architecture. The company is also developing a “China Electrical Architecture” (CEA) at its Anhui R&D center, aiming to standardize digital systems and accelerate development while improving cost efficiency.

Addressing Past Shortcomings

This restructuring comes after Volkswagen’s ID. models failed to meet expectations in China, partly due to features that didn’t align with local preferences. For instance, the infotainment system with its small touchscreen was criticized for appearing outdated compared to offerings from Chinese brands like Nio or Xpeng.

EVXL’s Take

Volkswagen’s strategic shift in China reflects the rapidly evolving EV landscape and the importance of localization in key markets. This move aligns with trends we’ve seen in recent Tesla developments, where adapting to local consumer preferences has proven crucial for success in the competitive Chinese market.

By centralizing development and embracing local technologies, Volkswagen is positioning itself to better compete with domestic EV manufacturers and potentially regain lost ground in the world’s largest electric vehicle market. This strategy could serve as a blueprint for other global automakers looking to strengthen their position in China’s EV sector.

We’d love to hear your thoughts on Volkswagen’s new strategy in China. Do you think this centralized approach will help them compete more effectively with local EV brands? Share your opinion in the comments section below!

Photo courtesy of Volkswagen