German automobile giant Volkswagen Group announced plans to hike its research and development capacity in China by investing EUR2.5 billion (USD2.7 billion).
Volkswagen will expand its production and innovation hub in Hefei, the capital city of China’s eastern Anhui province, to further increase the pace of innovation in the country, Volkswagen Group China announced yesterday.
The production and innovation center in Hefei, in which Volkswagen has already invested EUR1 billion, is the Wolfsburg-based company’s largest R&D center in the world after the one at its headquarters.
“With our ‘In China, for China’ strategy, we have a strong plan and are accelerating the realignment of our business, with more customer focus, speed, and local development,” said Ralf Brandstätter, chief executive of Volkswagen China. “Our new production and development hub in Hefei will bring technologies to market around 30 percent faster in the future. This additional investment in the site underlines our ambition to quickly expand our local innovative strength.”
In addition to the R&D capacity expansion, Volkswagen announced it will produce two more models co-developed with Chinese new energy vehicle startup Xpeng Motor in the Hefei hub. One of the two models is a sport utility vehicle for the mid-size segment, scheduled to kick off production in 2026.
Last July, Volkswagen spent USD700 million to buy a 5 percent stake in Xpeng. On that occasion, they signed a framework agreement on strategic technical collaboration, which included the joint development of two B-class battery EV models, which are mid-sized sedans.
Volkswagen will offer more than 30 electric models in China alone by 2030, Volkswagen China noted, adding that the Hefei hub will build at least four additional models for the electric entry-level segment in the compact class from 2026.
Volkswagen has been China’s best-selling auto brand for many years, but Chinese competitor BYD is catching up. The German firm delivered just over 3.2 million vehicles in the Chinese market last year, compared with BYD’s 3 million deliveries.
