VW Group invests €1 billion in Chinese R&D Center for EVs

Volkswagen will invest around one billion euros to establish a new R&D center for fully connected electric cars in Hefei, China, named ‘100%TechCo’. The Group announced the project at the Shanghai Auto Show on Tuesday and set ambitious targets for the unit charged with accelerating innovation locally.

The project is to combine vehicle and component development and procurement when launching in 2024. Volkswagen expects this to reduce development times for new products and technologies by around 30%.

The new unit shall also bring the German corporation closer to Chinese customers. The Group even lists integrating “state-of-the-art technologies from local suppliers” among the tasks set for 100%TechCo.

Local integration

Ralf Brandstätter, former VW brand boss and now Group Board Member for China, said: “This new business is an important step of our ‘in China, for China’ strategy. By consistently bundling development and procurement capacities and integrating local suppliers at an early stage, we will significantly accelerate our development pace. This will also strengthen the efficiency of cooperation for our joint venture and increase our profitability.”

This combination of R&D and procurement is not without precedent within the Group: the new Sandkamp Campus in Wolfsburg will also be staffed by employees from the other business divisions – for example, from purchasing, production, and quality assurance. Moreover, the joint ventures mentioned include the cooperations Volkswagen upholds with SAIC, FAW-VW, and Volkswagen Anhui.

VW Anhui will become the first task for the new unit. “In a first step, 100%TechCo will steer the development of the models of the Volkswagen Anhui joint venture based on the MEB platform and will be responsible for the development of China-specific platform requirements and modules with a focus on electric mobility,” said Marcus Hafkemeyer, the new CEO of 100%TechCo.

Hafkemeyer also acts as Chief Technology Officer of Volkswagen Group China. At 100%TechCo, he will oversee more than 2 000 employees from procurement and R&D when they launch early next year.

The company is already expected to play a significant role in developing a future Volkswagen brand model to be launched in 2024. In addition, the new unit will be “responsible for the development of China-specific platform requirements and modules with a focus on electromobility”.

Under pressure

VW is under pressure in the world’s most important car market, especially in the fast-growing electric car segment. Here, Chinese brands are well ahead of the Germans. The push for electric cars for the Chinese market is being “prompted at full speed”, Volkswagen said at the start of the auto show.

VW Group CEO Oliver Blume emphasized that the German carmaker will accelerate its decision-making and development processes in China. Audi boss Markus Duesmann was also upbeat: “We continue to take a positive view of the Chinese market,” Duesmann said on the sidelines of the international car show.

Electric cars already accounted for 25% of sales in the Chinese car market, he added. But many German brands have so far hardly played a role in China’s electric car sector. Local brands dominate there. Audi still sells hardly any vehicles in this segment and has a small market share.

The VW brand recently even lost the title of the largest car manufacturer in China, which it had held for decades because the domestic competitor BYD passed thanks to great successes in the electric vehicle segment.

According to Duesmann, Audi wants to expand its range of vehicles significantly. Ten all-electric models are planned for the next three years, he said. “This will significantly improve our position,” said Duesmann. Audi is ambitious to play a “very significant role” in the premium electric car segment.

Losing the leading role

Also, other German manufacturers were commenting on their position in the Chinese market. BMW sees itself well positioned. “The company is very happy with its position and is optimistic about the business,” said CEO Oliver Zipse at the Shanghai motor show.

But in contrast to the entire premium market, however, BMW does not occupy a leading position in the electric car sector. Tesla and the Chinese brand Nio, for example, were recently ahead of German brands.

Mercedes presented a fully electric version of its luxury brand Maybach in Shanghai for the first time. “We are confident that we will see significant growth rates,” said Mercedes board member Markus Schäfer on Tuesday with a view to the e-car business.

Industry expert Ferdinand Dudenhöffer (Center for Automotive Research) warned that German car manufacturers face major challenges. In March alone, sales of pure combustion engines in China fell by around 1%, while sales of pure electric cars and vehicles with plug-in hybrid drives (NEV) rose by more than a quarter.

According to Dudenhöffer, the Germans are also troubled by the price war raging in the Chinese market. “Tesla and the Chinese have the edge in price and cost competition,” he concluded.