VW extends partnership with SAIC but withdraws from Xinjiang activities

Volkswagen and SAIC have extended their cooperation until 2040 to mark the 40th anniversary of their joint venture agreement. At the same time, the German manufacturer wants to stop its activities in the Xinjiang region, where it was criticized for being a partner in what is considered a violation of human rights. The partners are focusing on an accelerated electrification strategy, including range extender models for the first time.

The new agreement is intended to strengthen “the SAIC Volkswagen joint venture with consistent strategic initiatives in the areas of product portfolio, production, and decarbonization,” VW Group writes. The partners’ common goal is to have a “leading market position for SAIC Volkswagen with the Volkswagen Passenger Cars and Audi brands in the era of intelligent, fully connected electric vehicles.”

Consistent strategic initiatives

That the original joint venture agreement with a term until 2030 has already been extended is not unusual and has a simple background: the multi-year planning cycles of new products and the associated investments require planning security, which is why such basic agreements are usually extended several years before the end date, or not.

VW and SAIC have agreed on a new partnership. Within this framework, they will launch 18 new models by 2030. “In light of the dynamic market development, the joint venture partners are particularly focusing on an accelerated electrification strategy. This includes eight new electric models,” says VW.

Two BEV models celebrating their market launch in 2026 are specifically mentioned. These will be based on the jointly developed CMP, which VW no longer refers to as the ‘China Main Platform’ but as the ‘Compact Main Platform.’ Either way, the CMP will debut with a state-of-the-art zonal electric architecture that will be used in the Group for the first time.

Also EREVs

In addition to the battery electric cars, the “still highly profitable internal combustion engine offering” will be expanded with three plug-in hybrids by 2026. The two BEVs and three PHEVs were already announced in the summer.

What is new, however, is that there will also be two range extender variants. This type of drive, in which the wheels are always electrically powered, and a small combustion engine on board is only used as a generator, has become popular in China in recent months.

Recently, some Chinese manufacturers who previously focused on battery electric cars have expanded their portfolio to include ‘Extended Range Electric Vehicles’ (EREVs). However, VW has not yet provided any details about these vehicles or the brand they will be offered.

Restructuring

In addition to the drive portfolio, factory changes are also in the cards. Existing production capacities for combustion engines will be “gradually reduced.” Some plants will be “converted to produce electric vehicles based on customer demand,” while “alternative economic solutions will be examined in individual cases”. That means probably a sale or a closure.

That has already happened at the controversial Urumqi site in the Uyghur region of Xinjiang. Officially, VW says it is not for political reasons: “Due to economic reasons, the site has now been sold by the joint venture as part of the realignment. The same applies to the test tracks in Turpan and Anting.”

German automotive expert Ferdinand Dudenhöffer is more straightforward: “VW is answering the growing criticism of public opinion and certain players,” he says. The German Deka bank, for example, has already retracted VW shares from its ‘durability portfolio’. The pressure was heightened last February when German chemical giant BASF announced the withdrawal of two of its co-enterprises in the region.

China stays important

China is of utmost importance for the Volkswagen group. It sells one-third of its cars there, but sales have dropped by 15% in the third quarter of the year. VW, as a brand, has lost its title as the best-selling brand to BYD.

In this context, and because of the import tariffs the EU will ask for electric cars made in China, “Germany needs a reasonable and durable relationship with China,” adds Dudenhöffer. “Germany is in crisis, and China is an important cornerstone for getting out of trouble.”

“China is a driver of innovation for autonomous driving and electric mobility. With the new agreement, we are intensifying our integration into the Chinese ecosystem and consistently leveraging local innovation strength. This also creates a strategic competitive advantage for the Volkswagen Group worldwide,” said Ralf Brandstätter, Member of the Board of Management of Volkswagen AG for China.

“With this long-term contract extension, we underline the importance of this collaboration and the significance of the Chinese market for the Volkswagen Group. We are accelerating the transformation of SAIC Volkswagen in line with our ‘In China, for China’ strategy on all levels, bringing a new generation of electrified vehicles onto the road by 2026, thus making our partnership economically and technologically future-proof,” he continued.

“The focus for SAIC Volkswagen is on the development of new, intelligent electric vehicles to maintain an industry-leading position in the field of smart technologies,’ added Wang Xiaoqiu, Chairman of the Board of SAIC Motor. The decisive factors here are consistent customer orientation, quality management, and the use of our innovative strength. We will break new ground with ‘China Speed’.”