Deepening local cooperation to propel China's intelligent electric vehicle development to new heights

In recent years, China's NEV market has made significant strides. In 2020, it was projected that NEV would account for 25 percent of new vehicle sales in China by 2025. It is now anticipated that by 2025, 50 percent of China's total annual automobile sales will be NEV, and by 2030, this proportion will rise to 75 percent, with BEVs becoming the dominant vehicle type.

China is now at the forefront of developing state-of-the-art technologies such as autonomous driving, smart cockpits, and mobile connectivity, demonstrating a vibrant and innovative energy in the sector. The average age of new car owners in China is around 35, 20 years younger than their European counterparts. These young car owners are more progressive-thinking and eager to embrace the latest intelligent and digital technologies. In no other country is the speed of transformation and innovation in the automotive sector as high as here. Undoubtedly, the future belongs to new energy and intelligent connected vehicles, and China has become the most developed market for the development of ICVs worldwide.

The rapid development of China's automotive industry presents both challenges and opportunities for international automakers. The global players with profound expertise in automotive manufacturing possess highly reputable vehicle development and engineering capabilities, while Chinese technology innovation companies continually make breakthroughs in the field of intelligent electric vehicle technology tailored to the specific needs of the Chinese market. In this new phase of development, innovative models of collaboration between China and international partners are being crafted to capitalize on mutual strengths and resources to promote win-win results and further drive the high-quality growth of China's NEV industry.

For 40 years since its entry into the Chinese market, the Volkswagen Group has been exploring innovative partnerships with China's automotive industry, which has remained as the top priority.

With an investment of 1 billion EUR by Volkswagen Group earlier this year, Volkswagen (China) Technology Company Limited (VCTC) officially began operations in Hefei, Anhui Province. This is the Group's largest research and development center outside Germany, focusing on ICV transformation. By integrating vehicle, component R&D and purchasing into one company, VCTC serves as the central interface between all the Group joint venture companies and partners, allowing the Group to make all decisions on products for China directly in China. This will reduce the development time for new products and technologies by around 30 percent. Recently, Volkswagen Group announced to invest an additional 2.5 billion EUR in China to further expand its production and innovation center in Hefei, demonstrating its commitment to integrating into China and strengthening local R&D capabilities.

In addition, Volkswagen Group has forged strategic cooperation with Chinese NEV maker XPENG to jointly develop two ICV models for the mid-size segment and co-develop China Electrical Architecture (CEA), a state-of-the-art Electrical/Electronic architecture, thereby continuously providing Chinese customers with the latest digital services and cutting-edge intelligent features. The Group is also partnering with Chinese technology companies including Horizon Robotics, ThunderSoft, and Gotion High-Tech on autonomous driving, infotainment systems and power batteries respectively. Additionally, the Group continues to explore and deepen innovative cooperation with the three joint ventures in China in the field of new energy vehicles.

Cooperation drives technological advancement and industrial prosperity. We are committed to our "in China, for China" strategy and work closely with local Chinese partners. We believe that by each of us doing our part and making the best use of our strengths and resources, we can better embrace the transformation of future intelligent connected vehicles, contributing to the expansion of a wider market within China's automotive sector.

(Ralf Brandstätter is CEO of Volkswagen Group China.)