Currently reading: How Volkswagen plans to conquer the Chinese EV market
Localised development working at 'China speed' is critical to the brand's future in the region

Volkswagen will attempt to grow its share of the electric car market in China by accelerating development through localised R&D and a range of partnerships with domestic tech firms.

The German giant has a strong position in China's car market: the Volkswagen Group sold 3.23 million cars in the country last year, of which the Volkswagen brand accounted for 2.2 million. But the vast majority of those sales were of combustion-powered cars, and while it dominates that market, it is a comparatively small player in China’s EV market.

Volkswagen sold around 155,000 EVs in China last year, compared with 1.3 million for BYD, a difference that has helped the Chinese firm – which sold 2.5 million cars in total – overhaul the German giant as the country’s best-selling car brand in 2023. 

That’s a significant moment, given Volkswagen has long regarded China as something of a second home. It was the first foreign car firm to enter the market when private car ownership was allowed in the 1980s, and this year marks 40 years in the market.

“Volkswagen has developed mobility in China: we were the first and we are deeply rooted in Chinese society,” says Volkswagen Cars China boss Stefan Mecha, who is also the sales chief for the VW Group in the region. “We are almost considered a local brand, and we have huge history. But history only helps so much. We need to develop the brand further and reinvent ourselves.”

The challenge is to grow its meagre EV sales in China while also protecting its dominant position in the ICE market. “What we are striving for is to bring intelligent connected vehicles to all our customers in China,” says Mecha.  “Volkswagen as a people’s brand applies even more in China and, for us, it's extremely important that these intelligent connected vehicles will be brought to a broader audience.”

The firm’s plan to achieve this is built around the pillars of ‘in China, for China’. That will include the launch of a new ID UX sub-brand aimed at affluent younger customers in China’s main cities, a partnership with fast-rising start-up Xpeng and greater collaboration with other local tech firms.

Volkswagen will launch more than 30 new cars in China by 2030, including 16 EVs, four plug-in hybrids and 12 ICE cars. As seen by the new ID Code concept, Mecha says the firm will move “towards more design-oriented and technology-oriented brand DNA”. 

Those new models will include the ID Code, and the first ID UX model, which will be called the ID Unyx. It will be built on the existing MEB platform by Volkswagen Anhui (the new name for a joint venture with Chinese firm JAC), and will essentially be a rebadged version of the Cupra Tavascan.

The firm has developed a new Volkswagen China Technology Company (VCTC), headed by former tech chief Thomas Ulbrich. Based in Hefei, Anhui, the centre will employ around 3000 people and will be tasked with developing a new China-only China Main Platform (CMP).

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Mecha calls localised development “the next level” of Volkswagen’s plan and says the new CMP “is really aimed at the main [mass-market] segment in China, which accounts for around 50% of the volume here”. Development will be fast too: Mecha keeps referring to working at “China speed”, to highlight the accelerated development times.

But he also notes that “in China, you need to have leading-edge technology” that is relevant to the market, “which is why we’ve moved to a ‘team up to speed up’ approach. We don’t want to do everything on our own. We want to become immersed in the ecosystem and work with capable tech companies to develop our technology faster for the Chinese market."

The key partnership is with Chinese EV start-up Xpeng, which will collaborate with Volkswagen on developing at least two new cars on a new shared EE platform. “It's a great help when two companies work together that are relentlessly working on their partnership approach, and both company can learn from each other,” says Mecha. “Xpeng as a start-up is more pragmatic and quicker, with not so many committees. We have a very solid engineering process, and we bring very good ideas to the table.”

Mecha says the Volkswagen is also working with Xpeng on a new Chinese Electronic Architecture (CEA) core computing system, which will be used in the CMP and other vehicles. 

The new CEA system will, Mecha claims, “have features you need for the Chinese ecosystem and form the best-performing platform in the market. That's a big leap ahead, and very important on the technology side.”

Mecha notes that not only does China has a local ecosystem of software, with the likes of Tencent and WeChat instead of Western apps (“Google is not relevant in China”), but the way technology is used in cars is also hugely different. “The key difference is you manage the car predominantly through speech control, and that needs to be developed into the electronic architecture,” he says. 

But he also notes the importance of an on-screen avatar: “A little Pacman or whatever, it depends on the brand, that talks to you and controls the HMI [human-machine interface]. This is required by Chinese customers.”

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The CMP platform and architecture will feed into wider Volkswagen efforts to lower the production costs of EVs and their batteries, which Mecha says “is very important because the market is very competitive”. But while it wants a competitive cost position, Mecha says that in the middle of a China EV price war, the aim with ID UX and other cars is “a clear strategy of value over volume. We are not chasing the last number whatever it takes. We need to stay calm.”

The ID UX brand that Volkswagen Anhui will run is aimed at younger customers – but it won’t strictly be an entry-level model. Mecha says: “In China, you have a huge growing middle class, and you find these customers predominantly in 'tier one' like Shanghai, Beijing and Chengdu. They have higher purchase power and are much more demanding, and they want more tech and edgier cars.”

And, of course, Volkswagen absolutely won’t be giving up on its combustion-engined cars in China: they still drive the business there. The firm will launch a new Passat-based saloon and an extended Tiguan L Pro in China this year, but they will be reworked with far greater levels of interior tech than their European equivalents: Mecha promises high levels of driver assistance systems and “pillar-to-pillar really big screens.”

Mecha adds: “We have this stronghold with ICE cars, where we are number one in the market with more than 50% market share. It's very important we have the business, because the current situation in the EV segment is extremely competitive, and from a margin perspective, the price war is very challenging. We are happy we have this backbone, and it's very important for our transformation.”

This change of approach is a big departure for Volkswagen, which has long dominated in China by importing the technology and producing it locally. But as Chinese firms entering the European market have found, the increasing divergence in technology means the global car is no longer a working concept. Volkswagen’s challenge is to utilise its partnerships and production base to move at the pace of its start-up EV rivals.

Mecha insists the firm is up to the task, noting that the VCTC is set to be producing cars on the CMP architecture in a few years, with five ID UX models also lined up. “What we will do here is bespoke to China, and we will make cars that are relevant,” he says. “Can Volkswagen do 'China speed'? Yes, we can.”

James Attwood

James Attwood, digital editor
Title: Acting magazine editor

James is Autocar's acting magazine editor. Having served in that role since June 2023, he is in charge of the day-to-day running of the world's oldest car magazine, and regularly interviews some of the biggest names in the industry to secure news and features, such as his world exclusive look into production of Volkswagen currywurst. Really.

Before first joining Autocar in 2017, James spent more than a decade in motorsport journalist, working on Autosport,, F1 Racing and Motorsport News, covering everything from club rallying to top-level international events. He also spent 18 months running Move Electric, Haymarket's e-mobility title, where he developed knowledge of the e-bike and e-scooter markets. 

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