Volkswagen to invest $2.7 billion in China, add EV models

Volkswagen said on Thursday it plans to invest $2.7 billion, or 2.5 billion euros, to boost sales in China, the world’s biggest car market, and improve the German automaker’s ability to respond more quickly. in the wake of local competition.

Volkswagen, whose brands also include Audi, Porsche, ŠKODA, Bentley and Lamborghini, will expand a production and innovation center in the eastern Chinese city of Hefei with a focus on electric vehicles, which are among the country’s best sellers.

“Our new production and development center in Hefei will bring technology to market about 30 percent faster in the future,” said Ralf Brandstetter, member of Volkswagen’s management board for China. “This additional investment in the site underscores our ambition to rapidly expand our local innovation strength.” By 2030, more than 30 all-electric models of Volkswagen brands will be available in China, the company said.

He did not provide a time frame for the new investments. The announcement came days before German Chancellor Olaf Scholz’s expected visit to China later this week. It also comes amid trade friction between China and major trading partners, including the US and Europe, over industrial policies adopted by Beijing.

Earlier this week, China reported a 10.6 percent rise in car sales in the first quarter of 2024 from a year earlier to 6.72 million vehicles. Production increased 6.4% year-on-year to 6.6 million units; production of new energy vehicles, or NEVs, led the way, rising 28% year over year to 2.1 million units. NEV sales during the period grew nearly 32% to 2.09 million units.

Underscoring China’s current influence in the auto business, half of the world’s 10 richest billionaires in the industry are from the country on Forbes’ 2024 billionaires list released this week. The five included CATL’s Robin Li, Geely Holdings’ Li Shufu and Great Wall Motor chairman Wei Jianjun. BYD had two founders in the top five: Wang Chuanfu and Lu Xiangyang.

Volkswagen’s 40s^th anniversary in China this year is “very important” for the company and “shows the longevity of their vehicles in the market,” said Tu Le, founder of Sino Auto Insights, a Detroit-based consultancy that focuses on the Chinese auto industry. “But at what appears to be China’s most vulnerable time” amid tough competition in a changing market, he added. EV competitors include domestic leader BYD, along with Tesla.

Volkswagen’s long-standing joint partners in China include SAIC and FAW. It paid $700 million for a stake in XPeng last year and is developing two new models with the Guangzhou-based electric car maker. Other partners in China also include Horizon Robotics (autonomous driving features), ThunderSoft (infotainment) and ARK (user experience), Volkswagen said. Volkswagen’s own 90,000 employees make it the largest European employer in China, the company noted in the announcement.

Many global auto industry executives will be turning their eyes to China for the key annual auto show to be held in Beijing this year – Auto China. It starts on April 25th.

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@rflannerychina