Volkswagen going fully native in China

Volkswagen Group China is turning to local procurement to reduce costs as it accelerates a multi-year investment plan aimed at becoming one of China’s leading electric vehicle producers.

The auto maker’s new “in China for China” strategy encompasses R&D, a substantial expansion of manufacturing capacity and a wider scope for collaboration with local partners.

Once known as the maker of Shanghai taxis, Germany’s largest automaker and its joint ventures now have nearly 100,000 employees and more than 40 vehicle and component manufacturing sites in China. From industrial robots and components to autonomous driving software and systems, it is deeply embedded in China’s automobile supply chain.

This is not what European Union bureaucrats or US politicians have in mind when they talk about “de-risking” economic relations with China but it is what the market dictates. Decades of relationship building and a commanding position in the world’s largest car market are now on the line.

In 2023, the Volkswagen Group delivered 3.2 million vehicles in mainland China and Hong Kong, a year-on-year increase of 1.6%. Deliveries of Audi premium brand vehicles rose 13.5% to 729,000 vehicles. Deliveries of battery electric vehicles (BEVs) increased by 23.2% to 191,800, or 5.9% of the total Chinese market.

In comparison, BYD sold slightly more than 3 million vehicles last year, 8% of which were exported. These included 1.6 million BEVs and 1.4 million hybrids. Tesla Shanghai delivered nearly 950,000 BEVs, slightly more than 600,000 of them to customers in China (Tesla does not make hybrids).

Volkswagen Group China’s BEV deliveries were up 72.3% in the fourth quarter, with its ID.3, ID.4 and Audi e-tron models contributing to the surge in sales.