Auto giant Volkswagen will overcome water scarcity in China, led by CEO Ralf Brandstätter
Volkswagen Shifts Gears in China with "In China, for China" Strategy
Volkswagen is set to ramp up its presence in China's automotive market with a new wave of products and technologies tailored specifically for Chinese customers, as part of its "In China, for China" approach. The strategy, unveiled in April at the Auto Shanghai trade fair, aims to strengthen Volkswagen's competitiveness in the world's largest EV market.
The heart of the strategy lies in local technology development. Volkswagen is investing in a proprietary AI-powered, highly automated driving system designed for China's complex traffic environments. This system, featuring a high-performance System-on-Chip (SoC) and self-learning capabilities, is set to debut in a Volkswagen brand model by the end of 2025.
Product localization and faster development are also key components of the strategy. Volkswagen's Chinese joint ventures, FAW-Volkswagen, SAIC Volkswagen, and Volkswagen Anhui, showcased electric concept cars at Auto Shanghai 2025, signalling a significant reduction in development time. These models, combining new technology and design that align with Chinese consumer preferences, are set to hit the market in the near future.
Production restructuring is another crucial aspect of the strategy. Volkswagen is closing its Nanjing plant by the end of 2025 due to its unsuitability for EV production and relocating production to the nearby Yizheng plant, which is more flexible and aligned with electric mobility.
Volkswagen's focus remains on profitable internal combustion engine (ICE) vehicle sales in China, but the company plans to more aggressively re-enter the EV market starting next year with a new generation of electric vehicles customized for Chinese buyers. This shift is necessary as the company faces declining sales and increasing pressure from rapidly growing local EV leaders such as BYD and Chery.
Ralf Brandstätter, a member of Volkswagen's board of management, has been instrumental in driving this strategy. He has extended his contract until the end of July 2028, having joined Volkswagen in 1993 and headed the Volkswagen Pkw brand before moving to China. Under his leadership, Volkswagen has achieved a deep integration of its own vehicle development into the local ecosystem in China through the build-up of local development capacities, partnerships with Chinese high-tech companies, and collaborations with manufacturers.
However, the success of Volkswagen's strategy in China's e-mobility market, where an irrational price war among over 130 brands exists, remains to be seen. In the first six months of 2025, Volkswagen's vehicle deliveries in China fell by 2.3% to 1.3 million vehicles, and the decline in pure electric vehicle deliveries was 34.5%. Despite these challenges, Volkswagen expects its joint ventures to reach an attributable operating result of 2 billion euros by 2027 and aims for sales of 3.5 to 4 million vehicles in China by 2030, with "appropriate profitability."
Sources: 1. Volkswagen Group China 2. Reuters 3. Bloomberg 4. CNBC
- Volkswagen is working on a cutting-edge AI-powered, highly automated driving system, specifically designed for China's complex traffic conditions, which will debut in a Volkswagen model by the end of 2025, showcasing the company's focus on local technology development.
- Under the "In China, for China" strategy, Volkswagen plans to introduce electric vehicles customized for Chinese buyers, starting next year, as part of the company's push to re-enter the EV market and counter increasing pressure from local competitors in the sports of e-mobility.
