Volkswagen Group says it is expanding its site in Hefei in eastern China into a production, development, and innovation hub that can reduce development time to market for EVs by around a third on previous timescales.

The Volkswagen China Technology Company (VCTC) is the VW Group’s largest development centre outside Germany. It aims to reduce the time to market for vehicles and components by 30 percent through ‘efficient development processes and the use of cutting-edge technologies’.

As a result, VW says it will be able to ‘better harness the growth momentum of the Chinese market’.

The VCTC hub is also taking on key development tasks, including the development of a local electric platform for the entry-level segment. Derived from the VW Group’s modular electric drive matrix (MEB), the new platform is intended to open up further market segments in China. From 2026, the platform will form the basis for additional battery-powered vehicles (BEV) specifically tailored to the wishes of Chinese customers. The development time of just 36 months is around a third shorter than the Volkswagen Group’s previous timescales.

Ralf Brandstätter, Volkswagen AG Board Member for China, said: “With our ‘in China, for China’ strategy, we are fully integrating ourselves into China’s industrial ecosystem. This enables us to customise our products even faster to meet the needs of Chinese customers. In a dynamic market environment, a high pace of development is crucial for competitiveness.

“The Volkswagen China Technology Company in Hefei is the central interface between all our joint venture companies and our Chinese partners, allowing us to make all decisions on products for China directly in China and launch them onto the market quickly. This boosts efficiency, increases the speed of development, and optimises our cost structure.”

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By GlobalData

Under its ‘in China for China’ strategy, Volkswagen is pursuing comprehensive localisation in development and procurement for its first China-specific electric platform. China-specific solutions for the battery, electric drive and electric motor will be used for the e-platform, which VW says will ensure ‘high cost efficiency and rapid market readiness’.

The VW Group’s product portfolio in China, which is being expanded towards the mid-range through the cooperation with the Chinese manufacturer XPeng, can now also be supplemented in the entry-level segment.

Mr Brandstätter added: “With the development of a China-specific platform for the entry-level segment, we are taking on significant development tasks in China for China. We will bring the platform to market maturity in just 36 months. This means that we are reducing the development time by around a third and can quickly tap into new customer groups in the dynamic e-car market in China. That way we utilise the full potential of the tech hub in Hefei.”

VW Anhui JV

Another key pillar is the Volkswagen Anhui joint venture, with a plant that will start production in the coming weeks, as well as the VW Anhui Component Company, with its production facility for high-voltage battery systems.

Erwin Gabardi, CEO Volkswagen Anhui, said: “We are systematically developing Hefei into the Volkswagen Group’s innovation hub in China. And we are stepping up the pace. We have already demonstrated this with the construction of the Volkswagen Anhui factory in just 18 months. We are specifically utilising new technologies and the outstanding infrastructure of the eastern Chinese province of Anhui. Its capital Hefei has developed into the Silicon Valley of China. We will also benefit from this innovative strength.”

With VCTC, Volkswagen is bundling all development units and decision-making processes in Hefei for vehicles destined for the Chinese market. This, it says, reduces interfaces between the different areas and increases efficiency. Coordination between teams also takes place in the same time zone and with a sole focus on the local market. In addition, the tech company brings together vehicle and component development and procurement right from the start of the development process. Simultaneous work saves additional time and enables an optimised cost structure.

Further synergies

VW Group also says further synergies are being realised through the close networking of development work with the joint venture companies SAIC Volkswagen, FAW-Volkswagen and Volkswagen Anhui as well as with Gotion (battery) and the Chinese manufacturer XPENG. The partners Horizon Robotics (autonomous driving), ARK (user experience) and Thundersoft (infotainment) are also involved in close cooperation with CARIAD, Volkswagen’s software unit.

VCTC also integrates technologies from local suppliers in the early product development phase in order to benefit even more from the innovative strength of the market. A 450,000 square metre supplier park is being built in Hefei for this purpose. VW says around 1,100 local suppliers provide both hardware and software, enabling application concepts to be integrated into new products at an early stage. The localisation rate is to be gradually increased up to 100 per cent. This also applies to the quality testing of supplier parts, which will create further cost benefits.

Marcus Hafkemeyer, CTO of Volkswagen Group China, said: “By closely interlinking our development and procurement teams and involving local suppliers and partners in product development at an early stage, we are increasing productivity. We are becoming more agile and faster. We are also using innovative technologies to safely accelerate our development, testing and production processes. But one thing is clear: we are preserving our Volkswagen DNA and are not compromising on quality and safety.”

Some 1,200 specialists are currently working at VCTC in Hefei. Around 3,000 are expected to be working there by the end of next year.

See also: VW developing low cost BEV platform