VW is investing big in e-mobility in China

VW is investing big in e-mobility in China

Volkswagen has inaugurated a research and development (R&D) for e-mobility in China as part of a step-up in its e-mobility plans in the country.

The new Research & Development center is in Hefei, Anhui province. At the same time, the joint venture JAC Volkswagen was renamed as Volkswagen (Anhui) Automotive Company Limited. With a raised 75 percent stake in the joint venture, Volkswagen also takes over management control at Volkswagen (Anhui).

The company's future products will be based on the group's Modular Electric Drive Matrix (MEB), with plans for a step-by-step expansion of local R&D competence in the localisation of MEB-based derivatives, and the aim of capitalising on global synergies. The first vehicle is expected to roll off the Anhui production line in 2023.

"Volkswagen Anhui is a promise for stronger partnership and e-mobility power in China. Within the next three years, we can expect state-of-the-art MEB production, a new full-electric portfolio and technology solutions from its R&D center in Anhui. This year's investment of around one billion Euro accelerates the progress within the joint venture. Volkswagen Anhui will strengthen China's role in the electrification and digitalization of the Volkswagen Group," said Dr. Herbert Diess, CEO of Volkswagen AG.

"With our commitment to Volkswagen (Anhui), we will fully leverage the global synergies of the Group to intensify our e-mobility strategy in China and help us achieve net-carbon neutrality come 2050," said Volkswagen Group China CEO Dr. Stephan Wöllenstein. "Through this new R&D center, we will strengthen the local expertise and production efficiency of Volkswagen (Anhui), which will play a key role in rapidly growing and optimizing our NEV portfolio to address the differing needs of Chinese customers in what is the world's largest NEV market. At Volkswagen, we appreciate the further opening up of the country, which allows for us to accelerate our transformation towards e-mobility."

In Hefei, research and development, quality assurance, simultaneous engineering and full capability pre-series manufacturing and testing will all be united in one facility, with integration across the industrial value chain. By combining these key functions and using the MEB platform, Volkswagen says it will speed up development cycles and allow for significantly faster time-to-market for new products. Volkswagen (Anhui) is now increasing local talent, the majority being in R&D, to number around 500 employees by 2025. The second phase of Volkswagen (Anhui)'s transformation will start in 2021, with the expansion of infrastructure and equipment for the production lines, plus the building of a battery workshop as well as a vehicle and component validation workshop. The full-scale factory for pure-electric vehicles, with a maximum production capacity of 350,000 units per annum, is due to be completed by the end of 2022, with the first model planned to go into series production in 2023.

Volkswagen Group has invested around EUR1bn to increase its shareholding in Volkswagen (Anhui), formerly known as JAC Volkswagen, from 50 to 75 percent. Also included in the investment is the acquisition of 50 percent of JAG, the parent company of Volkswagen's joint venture partner JAC. With the closing of this transaction, Volkswagen now takes over management control at Volkswagen (Anhui). The joint venture will be fully consolidated in the Group's operating results.

Anhui, and its provincial capital of Hefei, have become rising new hubs for technology and innovation. Since the creation of the formerly known JAC Volkswagen joint venture back in 2017, Volkswagen has become a fixture in Anhui's local ecosystem of NEV manufacturers and suppliers. For example, Volkswagen recently acquired a strategic stake in Hefei-based battery supplier Gotion. Volkswagen is starting talks to establish a supplier park near to the factory in Hefei. And in addition to an e-mobility hub, Volkswagen also aims to establish a digital hub in Anhui to support future connectivity and digital services across the Group's portfolio.

Bakar Sadik Agwan, Senior Automotive Consulting Analyst at GlobalData, said the development will support VW's strategy to increase its share of electric models in the country to 35% and deliver 1.5 million EVs by 2025.

"Volkswagen, which is already the market leader in China in terms of sales is all set to grab the opportunities in the high growth electric vehicle market," Agwan said. "The country is the first automotive market to recover from the COVID-19 slump and the appetite for new vehicles, including the electric models, has been growing, thanks to the conducive government policies and strong charging infrastructure. The company now needs to focus on bringing in right positioned electric vehicle products to continue its legacy in China."

See also: VW to build new EV plant in China following JV takeover