Volkswagen Group said it planned to invest a further EUR2.5bn (US$2.7bn) to expand its research and development (R&D) operations in Hefei, in China’s Anhui province, to accelerate new product development in an increasingly competitive domestic market.

VW has already invested EUR1bn at Hefei, the company’s largest R&D centre outside Germany.

The automaker said some of the additional investment would be used to speed development and production of two new VW brand smart battery electric vehicles (BEVs) currently under development in a collaboration with Chinese startup Xpeng.

VW said it was stepping up its overall new product development programme in China and plans to launch 30 completely new smart BEV models there by 2030.

The first will be a model developed with Xpeng scheduled for release in 2026.

Ralf Brandstaetter, chairman and CEO of Volkswagen Group China, said in a statement: “This additional investment in the site underlines our ambition to quickly expand our local innovative strength”, adding new product development would be speeded up by 30% as a result.

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VW’s R&D operations in Hefei are run by its local subsidiary Volkswagen (China) Technology which works closely with the local production joint ventures such as SAIC-Volkswagen and FAW-Volkswagen to bring new products to market and develop local content.