by Brad Anderson
- VW can build Chinese EVs for half the cost of European production.
- Lower labor and faster R&D cut time by 30 percent at its Hefei hub.
- Tariffs make exporting to Europe less viable for now, VW admits.
Volkswagen is leaning further into its Chinese operations, looking to export more vehicles built there to overseas markets. albeit with the notable exception of Europe. The strategy hinges on a striking cost advantage that makes developing cars in China significantly cheaper than in other regions.
As established European carmakers face growing pressure from newer Eastern brands, many are beginning to shift attention toward their Chinese production networks. For legacy manufacturers like VW, the appeal is increasingly hard to ignore.
Read: VW Will Start Selling Its Chinese Models Overseas
According to a report from the Financial Times, Volkswagen says it can develop and build a new electric vehicle in China from scratch for about half the cost of doing so elsewhere.
What Makes China So Efficient?
Volkswagen has invested billions of dollars into the local market, and, thanks to things like lower labor costs, shorter development periods, better battery procurement, and supply chain efficiencies, costs can be reduced by 50 percent.
Part of this efficiency comes from VW’s new research and development hub in Hefei, which is playing a key role in shaping the company’s next-generation EVs. By optimizing integration across teams and disciplines, the automaker now claims it can develop a new electric model in roughly 30 percent less time than before, a process that would traditionally take around 50 months.
Thomas Ulbrich, chief technology officer at Volkswagen Group China, described the facility as offering “an entirely new level of integration,” with software, hardware, and vehicle validation processes all running in parallel.
“We can now run software, hardware and full-vehicle validation processes in parallel, shorten decision loops and bring innovations to maturity much faster,” he told the Financial Times.
VW has already begun shipping Chinese-built petrol sedans to the Middle East, and Ulbrich confirmed the company is exploring similar exports to countries across Southeast and Central Asia. That said, there are no plans to bring these China-built vehicles to Europe.
The reason is twofold. First, the electronic architecture of China-developed vehicles doesn’t align with European standards. Second, tariffs on Chinese-made EVs would likely negate any cost benefits, undermining the very strategy that makes this approach viable elsewhere.
VW’s Chinese Plans
VW plans to release 30 new EV models in China over the next five years. These models will be crucial in helping the automaker regain market share in China.
Data reported by The Financial Times reveals that VW does not rank among the top 10 battery-electric or even plug-in hybrid brands in China, although it still holds a 20 percent share of pure ICE model sales.
