Volkswagen’s $2.68 Billion Investment to Expand Hefei Production Base and Introduce Co-Developed Models with Xpeng.
Volkswagen has announced a substantial investment of 2.5 billion euros ($2.68 billion) to bolster its production and innovation hub in Hefei, Anhui province. This move aims to fortify local research and development capabilities, aligning with the company’s “In China, for China” strategy, and accelerating innovation.
Part of this initiative involves the production of two Volkswagen-branded models, developed in collaboration with Xpeng, with the first model, a mid-size SUV, slated for production in 2026. This collaboration stems from Volkswagen’s earlier investment in Xpeng, where the two giants plan to jointly develop electric vehicle models targeting the mid-size vehicle market in China.
Leveraging Xpeng’s G9 platform and advanced software technologies in connectivity and ADAS, Volkswagen aims to drive innovation and cost-efficiency in the development process. This partnership, reinforced by a recent agreement signed between Xpeng and Volkswagen, underscores a shared commitment to expedite model development and enhance market competitiveness.
Furthermore, Volkswagen’s electrification strategy in China is gaining momentum, with plans to introduce over 30 purely electric models by 2030. The company is also pioneering its first EV architecture tailored for the Chinese market, the China Main Platform (CMP), which will spawn at least four EV models targeting the compact entry market segment from 2026 onwards.
Ralf Brandstaetter, a management board member for Volkswagen Group’s China division, emphasizes that the expanded production and innovation center in Hefei will facilitate a 30 percent acceleration in bringing new technologies to market. This ongoing investment underscores Volkswagen’s unwavering commitment to bolster local innovation capabilities swiftly.
Volkswagen’s journey in the Chinese market began in 2017 with the establishment of a joint venture with Anhui Jianghuai Automobile Group (JAC). Initially known as Jianghuai Volkswagen Automobile, the company was renamed Volkswagen Anhui following Volkswagen’s increased stake to 75 percent by the end of 2020.
