The new Volkswagen EV China strategy might have many consumers asking “why?” and the simple answer is cost savings and technolgical advantages.
Volkswagen just opened its first full development center outside Germany, and the numbers are pretty wild. The automaker says building electric vehicles in China can cut costs by 50% and speed up development by 30%. VW is collaborating with local suppliers and tech companies to keep up with Chinese EV makers like BYD and is planning to export these China-built EVs to other markets. It’s a major shift for the German brand as it tries to stay competitive in the electric vehicle race.
Electric vehicle manufacturing in China is huge
As the price of everything goes up significantly, doesn’t it make sense for an automaker to find ways to cut costs? Future Volkswagen electric vehicles could come with the “made in China” stamp on them because EVs can be built in China for much less than in other markets. In fact, VW claims it can reduce the manufacturing costs by as much as 50%, which is hard to argue against, even if you want to argue against developing anything in China.
The Volkswagen EV China strategy is meant for export to other markets
The new Volkswagen R&D center in China brings huge awareness of cost reduction and technological development to the company. In addition to the reduced EV development costs, VW has found that the new development center allows the company to test, develop, and manufacture intelligent connected vehicles. According to CEO Oliver Blume, this “makes us even faster and more efficient,” which is huge for any automaker. The huge Chinese electric vehicle market and embracing of this new technology make it the perfect place for VW to develop new EVs at an incredible automotive cost reduction compared to developing them in Germany.
VW’s shiny new toy
The Volkswagen Group China Technology Company (VCTC) is the shiny new toy and the catalyst behind the Volkswagen EV China strategy. It’s the most comprehensive R&D facility of the company and is dedicated to the most advanced vehicles from the Volkswagen Group, which includes twelve brand names. VW has recruited local tech companies and suppliers to work with them to reduce costs associated with developing electric vehicles, ensuring the brand can keep pace with the latest trends, which seem to be driven by China, which is currently the global leader in the EV sector.
The Volkswagen EV China strategy moves tech forward
Part of what VW intends to accomplish with the new research center is to become a serious leader in the EV market. This means keeping pace with China in the development of the next generation of driver assistance and safety features, such as autonomous driving, an improved digital cockpit setup, and digitized functionality throughout the cabin of every EV.
The new EV strategy is better in every way
In addition to developing more advanced vehicles and becoming a leader in the push toward autonomous driving, Volkswagen has cut the development time and production costs of new electric vehicles. This is a key factor in the new Volkswagen EV China strategy, meant to allow the company to deliver EVs to consumers at much lower prices. The new software-defined vehicle development process can shorten the development cycles by up to 30% while also reducing the cost of a new EV by as much as 50% for some aspects of the production cycle. This could be huge and put pressure on other automakers to find cost reduction strategies to offer EVs at more affordable prices.
Does this solve some EV challenges?
In many markets, this new strategy could offer VW a pricing advantage over other automakers. The new hub is working to develop and export vehicles to various markets, including the Middle East and Southeast Asia. It’s unlikely any of the China-made EVs will be sent to America due to the high tariff rates currently imposed. Additionally, EVs have mostly fallen out of favor in the United States, but that could change in a few years.
Should other automakers be concerned about the Volkswagen EV China strategy?
It’s likely that other foreign-based automakers might consider partnering with Chinese EV companies, such as BYD and XPeng, to gain a tech and development advantage, but not all automakers will take advantage of the benefits. Chinese-made EVs entering America under any brand name could be the beginning of what Jim Farley, CEO of Ford, has warned about. Still, if automakers want to have a pricing advantage and to push the EV market forward, cutting costs is a good place to start.