VW to launch €1bn Chinese innovation centre 100%TechCo

Volkswagen will spend €1bn on setting up a new innovation centre in China, as the German company seeks to better appeal to the tastes of local consumers in the world’s largest car market where its market share is in decline.

The German carmaker said on Tuesday it would start a company, 100%TechCo, that would employ about 2,000 people and play a “major role” in the development of a future Volkswagen model expected to be launched next year.

VW has long dominated sales of combustion engine cars in China but has lagged behind domestic rivals, most notably BYD, in the rapidly growing category of electric vehicles. Its market share in China was 16 per cent last year, down from 18.5 per cent in 2018.

The declining Chinese position for VW, which has faced criticism for becoming too closely entwined with Asia’s largest economy, is among the biggest problems facing relatively new chief executive Oliver Blume.

Concern has been mounting in Germany over large investments in China by several of its biggest companies, amid soul-searching over how the country found itself so deeply reliant on Russia for energy.

VW, a sprawling group of brands including Porsche, Audi and Škoda, has continued to invest heavily in China despite pressure to reduce its dependency on the country, where it makes nearly half of its profits.

The company unveiled plans last year to invest €2.4bn in a joint venture with Horizon Robotics, one of China’s leading designers of artificial intelligence chips, in a bet that AI-assisted and driverless cars would help it retain market share in its biggest market.

The group also said in recent days it would invest about €10mn in a partnership with Chinese company ThunderSoft to create China-specific features for its in-car entertainment offering.

Ralf Brandstätter, VW’s board member responsible for China, said 100%TechCo was an important step for VW’s “in China, for China strategy”. VW said the new company, to be based in the southern Chinese city of Hefei, would reduce the time needed to develop new products and technologies for China by about 30 per cent.

“Local suppliers will be involved in the early stages of product development in order to integrate the latest technologies and application concepts into new products,” VW said. “In addition, the new company will more closely integrate the development projects of all of the Volkswagen Group’s joint ventures in China.”