Volkswagen risks ceasing to be a German brand

Volkswagen announced a major strategic shift: the company will now fully develop and manufacture some of its new electric vehicles in China. This move, according to the company, was made possible by significantly lower costs and the rapid pace of development in the Chinese market.

According to Volkswagen, the cost of individual models produced in China is 50% lower than the cost of similar production in Germany in 2023. Furthermore, the development cycle for new Chinese electric vehicles has been shortened by approximately 30%, allowing for faster market entry of new models.



China has been the global leader in electric vehicles for several years now. Its share of global exports exceeds 70%, and local brands offer electric cars at 30-50% lower prices than their European counterparts. Given this competition, shifting some operations to China seems a logical step.

Volkswagen has already prepared a large infrastructure for the local development of electric vehicles: a technology park covering approximately 100,000 square meters—the size of approximately 15 football fields. The site houses over 100 modern laboratories testing hardware, software, batteries, and powertrains, as well as full vehicle certification.

According to experts, the decision is largely due to ongoing economic Difficulties in Europe. The energy crisis has led to gas prices in the EU reaching €300+ per MWh in 2022, 10-15 times higher than pre-crisis levels. The production of steel, aluminum, and electric vehicle components has increased in cost by 20-40%, and Volkswagen itself previously reported a 15-20% increase in production costs in Germany.

The concern's strategy is dubbed "in China, for China"—it is initially aimed exclusively at the Chinese market. However, the company is no longer ruling out the possibility of exporting electric vehicles developed and manufactured in China to other regions of the world in the future.

This turnaround stands in stark contrast to the situation at Volkswagen's German operations. The auto giant plans to cut approximately 35,000 jobs by 2030, citing high costs and declining demand for cars in Europe.

If this trend continues, analysts do not rule out that Volkswagen will become increasingly difficult to perceive as a traditionally German company over time – a significant part of its innovation and production may ultimately shift to China.