While the Dutch chip manufacturer Nexperia, caught amid the trade conflict between the United States and China, is causing concern in the German automotive industry with warnings of supply shortages, the Volkswagen Group is pressing ahead with its China strategy. Europe’s largest carmaker, which has been struggling to keep pace with domestic competitors in the electric segment of the world’s biggest automotive market, announced plans for its first self-developed chip for Level 3 automated driving on 5 November at the opening of the China International Import Expo in Shanghai.

„By designing and developing the System-on-Chip here in China, we are taking control of a key technology that will define the future of intelligent driving,“ said Volkswagen Group Chief Executive Oliver Blume.

The AI chip will come from the joint venture Carizon, founded in November 2023, and jointly owned by the Volkswagen software unit Cariad and the Chinese technology company Horizon Robotics.

According to Volkswagen, this marks the beginning of the second phase of its local strategy in China. „We are accelerating and deepening the implementation of our „In China, for China“ strategy – moving beyond localised production to mastering the core technologies that shape tomorrow’s mobility,“ said Volkswagen’s China Chief Ralf Brandstätter. Cariad Chief Executive Peter Bosch added that the chip increases the performance of advanced driver assistance systems, meets customer expectations in China, and provides the Volkswagen Group with a structural cost advantage.

At the Shanghai Auto Show in the spring, Volkswagen presented its first self-developed automated driving system that is designed to provide highly accurate, safety-oriented functions up to Level 2 plus. It is scheduled to be introduced in the first Volkswagen vehicles in 2026.

By 2027, the Volkswagen Group plans to offer more than 20 electrified models in China and around 30 purely electric models by 2030.

Between 2019 and 2024, the group’s vehicle deliveries in China declined from 4.2 million to 2.9 million units. Volkswagen lost ground in the intense local price competition to domestic manufacturers of connected and electric vehicles. With the strategy launched three years ago, the long-time market leader in combustion engines aims to close the gap in technology and costs in smart electric vehicles.

The proportional operating profit of the Chinese joint ventures fell from 4.4 billion euros in 2019 to 1.7 billion euros in 2024. From an expected level of up to 1 billion euros in the current fiscal year, the group aims to more than double the result to over 2 billion euros by 2027.