VW gains full end-to-end development capability in China

ADT editorial team ADT editorial team

1 December 2025 - 09:00

1 min

Volkswagen aims to further strengthen its position in the strategically vital Chinese automotive market.

Volkswagen AG

Volkswagen has expanded its Hefei operations into a full development hub, enabling the German company to design, test and validate the next generation of connected vehicles entirely within China — and at the speed the local market demands.

Volkswagen has completed the final expansion stage of its technology and innovation centre in Hefei, marking a major shift in how the group develops vehicles for the Chinese market. The newly operational facilities of the Volkswagen Group China Technology Company (VCTC) bring software engineering, hardware development and full-vehicle validation together under one roof — a structure designed to tighten development cycles and support market-specific innovation.

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A consolidated hub for China-specific development

With the centre now fully equipped, VCTC can handle complete vehicle programmes independently, from early software architecture to physical subsystem testing and full-platform verification. The site houses more than 100 laboratories covering software–hardware integration, electric-drive and battery testing, and whole-vehicle validation. Volkswagen describes the facility as its largest and most comprehensive R&D location outside Germany.

According to the group, this consolidation enables faster decisions, more efficient engineering workflows and shorter time-to-market — all crucial in a region where product life cycles and feature expectations move at exceptional pace. The company positions the expansion as a cornerstone of its “In China, for China” strategy, intended to align development more closely with local customer expectations and competitive dynamics.

Local architecture development in record time

One of the first major outcomes is the initial version of the China Electronic Architecture (CEA), developed jointly by VCTC and Cariad China. Tailored specifically to the requirements of Chinese customers, the architecture includes a new zonal E/E structure, updated digital-cockpit features and advanced driver-assistance capabilities. Volkswagen reports that the first iteration was delivered to the Volkswagen brand after only 18 months — a development speed the company refers to as “China Speed”. The Germans see considerable efficiency gains in the new setup. The group expects development cycles for software-defined vehicles to shorten by around 30 percent, while key model programmes could achieve cost reductions of up to 50 percent through streamlined processes and parallel engineering.

Strategic intent behind the Hefei expansion

Executives describe the new capabilities as a foundation for strengthening the company’s position in the world’s largest automotive market. The structure allows software, hardware and validation activities to run concurrently, reducing the number of decision loops and enabling faster market introduction of new features. The company emphasises that these capabilities also support long-term ambitions to lead technological development across the global automotive sector.